Debt Obligations | 6 Months Ended |
Jun. 30, 2014 |
Debt Disclosure [Abstract] | ' |
Debt Obligations | ' |
8 | Debt Obligations |
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The following discussion of our debt obligations should be read in conjunction with Note 12 to the audited consolidated financial statements in our 2013 Form 10-K. |
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Senior Notes. During August 2013, the Company completed the issuance of its 6.875% Senior Notes due 2021 in the aggregate principal amount of $200.0 million (the “Original 2021 Notes”) at an issue price of 100.0%. During June 2014, the Company completed the issuance of additional 6.875% Senior Notes due 2021 in the aggregate principal amount of $50.0 million (the “Supplemental 2021 Notes”) at an issue price of 102.5%, plus accrued and unpaid interest from February 15, 2014 to June 26, 2014. Each of the Original 2021 Notes and the Supplemental 2021 Notes were offered and sold in private transactions either to “qualified institutional buyers” pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), or to persons outside the U.S. under Regulation S of the Securities Act. |
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The net proceeds from the offering of the Original 2021 Notes (the “Original 2021 Notes Offering”) were $195.5 million after deducting fees and expenses payable by us. One of the Company’s largest shareholders and one of such shareholder’s affiliates collectively purchased $10.0 million of the Original 2021 Notes when they were first issued by us and those entities subsequently sold their notes during March 2014. The Company used $127.0 million of the net proceeds from the Original 2021 Notes Offering to voluntarily prepay the entire outstanding principal amount of its Senior Secured Term Notes due 2017, of which $125.0 million in aggregate principal amount was outstanding, at a price equal to 101% of the principal amount, plus accrued and unpaid interest. We intend to use the remainder of the net proceeds from the Original 2021 Notes Offering for general corporate purposes, including the acquisition and development of land and home construction. |
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The Supplemental 2021 Notes were issued as additional securities under the indenture governing the Original 2021 Notes (as amended, modified or supplemented from time to time in accordance with its terms, the “Indenture”). The Original 2021 Notes and the Supplemental 2021 Notes are treated as a single series of notes and have the exact same terms and conditions, except that the Supplemental 2021 Notes are subject to a separate registration rights agreement, which is discussed below. Until the Supplemental 2021 Notes are registered with the Securities and Exchange Commission, they will have a separate CUSIP number from that of the Original 2021 Notes. The net proceeds from the offering of the Supplemental 2021 Notes (the “Supplemental 2021 Notes Offering”), excluding accrued interest of $1.3 million paid to the Company by the initial noteholders, are expected to approximate $50.2 million after deducting fees and expenses payable by us. We intend to use the net proceeds from the Supplemental 2021 Notes Offering for general corporate purposes, including the acquisition and development of land and home construction. In connection with the issuance of the Supplemental 2021 Notes, the Company incurred approximately $0.7 million of debt issuance costs through June 30, 2014. |
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The Original 2021 Notes and the Supplemental 2021 Notes (collectively, the “2021 Notes”) are senior unsecured obligations of WCI Communities, Inc. (“WCI”) that are fully and unconditionally guaranteed on a joint and severable and senior unsecured basis by certain of WCI’s subsidiaries (collectively, the “Guarantors”). Each of the Guarantors is directly or indirectly owned 100% by WCI. There are no significant restrictions on the ability of any of the Guarantors to pay dividends, provide loans or otherwise make payments to WCI. Each of the Guarantors will be released and relieved of its guarantee obligations pertaining to the 2021 Notes: (i) in the event of a sale or other disposition of all of the assets of one or more of the Guarantors, by way of merger, consolidation or otherwise; (ii) upon designation of a Guarantor as an unrestricted subsidiary in accordance with the terms of the Indenture; (iii) in connection with the dissolution of a Guarantor under applicable law in accordance with the Indenture; (iv) upon release or discharge of the guarantee that resulted in the creation of such guarantee of the 2021 Notes; or (v) if WCI exercises its legal defeasance option or covenant defeasance option or if its obligations under the Indenture are discharged in accordance with the terms of the Indenture. Separate condensed consolidating financial statements of the Company are not provided herein because: (i) WCI has no independent assets or operations; (ii) the guarantees provided by the Guarantors are full and unconditional and joint and several; and (iii) the total assets, equity and operations of WCI’s non-guarantor subsidiaries are individually and in the aggregate minor. |
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In connection with the issuance of the Original 2021 Notes during August 2013, the Company, the Guarantors and the initial purchasers of such notes entered into an Exchange and Registration Rights Agreement (the “2013 Registration Rights Agreement”). Among other things, the 2013 Registration Rights Agreement required the Company to file an exchange offer registration statement with respect to an offer to exchange the unregistered Original 2021 Notes for new notes of the Company registered under the Securities Act having terms substantially identical to those of the Original 2021 Notes (except for provisions relating to transfer restrictions and payments of additional interest). In connection with the Company’s obligations under the 2013 Registration Rights Agreement, we filed a registration statement on Form S-4 on March 27, 2014 (as amended on March 31, 2014 and April 28, 2014), which was declared effective by the Securities and Exchange Commission on May 2, 2014. On May 5, 2014, we sent a notice of the registered exchange offer to the holders of the Original 2021 Notes offering them publicly registered notes in exchange for the surrender of their existing notes. During the exchange period, which ended on June 11, 2014, all of the Original 2021 Notes were surrendered for the publicly registered notes. In connection with the filing of the registration statement and its amendments, the Company incurred $0.3 million of debt issuance costs through June 30, 2014. |
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In connection with the issuance of the Supplemental 2021 Notes during June 2014, the Company, the Guarantors and the initial purchasers of such notes entered into an Exchange and Registration Rights Agreement (the “2014 Registration Rights Agreement”). The 2014 Registration Rights Agreement requires the Company to: (a) file an exchange offer registration statement on or before September 24, 2014 with respect to an offer to exchange the unregistered Supplemental 2021 Notes for new notes of the Company registered under the Securities Act having terms substantially identical, in all material respects, to those of the Supplemental 2021 Notes (except for provisions relating to transfer restrictions and payments of additional interest); (b) use its commercially reasonable efforts to cause the registration statement to become effective on or before November 24, 2014; (c) as soon as reasonably practicable after the effectiveness of the exchange offer registration statement, offer the exchange notes for surrender of the Supplemental 2021 Notes; and (d) keep the registered exchange offer open for not less than 30 days (or longer if required by applicable law) after the date notice of the registered exchange offer is sent to holders of the Supplemental 2021 Notes. The 2014 Registration Rights Agreement provides that, in the event that the Company cannot effect the exchange offer within the time periods described above and in certain other circumstances as described in the 2014 Registration Rights Agreement, the Company will file a “shelf registration statement” that would allow some or all of the Supplemental 2021 Notes to be offered to the public in the U.S. If the Company does not comply with the foregoing obligations under the 2014 Registration Rights Agreement, it will be required to pay special interest to the holders of the Supplemental 2021 Notes. |
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Revolving Credit Arrangements. During August 2013, the Company entered into a four-year senior unsecured revolving credit facility (the “Revolving Credit Facility”), providing for a revolving line of credit of up to $75.0 million. The commitment under the Revolving Credit Facility is limited by a borrowing base calculation based on certain asset values as set forth in the underlying loan agreement. In addition, a portion of the Revolving Credit Facility is available for the issuance of letters of credit. The Company has never borrowed under the Revolving Credit Facility. As of August 5, 2014, there were no limitations on the Company’s borrowing capacity under the Revolving Credit Facility, leaving the full amount of the line of credit available to us on such date. |
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During February 2013, WCI and WCI Communities, LLC (collectively, the “WCI Parties”) entered into a five-year $10.0 million loan with a bank secured by a first mortgage on a parcel of land and related amenity facilities comprising the Pelican Preserve Town Center (the “Town Center”) in Fort Myers, Florida. The loan is also secured by the rights to certain fees and charges that the WCI Parties are to receive as the owners of the Town Center. During its initial 36 months, the loan is structured as a revolving credit facility whereby the WCI Parties may borrow and repay advances up to $10.0 million and have the right to issue standby letters of credit up to an aggregate amount of $5.0 million at any time. The WCI Parties have never borrowed under this credit facility; however, $2.0 million of letters of credit have been issued thereunder as of August 5, 2014, limiting the borrowing capacity on such date to $8.0 million. |
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Other. As of June 30, 2014, we were in compliance with all of the covenants contained in our debt agreements. |