| Item 1.01 | Entry into a Material Definitive Agreement |
On October 6, 2021 (the “Closing Date”), Landsea Homes Corporation, a Delaware corporation (the “Company”), as borrower, entered into that certain credit agreement (the “Credit Agreement”) with Western Alliance Bank, as administrative agent, Western Alliance Bank and BofA Securities, Inc., as joint lead arrangers and joint bookrunners, and the lender parties thereto. Capitalized terms used without definition are defined in the Credit Agreement. Concurrently with the entry into the Credit Agreement, (i) Landsea Homes- WAB 2 LLC, a wholly owned subsidiary of the Company (“Landsea WAB 2”) terminated and repaid all borrowings outstanding under that certain Credit Agreement, dated as of January 15, 2020, as amended, by and between Landsea WAB 2 and Western Alliance Bank and (ii) Landsea Homes- WAB LLC, a wholly owned subsidiary of the Company (“Landsea WAB”) terminated and repaid all borrowings outstanding under that certain Senior Secured Credit Agreement dated February 1, 2018, as amended, by and between Landsea WAB and Western Alliance Bank As of the Closing Date, the Company had $295.9 million in borrowings outstanding under the Credit Agreement.
The Credit Agreement provides for a senior unsecured revolving credit facility (“Revolving Facility”) of up to $500.0 million (“Revolving Commitment”), consisting of revolving loans and letters of credit provided by lenders. The Credit Agreement also includes an uncommitted accordion feature whereby the Company may increase the Revolving Commitment in increments of up to $20.0 million, up to an aggregate amount not to exceed $350.0 million, subject to certain conditions. The Revolving Facility matures on October 6, 2024, unless the Company requests, and the requisite lenders agree, to extend it pursuant to its terms.
The maximum borrowing permitted under the Revolving Facility is equal to the lesser of (x) the Revolving Commitment and (y) the Borrowing Base. The Borrowing Base is equal to (a) 100% of the amount of Unrestricted Cash of the Company in excess of the greater of (i) $20.0 million or (ii) 1.78% of the Company’s consolidated total assets as of the end of the most recent fiscal quarter of the Company, plus (b)(i) 90% of the Cost of Presold Units, plus (ii) 80% of the Cost of Spec Units and Model Units, plus (iii) 70% of Cost of Finished Lots, (iv) 65% of Cost of A&D Lots, and (v) 55% of Cost of Entitled Land, in each case, subject to certain limitations set forth in the Credit Agreement.
Borrowings under the Revolving Facility bear interest at a rate per annum of either (i) the Index Rate (which is equal to the LIBOR Rate then in effect, subject to a floor of 0.50% per annum) plus 3.25% per annum, or (ii) the Base Rate (which is equal to a fluctuating rate per annum equal to the highest of: (a) the rate of interest most recently publicly announced in the Western Edition of The Wall Street Journal as the “prime rate” for such day, plus 0.50% and (b) the Federal Funds Effective Rate for such day, plus 0.50%) plus 2.25% per annum. The Company may elect to apply either the Index Rate or Base Rate interest to borrowings pursuant to the Revolving Facility, subject to certain terms and conditions. The unused portion of the Revolving Commitment accrues a commitment fee, which ranges from 0.15% to 0.25% per annum, based on unused commitments under the Revolving Facility as of the applicable period.
Under the Credit Agreement, the Company is subject to (i) customary affirmative and negative covenants, including, among other things, covenants related to indebtedness, fundamental changes, restricted payments, investments and other matters and (ii) customary financial covenants, tested quarterly, including covenants related to minimum liquidity, minimum tangible net worth, a maximum leverage and a minimum interest coverage. The Credit Agreement also contains customary events of default, which would trigger the acceleration of repayment of all borrowings thereunder, including, among other things, failure to pay principal, interest, fees or other amounts; covenant defaults; material inaccuracy of representations and warranties; bankruptcy events, or a change of control of the Company.
