LGI Homes arranges $225 million revolver due 2018 via Wells Fargo

By Toni Weeks

San Luis Obispo, Calif., June 1 – LGI Homes, Inc. entered into a credit agreement on May 27 that provides for a $225 million revolving credit facility due May 26, 2018, according to an 8-K filing with the Securities and Exchange Commission. Wells Fargo Bank, NA is the administrative agent.

The credit facility may be increased up to $300 million. It matures on May 26, 2018. Prior to each annual anniversary of the closing of the credit facility, the company may request a one-year extension of the maturity date.

Borrowings initially bear interest at Libor plus 350 basis points. The margin over Libor may range from 300 bps to 350 bps and is based on the company’s leverage ratio

Under the agreement terms, a trigger event occurs if, at the end of any fiscal quarter, (i) the ratio of EBITDA to interest expense for the prior four fiscal quarters is less than 4.00 to 1.00 and/or (ii) the leverage ratio is greater than or equal to 65%. If a trigger event occurs, the company must grant Wells Fargo a first-priority lien in substantially all real property, including completed homes and homes under construction.

The agreement requires the company to maintain a tangible net worth of not less than the sum of about $160.5 million plus 75% of the net proceeds of any equity issuances plus 50% of net income earned in any fiscal quarter after the date of the credit agreement. It must also maintain a leverage ratio of not greater than 67.5%, liquidity of at least $40 million and a ratio of EBITDA to interest expense for the most recent four quarters of at least 2.5 to 1.00.

Wells Fargo Securities, LLC is the lead arranger and bookrunner. Deutsche Bank Securities Inc. and Fifth Third Bank are documentation agents.

In connection with the entry into the credit agreement, LGI Homes terminated its credit agreement dated April 28, 2014 with Texas Capital Bank, NA as administrative agent and letter-of-credit issuer.

The homebuilder is based in the Woodlands, Texas.

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