Two new press releases dated June 21 and June 28. The first announced an offering of unsecured notes in the amount of $400 million to repay a portion of the borrowing under the revolving credit facility. The second announced the pricing of the “previously announced” $300 million notes. I assume that this is the final amount and the rate is 6.875% and the notes due in 2026.
At year end, the amount borrowed under the revolving credit facility was $394.7 million at USD 1-month LIBOR plus 3.15%, which today amounts to 5.24% (2.09% LIBOR). Couple of things going on. One, they prefer a fixed 6.875% to LIBOR plus 3.15% (this variable 3.0 to 3.5% based on leverage ratio). Also, the current revolving credit facility can be raised to $650 million, but this would probably take them to plus 3.5% (?).
The second issue is that the convertible bonds issued in 2014 are due in November 2019 and convertible again after May 2019. There are $70 million of the original $85 million still outstanding, convertible at $21.52. That is 3.25 million shares or 14% dilution. LGIH has said they anticipate settling the convertibles with cash. $300 million would cover a share price of $92.
If an EPS of $7.15 were announced before May 2019, $92 is a p/e of 12.9 which is historically reasonable.
Looks as if they do not want share dilution and in anticipation of rising interest rates they are positioning themselves, as best they can, to achieve both goals even with higher share price in 2019.
KC, who would be happy with $92 nine months from now.