Forestar extends credit facilities, lifts commitments, reduces pricing

By Marisa Wong

Madison, Wis., Sept. 17 - Forestar Group Inc. entered into a second amended and restated revolving and term credit agreement on Sept. 14, according to an 8-K filed Monday with the Securities and Exchange Commission.

The amendment

• Increases the term loan commitment to $200 million from $130 million, with an option to further increase the $400 million facility by up to $100 million;

• Extends the maturity date of the revolving loan to Sept. 14, 2015 from Aug. 6, 2014, with a one-year extension option, and extends the maturity of the term loan to Sept. 14, 2017 from Aug. 6, 2015;

• Reduces pricing to Libor plus 400 basis points from Libor plus 450 bps and eliminates the Libor floor of 200 bps;

• Increases the minimum interest coverage ratio to 1.50 times from 1.05 times;

• Reduces the unused fee to 25 bps to 35 bps, depending on usage, from 45 bps; and

• Eliminates the minimum value to commitment ratio covenant and replaces it with a reduction to the borrowing base such that the ratio of the value of assets in the borrowing base to the aggregate commitments under the facility is less than 1.50 times.

Prepayment is permitted at any time, subject to a prepayment fee of 1% during the initial six months after the closing date.

According to the filing, up to $70 million of the term loan may be borrowed after the closing date. The company said it expects to borrow the $70 million in full for its planned acquisition of Credo Petroleum Corp.

KeyBanc Capital Markets is the arranger and bookrunner for the restated facilities, and KeyBank NA is the lender and agent.

The credit agreement, originally dated Dec. 14, 2007, was previously amended in March 2008, July 2009, August 2010, May 2011 and September 2011.

Forestar is an Austin, Texas-based real estate, mineral and fiber resource company.

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