KB Home aims to repay $250 million revolver debt by fiscal year-end

By Devika Patel

Knoxville, Tenn., March 24 – KB Home plans to repay the $250 million balance under its new $1.09 billion unsecured revolving credit facility by the end of its 2022 fiscal year on Nov. 30, but other than that repayment, management does not plan to reduce debt.

The company amended the revolver late last quarter, increasing the size from $800 million and extending the term to Feb. 18, 2027 from Oct. 7, 2023.

“In February, we completed an amendment to our unsecured revolving credit facility increasing its borrowing capacity by $290 million to $1.09 billion and extending its maturity to February 2027,” executive vice president and chief financial officer Jeff Kaminski said on the company’s first quarter ended Feb. 28 earnings conference call on Wednesday.

“This upsize and term extension supports our strategy to operate the business with a more efficient level of cash as we continue to drive returns focused growth.

“Under the new credit facility, we had $250 million outstanding at the end of the first quarter and expect to end our 2022 fiscal year with no borrowings outstanding,” Kaminski said.

Apparently, the company does not plan to reduce debt much beyond that.

“We don’t see the need for a lot of debt reduction,” chairman, president and chief executive officer Jeffrey T. Mezger said on the call.

At quarter end, total liquidity was approximately $1.07 billion, with $240.7 million of cash and cash equivalents and $831.4 million of available capacity under the revolver.

On Feb. 18, KB Home entered into a fourth amended and restated loan agreement to increase the commitment under its unsecured revolver to $1.09 billion from $800 million and to extend the maturity to Feb. 18, 2027 from Oct. 7, 2023.

In some cases, the aggregate maximum principal amount of available loans under the credit facility may be increased to up to $1.29 billion.

The credit facility includes a $250 million sublimit for letters of credit.

The fourth amended credit facility replaces the company’s prior revolver dated Oct. 7, 2019.

Borrowings bear interest at adjusted term SOFR plus a spread ranging from 125 basis points to 175 bps, depending on the company’s leverage ratio.

Based on the company’s leverage ratio at closing, the commitment fee on the unused portion of the credit facility is 15 bps.

As before, the credit facility contains financial covenants relating to tangible net worth, leverage, liquidity or interest coverage and borrowing base.

At closing, the company had about $475 million of loans and $8.6 million of letters of credit outstanding, leaving $606.4 million available, with up to $241.4 million of that amount available for the issuance of letters of credit.

Citibank, NA was administrative agent and a lender.

Bank of America, NA, Bank of the West, Citizens Bank, NA, Fifth Third Bank, NA, JPMorgan Chase Bank, NA and Wells Fargo Bank, NA are syndication agents and lenders. Citibank, BofA Securities, Inc., Bank of the West, Citizens Bank, Fifth Third Bank, JPMorgan Chase and Wells Fargo Securities, LLC were joint lead arrangers and joint bookrunners.

KB Home is a Los Angeles-based homebuilder.

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