Meritage amends loan, reducing size, increasing pricing

By Sara Rosenberg

New York, July 21 - Meritage Homes Corp. amended its credit facility, decreasing the size to $500 million from $800 million and increasing pricing by up to 100 basis points depending on leverage, according to an 8-K filed with the Securities and Exchange Commission Monday.

In addition, the unused fee was raised by up to 10 bps depending on leverage.

The amendment also changed the interest coverage ratio to 0.50 to 1.00 from June 30 through June 30, 2009, 1.00 to 1.00 from Sept. 30, 2009 through Dec. 31, 2009, 1.25 to 1.00 at March 31, 2010, 1.50 to 1.00 at June 30, 2010, 1.75 to 1.00 at Sept. 30, 2010, and 2.00 to 1.00 thereafter.

The company's leverage ratio was changed to 2.15 to 1.00 if the interest coverage ratio is greater than or equal to 2.00 to 1.00, 1.75 to 1.00 if the interest coverage ratio is less than 2.00 to 1.00, but greater than or equal to 1.00 to 1.00, and 1.50 to 1.00 if the interest coverage ratio is less than 1.00 to 1.00.

Furthermore, the amendment eliminated the individual quarterly interest coverage test, modified the covenant requirements to allow for alternative compliance with any of the interest coverage ratio, the adjusted cash flow ratio or a minimum liquidity requirement, lowered the minimum tangible net worth requirement base to $500 million and allowed for exclusion of the cumulative amount of any deferred tax valuation allowance from the calculation of tangible net worth, and changed the definition of the leverage ratio to reduce the debt component for unrestricted cash in excess of $25 million, up to a maximum of $300 million.

Also, the amended added a commitment reduction provision that requires the facility size to be reduced dollar for dollar by the amount that shareholders' equity falls below $500 million, subject to a maximum commitment reduction of $100 million.

The amendment was completed on July 18.

Guaranty Bank is the administrative agent on the deal.

Meritage is a Scottsdale, Ariz.-based single-family homebuilder.

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