Meritage Homes: No plans for new debt, will use excess cash for land

By Lisa Kerner

Charlotte, N.C., Nov. 14 - Meritage Homes Corp. isn't planning on accessing the capital markets anytime soon, at least not in the short term, according to chief executive officer Steve Hilton.

"I think we're pretty much done," Hilton said during a "fireside chat" presentation on Wednesday at the Citi 2012 North American Credit Conference in New York.

Meritage completed four capital market transactions in the last seven or eight months, according to Hilton.

The Scottsdale, Ariz.-based homebuilder completed an equity deal and a convertible, and also put a bank line in place.

In addition, Meritage refinanced $300 million of its debt, Hilton said.

Meritage has $100 million of private placement bonds outstanding at "a little above 7%," noted Hilton. However, he said it doesn't make sense to call them due to the high call premiums. The company may replace the bonds at some point with lower-cost capital.

"We have a lot of cash on our balance sheet and would like to spend some of that cash down," said Hilton. Specifically, Meritage would put the cash to work by purchasing lots and land.

"I think our balance sheet looks pretty good, and I am pretty comfortable we have the capital we need to grow our business at an interesting growth rate," Hilton said.

When asked about liquidity, Hilton said Meritage likes to keep $100 million to $150 million of cash on its balance sheet, backed up with a bank line, unlike in the past, when it kept little cash.

Hilton said Meritage is going to generate good retained earnings over the next several years and is not paying any taxes.

At Sept. 30, Meritage had cash and securities of about $387 million and total outstanding debt of $387 million, and its net debt to capital was 36%, according to the company's presentation materials.

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