Item 1.01 Entry Into a Material Definitive Agreement.
Indenture
On March 17, 2017 (the Closing
Date), The New Home Company Inc., a Delaware corporation (the Company), completed the sale to certain purchasers (the Offering) of $250.0 million in aggregate principal amount of 7.250% Senior Notes due 2022 (the
Notes), in a private placement to qualified institutional buyers as defined in Rule 144A under the Securities Act of 1933, as amended (the Securities Act) and outside the United States in reliance on Regulation S
under the Securities Act. The Notes were issued at an offering price of 98.961% of their face amount, which represents a yield to maturity of 7.500%, pursuant to an indenture, dated as of March 17, 2017 (the Indenture), by and among
the Company, the subsidiary guarantors party thereto (the Guarantors) and U.S. Bank National Association, as trustee.
The Company intends to
use the net proceeds from the Offering to repay all borrowings outstanding under the Companys senior unsecured revolving credit facility, and the remainder for general corporate purposes.
Pursuant to the Indenture, interest on the Notes will be paid semiannually in arrears on April 1 and October 1, commencing October 1, 2017. The
Notes will mature on April 1, 2022.
The Notes and the guarantees are the Companys and the Guarantors senior unsecured obligations. The
Notes and the guarantees rank equally in right of payment with all of the Companys and the Guarantors existing and future unsecured senior debt, and senior in right of payment to all of the Companys and the Guarantors
existing and future subordinated debt. The Notes and the guarantees will be effectively subordinated to any of the Companys and the Guarantors existing and future secured debt.
On or after October 1, 2019, the Company may redeem all or a portion of the Notes upon not less than 30 nor more than 60 days notice, at the
redemption prices (expressed as percentages of the principal amount on the redemption date) set forth below plus accrued and unpaid interest, if any, to the applicable redemption date, if redeemed during the
12-
or
six-month
period, as applicable, commencing on each of the dates as set forth below:
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Year
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Redemption Price
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October 1, 2019
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103.625
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%
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October 1, 2020
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101.813
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%
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April 1, 2021
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100.000
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%
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Prior to October 1, 2019, the Notes may be redeemed in whole or in part at a redemption price equal to 100% of the
principal amount plus an applicable premium (as defined in the Indenture), and accrued and unpaid interest, if any, to the redemption date.
In addition,
any time prior to October 1, 2019, the Company may, at its option on one or more occasions, redeem Notes (including any additional notes that may be issued in the future under the Indenture) in an aggregate principal amount not to exceed 35% of
the aggregate principal amount of the Notes (including any additional notes that may be issued in the future under the Indenture) issued prior to such date at a redemption price (expressed as a percentage of principal amount) of 107.250%, plus
accrued and unpaid interest, if any, to the redemption date, with an amount equal to the net cash proceeds from one or more equity offerings by the Company.
If the Company experiences certain change of control events (as defined in the Indenture), holders of the Notes will have the right to require the Company to
repurchase all or a portion of the Notes at 101% of their principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date).
The Indenture contains certain covenants limiting, among other things, the ability of the
Company and its restricted subsidiaries to:
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incur or guarantee additional indebtedness or issue certain equity interests;
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pay dividends or distributions, repurchase equity or make payments in respect of subordinated indebtedness;
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make certain investments;
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create certain restrictions on the ability of restricted subsidiaries to pay dividends or to transfer assets;
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enter into transactions with affiliates;
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create unrestricted subsidiaries; and
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consolidate, merge or sell all or substantially all of its assets.
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These covenants are subject to a number of
exceptions and qualifications as set forth in the Indenture. The Indenture also provides for events of default, which, if any of them occurs, would permit or require the principal of and accrued interest on such Notes to be declared due and payable.
In addition, if the Notes are assigned an investment grade rating by certain rating agencies and no default or event of default has occurred or is continuing, certain covenants related to the Notes would be suspended. If the rating on the Notes
should subsequently decline to below investment grade, the suspended covenants would be reinstated.
The Notes and the related guarantees have not been
registered under the Securities Act or the securities laws of any other jurisdiction. Unless they are registered, the Notes may be offered only in transactions that are exempt from registration under the Securities Act or the securities laws of any
other jurisdiction.
The foregoing description of the Indenture is qualified in its entirety by reference to the full text of the Indenture filed as
Exhibit 4.1 hereto and incorporated by reference herein.
Registration Rights Agreement
Also on the Closing Date, in connection with the sale and issuance of the Notes, the Company and the Guarantors entered into a registration rights agreement
(the Registration Rights Agreement) with Credit Suisse Securities (USA) LLC, acting as representative of the initial purchasers listed on Schedule I thereof (the Initial Purchasers), with respect to the Notes.
Under the Registration Rights Agreement, the Company and the Guarantors have agreed, subject to certain exceptions, to (i) file a registration statement
(the Exchange Offer Registration Statement) with the U.S. Securities and Exchange Commission, with respect to a registered offer to exchange the Notes for new notes of the Company having terms substantially identical in all material
respects to the Notes (the Exchange Notes), within 180 days after the Closing Date, (ii) use commercially reasonable efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act within
240 days after the Closing Date, (iii) offer the Exchange Notes in exchange for surrender of the Notes as soon as practicable after the effectiveness of the Exchange Offer Registration Statement, and (iv) keep the exchange offer open for
not less than 20 business days (or longer if required by applicable law). Under certain circumstances, including if the Company is unable to consummate an exchange offer within 240 days after the Closing Date, the Company may be required to file a
shelf registration statement with respect to the Notes.
If the Company defaults on certain of its requirements under the Registration Rights Agreement,
the Company has agreed to pay, under certain circumstances, additional interest to the holders of the effected Notes at a rate of 0.25% per annum for the first
90-day
period immediately following the
occurrence of such default, with such rate increasing by an additional 0.25% per annum with respect to each subsequent
90-day
period until all such defaults have been cured, up to a maximum additional interest
rate of 1.0% per annum.
The foregoing description of the Registration Rights Agreement is qualified in its entirety by reference to the full text of the
Registration Rights Agreement filed as Exhibit 10.1 hereto and incorporated by reference herein.