Phoenix Business Journal by Kristena Hansen, Reporter
Date: Wednesday, July 25, 2012
Further positioning itself for an anticipated upswing in new-home demand, Scottsdale-based Meritage Homes Corp. (NYSE: MTH) told its shareholders Wednesday that it has entered into an unsecured, revolving line of credit of up to $125 million with JPMorgan Chase Bank and three other lenders.
The credit facility will be available to Meritage for three years, with a July 24, 2015 maturity date, according to the home builder’s 8-K filing on Wednesday with the U.S. Securities and Exchange Commission. Under certain terms of the revolving facility, the credit cap may be boosted to a total $150 million, according to the SEC filing.
“The credit facility provides additional liquidity that we can use for short-term working capital requirements as our orders grow,” Brent Anderson, VP of investor relations for Meritage, told the Phoenix Business Journal.
By coincidence, Meritage divulged its new credit facility on the same day the U.S. Commerce Department released surprising data that showed a steep decline in new homes sales last month after posting a two-year high in May, largely instigated by a still-weak job market.
The Commerce Department figures show sales of new single-family homes in June fell 8.4 percent — the biggest drop since February 2011 — to a seasonally adjusted rate of 350,000 units. The housing data was somewhat of a setback for home builders, who have become hopeful over the market’s recent gains: last week, other federal reports showed new-home construction in June was at its fastest pace since October 2008 while home builder confidence this month has so far been at its highest level since March 2007.
Following the release of the Commerce Department data Wednesday, home builder stock prices, including Meritage, had fallen by the close of trading day.
While the housing report was disappointing, Wall Street analysts say the drop in new home sales will likely be short-lived.
The recent surge in home builder confidence and new home construction has been largely driven by a dwindling inventory of existing home listings, especially in Phoenix where resale listings have dropped 50 percent compared with last year.
Home builders say people are now turning to the new-home market as a result, posting notable increases in home orders, backlogs and closings during the second quarter as stock prices have soared this year. Meritage, for example, saw a 50 percent jump in home orders in the second quarter compared with the same period last year, while home closings rose 22 percent.
Home builders have thus started positioning themselves in anticipation of surging new-home demand, and Meritage’s new credit facility is its latest move in that same direction.
Earlier this month, Meritage sought Wall Street investors to raise $75.7 million in net proceeds for land investments and other corporate purposes through a registered public offering of 2.3 million common shares.
Also eying land investments and resolution of outstanding debts, Beazer Homes, which has 12 communities in Arizona, aimed to raise $156.6 million this month from its offering of 22 million common shares, at $2.90 per share, and 4 million tangible equity units, at $25 each.