Meritage Homes Corporation (MTH) recently announced the pricing of senior unsecured notes worth $175 million due on 2018 to qualified institutional buyers. The bonds were priced with a coupon of 4.50% and sold at par.
Meritage intends to use a portion of the net proceeds to repurchase its outstanding senior subordinate notes worth $99,825,000 due 2017. The rest of the net proceeds will be used for general corporate expenses.
Adjusting for the above transactions, Meritage will have about $366 million of cash and cash equivalents compared with $295.5 million at the end of fiscal 2012 and about $798 million of total debt outstanding.
The company has been witnessing a strong increase in revenues, orders, prices and backlog for the past few quarters on the back of improving housing market. In fact, the stabilizing recovery in the housing market was also backed by lower home prices and moderating interest rates as renting became a more expensive option luring buyers to new homes.
Meritage reported impressive fourth-quarter 2012 results, beating the Zacks Consensus Estimate for both revenues and earnings on the back of a robust rise in home closings, revenues, improved leverage of overhead expenses and reduced interest expenses. The company has also been raising prices in most of its communities with market demand gaining momentum.
In order to capitalize on the increased demand for new homes, the company invested about $480 million in land and development in fiscal 2012. The recent transaction will help the company improve its inventory levels in order to meet the increased demand for new homes.
Meritage Homes currently carries a Zacks Rank #3 (Hold).
Other stocks in the homebuilding sector that are performing well and deserve a mention include NVR Inc. (NVR) carrying a Zacks Rank #1 (Strong Buy) and D. R. Horton Inc. (DHI) and Gafisa S.A. (GFA) carrying a Zacks Rank #2 (Buy).
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