Calif. -based homebuilder The Ryland Group Inc (RYL - Snapshot Report) has announced the completion of its sale of senior notes aggregating $250 million, which will mature on Jun 1, 2019. These notes carry an annual interest rate of 0.25%, which will be paid semi-annually on Jun 1 and Dec 1, starting from Dec 1, 2013.
Further, underwriters have an option to purchase additional notes worth up to $37.5 million, within a 30-day period to cover over-allotments. Initially, the notes will be convertible into shares at a conversion price of approximately $75.01 per share of common stock. Also, the notes will be guaranteed by all the direct and indirect wholly-owned homebuilding subsidiaries of Ryland.
The net proceeds from the note offering will be used for general corporate purposes, land and other acquisitions. Last week, Ryland acquired the assets of LionsGate Homes in Dallas, Texas. Though financial terms of the deal were not disclosed, Ryland’s acquisition of LionsGate Homes will allow it to gain control over the Fort Worth market where LionsGate Homes currently operates 15 active communities.
This is Ryland’s third acquisition in the past 11 months, after the acquisition of the assets of Timberstone Homes in Charlotte and Raleigh in Jul 2012 and Trend Homes in Phoenix in Dec 2012.
Ryland also posted strong first quarter 2013 earnings of 43 cents per share compared with the year-ago loss of 7 cents. Ryland’s revenues in the quarter surged 73.6% year over year on the back of increase in homebuilding revenues. The company’s new orders also increased in double-digits.
The favorable situation in the housing market has resulted in increase in demand for new homes, where inventory levels are dropping and prices are moving up. Ryland has been constantly introducing new communities, thus capitalizing on the improving housing market. Ryland holds a Zacks Rank #1 (Strong Buy).
Other Stocks to Consider
Other stocks in the homebuilding sector that are worth considering include Meritage Homes Corp (MTH - Snapshot Report), D. R. Horton Inc. (DHI - Analyst Report) and MDC Holdings Inc (MDC - Snapshot Report). While Meritage and D.R. Horton hold a Zacks Rank #1, MDC carries a Zacks Rank #2 (Buy).