The 2013 notes will be given priority, with the amount of the 2012 notes to be repurchased determined by the volume of 2013 notes tendered. The company is offering $70 on each $1,000 principal for the 2013 notes and $80 for the 2012 notes. Both include an early tender premium of $30.
MDC said it intends to fund the purchase from its cash reserves and that it may or may not increase the total amount of the tender offer. The offer will expire at 11:59 p.m., New York City time, on July 6, 2011 unless extended or earlier terminated.
Citigroup Global Markets Inc. is acting as sole dealer manager.
Stephen East at Ticonderoga Securities liked the idea. In a note to investors, he wrote, "We have harped on builders to reduce the debt loads that were generally put in place when the companies were three and four times the size they are today, so we applaud MDC's move. We believe MDC is one of four or so builders that have enough excess cash to repurchase debt, the others being DHI, MTH and RYL." He added, however, "While we like the move and view it as a moderate positive, we believe MDC still has much heavy lifting to do on the cost structure, as both gross margins and SG&A are not at needed levels--primarily SG&A."