UPDATE 2-Toll Brothers announces $885 mln credit facility

* Facility can increase to $2 bln

* Lender group includes new members

* Shares up 2.1 percent
(Rewrites, adds analyst comments, shares, background)

By Helen Chernikoff

NEW YORK, Oct 25 (BestGrowthStock) – Luxury homebuilder Toll
Brothers Inc (TOL.N: ) said on Monday that it had exchanged its
revolving bank facility for a smaller line of credit, an
indication of the homebuilding industry’s protracted downturn.

Toll Brothers obtained a four-year, $885 million bank
facility that can increase to $2 billion, replacing a $1.89
billion facility scheduled to mature in March 2011.

It also repaid a $331.7 million loan due in March 2011.

“They don’t need as large a facility, especially as it
appears the industry is not going to be especially robust over
the next year or perhaps two,” said Fitch Ratings analyst
Robert Curran.

Most homebuilders do not currently have comparable credit
lines because they have a lot of cash and do not want to pay
for access to more capital, especially since the cost of debt
has risen sharply in this downturn, said Ticonderoga Securities
analyst Stephen East.

Toll ended its third quarter with $1.64 billion in cash and
securities and a net-debt-to-capital ratio of 11.5 percent,
down from 14.5 percent a year earlier.

Unlike its peers, however, Toll has maintained its
commitment to land purchase and development, the highest-risk
aspect of the homebuilding business.

The new credit will allow them to continue pursuing
distressed asset purchases, East said.

In July, the company announced the formation of an
investment fund to buy distressed loan portfolios and land for
which it will dedicate funds as opportunities arise.

“Four years is a long time in this economy,” Curran said.
“You can dissipate your cash. Having this as a backup is a

Toll’s lender group includes new members, Chief Executive
Officer Doug Yearley Jr. said in a statement.

That’s a necessity, as many lenders are no longer willing
to expose themselves to the risky business of residential
construction, Curran said.

Toll’s shares were up 2.1 percent at $18.79, roughly flat
with a 2 percent rise in the Dow Jones U.S. Home Construction
Index (.DJUSHB: ).
(Reporting by Helen Chernikoff; Editing by Lisa Von Ahn, Dave

UPDATE 2-Toll Brothers announces $885 mln credit facility