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Debt | 9 Months Ended
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Sep. 30, 2020
Debt Disclosure [Abstract] |
Debt | Debt The following table presents the carrying values of Zillow Group’s debt as of the dates presented (in thousands):
|  | September 30, 2020 |  | December 31, 2019
Homes Segment |  |  |  |
Credit facilities: |  |  |  |
Goldman Sachs Bank USA |  | $ | 22,460 |  |  | $ | 39,244 |
Citibank, N.A. |  | 28,512 |  |  | 296,369 |
Credit Suisse AG, Cayman Islands |  | 63,331 |  |  | 355,911 |
Total Homes Segment debt |  | 114,303 |  |  | 691,524 |
Mortgages Segment |  |  |  |
Repurchase agreement: |  |  |  |
Citibank, N.A. |  | 58,859 |  |  | 394 |
Warehouse line of credit: |  |  |  |
Comerica Bank |  | 59,235 |  |  | 30,033 |
Total Mortgages Segment debt |  | 118,094 |  |  | 30,427 |
Convertible Senior Notes |  |  |  |
1.375% convertible senior notes due 2026 |  | 342,316 |  |  | 327,187 |
2.75% convertible senior notes due 2025 |  | 408,323 |  |  | — |
0.75% convertible senior notes due 2024 |  | 515,573 |  |  | 490,538 |
1.50% convertible senior notes due 2023 |  | 322,535 |  |  | 310,175 |
2.00% convertible senior notes due 2021 |  | 249,263 |  |  | 415,502 |
2.75% convertible senior notes due 2020 |  | 7,584 |  |  | 9,637 |
Total convertible senior notes |  | 1,845,594 |  |  | 1,553,039 |
Total |  | $ | 2,077,991 |  |  | $ | 2,274,990 |
Homes Segment To provide capital for Zillow Offers, we utilize credit facilities that are classified as current liabilities in our condensed consolidated balance sheets. We classify these credit facilities as current liabilities as amounts drawn to purchase homes are typically repaid as homes are sold, which we expect to be within one year. The following table summarizes certain details related to our credit facilities (in thousands, except interest rates):
Lender |  | Final Maturity Date |  | Maximum Borrowing Capacity |  | Weighted Average Interest Rate
Goldman Sachs Bank USA |  | April 20, 2022 |  | $ | 500,000 |  |  | 3.15 | %
Citibank, N.A. |  | January 31, 2022 |  | 500,000 |  |  | 3.67 | %
Credit Suisse AG, Cayman Islands |  | July 31, 2021 |  | 500,000 |  |  | 3.97 | %
|  | Total |  | $ | 1,500,000 |  |  |
Undrawn amounts available under the credit facilities included in the table above are not committed, meaning the applicable lender is not committed to, but may in its discretion, advance loan funds in excess of the outstanding borrowings. The final maturity dates are inclusive of extensions which are subject to agreement by the respective lender. Zillow Group formed certain special purpose entities (each, an “SPE”) to purchase and sell residential properties through Zillow Offers. Each SPE is a wholly owned subsidiary of Zillow Group and a separate legal entity, and neither the assets nor credit of any such SPE are available to satisfy the debts and other obligations of any affiliate or other entity. The credit facilities are secured by the assets and equity of one or more SPEs. These SPEs are variable interest entities and Zillow Group is the primary beneficiary as it has the power to control the activities that most significantly impact the SPEs’ economic performance and the obligation to absorb losses of the SPEs or the right to receive benefits from the SPEs that could potentially be significant to the SPEs. The SPEs are consolidated within Zillow Group’s condensed consolidated financial statements. The collective inventory and credit facility borrowings of the SPEs were $193.3 million and $114.3 million, respectively, as of September 30, 2020, and $836.6 million and $691.5 million, respectively, as of December 31, 2019. Outstanding amounts drawn under each credit facility are required to be repaid on the facility maturity date or earlier if accelerated due to an event of default. Further, each SPE is required to repay any resulting shortfall if the value of the eligible properties owned by such SPE falls below a certain percentage of the principal amount outstanding under the applicable credit facility. Continued inclusion of properties in each credit facility is subject to various eligibility criteria. For example, aging criteria limit the inclusion in the borrowing base of properties owned longer than a specified number of days, and properties owned for longer than one year are generally ineligible. The stated interest rate on our credit facilities is one-month LIBOR plus an applicable margin, and in certain cases include a LIBOR floor, as defined in the respective credit agreements. Our credit facilities include customary representations and warranties, provisions regarding events of default and covenants. The terms of these credit facilities and related financing documents require Zillow Group and certain of its subsidiaries, as applicable, to comply with a number of customary financial and other covenants, such as maintaining certain levels of liquidity, tangible net worth and leverage ratios. As of September 30, 2020, Zillow Group was in compliance with all financial covenants and no event of default had occurred. Except for certain limited circumstances, the credit facilities are non-recourse to Zillow Group. Our credit facilities require that we establish, maintain and in certain circumstances that Zillow Group fund specified reserve accounts. These reserve accounts include, but are not limited to, interest reserves, insurance reserves, tax reserves, renovation cost reserves and reserves for specially permitted liens. Amounts funded to these reserve accounts and the collection accounts have been classified within our condensed consolidated balance sheets as restricted cash. Mortgages Segment To provide capital for Zillow Home Loans, we utilize a warehouse line of credit and a master repurchase agreement which are classified as current liabilities in our condensed consolidated balance sheets. The warehouse line of credit and repurchase agreement provide short-term financing between the issuance of a mortgage loan and when Zillow Home Loans sells the loan to an investor. The following table summarizes certain details related to our warehouse line of credit and repurchase agreement (in thousands, except interest rates):
Lender |  | Maturity Date |  | Maximum Borrowing Capacity |  | Weighted Average Interest Rate
Citibank, N.A. |  | October 27, 2020 |  | $ | 75,000 |  |  | 1.65 | %
Comerica Bank |  | June 26, 2021 |  | 75,000 |  |  | 1.01 | %
|  | Total |  | $ | 150,000 |  |  |
On September 25, 2020, Zillow Home Loans amended its Comerica Bank warehouse line of credit to provide for a temporary maximum borrowing capacity increase of $25.0 million, such that the total maximum borrowing capacity of the facility is increased to $75.0 million until February 16, 2021. The warehouse line of credit with Comerica Bank is committed. The repurchase agreement with Citibank, N.A. includes a committed amount of $25.0 million. As of September 30, 2020 and December 31, 2019, $58.9 million and $0.4 million, respectively, in mortgage loans held for sale were pledged as collateral under the Citibank, N.A. facility. Borrowings on the warehouse line of credit and repurchase agreement bear interest at the one-month LIBOR plus an applicable margin, and in certain cases include a LIBOR floor, as defined in the governing agreements, and are secured by residential mortgage loans held for sale. The repurchase agreement contains margin call provisions that provide Citibank, N.A. with certain rights in the event of a decline in the market value of the assets purchased under the repurchase agreement. The warehouse line of credit and repurchase agreement include customary representations and warranties, covenants and provisions regarding events of default. As of September 30, 2020, Zillow Home Loans was in compliance with all financial covenants and no event of default had occurred. The warehouse line of credit and repurchase agreement are recourse to Zillow Home Loans, and have no recourse to Zillow Group or any of its other subsidiaries. For additional details related to our warehouse line of credit and repurchase agreement, see Note 15 in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Convertible Senior Notes The following tables summarize certain details related to our outstanding convertible senior notes as of the dates presented or for the periods ended (in thousands, except interest rates):
|  |  |  |  |  |  |  |  |  |  |  | September 30, 2020 |  | December 31, 2019
Maturity Date |  | Aggregate Principal Amount |  | Stated Interest Rate |  | Effective Interest Rate |  | First Interest Payment Date |  | Semi-Annual Interest Payment Dates |  | Unamortized Debt Discount and Debt Issuance Costs |  | Fair Value |  | Unamortized Debt Discount and Debt Issuance Costs |  | Fair Value
September 1, 2026 |  | $ | 500,000 |  |  | 1.375 | % |  | 8.10 | % |  | March 1, 2020 |  | March 1; September 1 |  | $ | 157,684 |  |  | $ | 1,190,750 |  |  | $ | 172,813 |  |  | $ | 597,380 |
May 15, 2025 |  | 565,000 |  |  | 2.75 | % |  | 10.32 | % |  | November 15, 2020 |  | May 15; November 15 |  | 156,677 |  |  | 978,863 |  |  | — |  |  | — |
September 1, 2024 |  | 673,000 |  |  | 0.75 | % |  | 7.68 | % |  | March 1, 2020 |  | March 1; September 1 |  | 157,427 |  |  | 1,597,480 |  |  | 182,462 |  |  | 819,378 |
July 1, 2023 |  | 373,750 |  |  | 1.50 | % |  | 6.99 | % |  | January 1, 2019 |  | January 1; July 1 |  | 51,215 |  |  | 535,771 |  |  | 63,575 |  |  | 356,464 |
December 1, 2021 |  | 265,330 |  |  | 2.00 | % |  | 7.43 | % |  | June 1, 2017 |  | June 1; December 1 |  | 16,067 |  |  | 512,949 |  |  | 44,498 |  |  | 514,312 |
December 15, 2020 |  | 7,584 |  |  | 2.75 | % |  | N/A |  | N/A |  | June 15; December 15 |  | — |  |  | 13,254 |  |  | — |  |  | 16,842 |
Total |  | $ | 2,384,664 |  |  |  |  |  |  |  |  |  |  | $ | 539,070 |  |  | $ | 4,829,067 |  |  | $ | 463,348 |  |  | $ | 2,304,376 |
|  | Three Months Ended September 30, 2020 |  | Three Months Ended September 30, 2019
Maturity Date |  | Contractual Coupon Interest |  | Amortization of Debt Discount |  | Amortization of Debt Issuance Costs |  | Interest Expense |  | Contractual Coupon Interest |  | Amortization of Debt Discount |  | Amortization of Debt Issuance Costs |  | Interest Expense
September 1, 2026 |  | $ | 1,719 |  |  | $ | 5,022 |  |  | $ | 123 |  |  | $ | 6,864 |  |  | $ | 420 |  |  | $ | 1,142 |  |  | $ | 28 |  |  | $ | 1,590 |
May 15, 2025 |  | 3,884 |  |  | 6,205 |  |  | 331 |  |  | 10,420 |  |  | — |  |  | — |  |  | — |  |  | — |
September 1, 2024 |  | 1,262 |  |  | 8,251 |  |  | 283 |  |  | 9,796 |  |  | 275 |  |  | 1,681 |  |  | 57 |  |  | 2,013 |
July 1, 2023 |  | 1,402 |  |  | 3,814 |  |  | 373 |  |  | 5,589 |  |  | 1,402 |  |  | 3,557 |  |  | 348 |  |  | 5,307 |
December 1, 2021 |  | 1,326 |  |  | 2,960 |  |  | 306 |  |  | 4,592 |  |  | 2,300 |  |  | 4,763 |  |  | 493 |  |  | 7,556 |
December 15, 2020 |  | 59 |  |  | — |  |  | — |  |  | 59 |  |  | 67 |  |  | — |  |  | — |  |  | 67 |
Total |  | $ | 9,652 |  |  | $ | 26,252 |  |  | $ | 1,416 |  |  | $ | 37,320 |  |  | $ | 4,464 |  |  | $ | 11,143 |  |  | $ | 926 |  |  | $ | 16,533 |
|  | Nine Months Ended September 30, 2020 |  | Nine Months Ended September 30, 2019
Maturity Date |  | Contractual Coupon Interest |  | Amortization of Debt Discount |  | Amortization of Debt Issuance Costs |  | Interest Expense |  | Contractual Coupon Interest |  | Amortization of Debt Discount |  | Amortization of Debt Issuance Costs |  | Interest Expense
September 1, 2026 |  | $ | 5,157 |  |  | $ | 14,768 |  |  | $ | 361 |  |  | $ | 20,286 |  |  | $ | 420 |  |  | $ | 1,142 |  |  | $ | 28 |  |  | $ | 1,590 |
May 15, 2025 |  | 5,891 |  |  | 9,353 |  |  | 499 |  |  | 15,743 |  |  | — |  |  | — |  |  | — |  |  | — |
September 1, 2024 |  | 3,772 |  |  | 24,207 |  |  | 828 |  |  | 28,807 |  |  | 275 |  |  | 1,681 |  |  | 57 |  |  | 2,013 |
July 1, 2023 |  | 4,206 |  |  | 11,260 |  |  | 1,100 |  |  | 16,566 |  |  | 4,206 |  |  | 10,441 |  |  | 1,026 |  |  | 15,673 |
December 1, 2021 |  | 5,429 |  |  | 11,816 |  |  | 1,222 |  |  | 18,467 |  |  | 6,900 |  |  | 14,024 |  |  | 1,452 |  |  | 22,376 |
December 15, 2020 |  | 191 |  |  | — |  |  | — |  |  | 191 |  |  | 199 |  |  | — |  |  | — |  |  | 199 |
Total |  | $ | 24,646 |  |  | $ | 71,404 |  |  | $ | 4,010 |  |  | $ | 100,060 |  |  | $ | 12,000 |  |  | $ | 27,288 |  |  | $ | 2,563 |  |  | $ | 41,851 |
The convertible notes are senior unsecured obligations. The convertible senior notes maturing in 2021, 2023, 2024, 2025 and 2026 (the “Notes”) are classified as long-term debt based on their contractual maturity dates in our condensed consolidated balance sheets. The convertible senior notes maturing in 2020 are classified within current liabilities. For more than 20 trading days during the 30 consecutive trading days ended September 30, 2020, the last reported sale price of our Class C capital stock exceeded 130% of the conversion price of the convertible senior notes due in 2021, 2024 and 2026 (the “2021 Notes,” “2024 Notes” and “2026 Notes,” respectively). Accordingly, the 2021 Notes, 2024 Notes and 2026 Notes became convertible at the option of the holders from October 1 through December 31, 2020. The 2021 Notes are also redeemable, at our option, as of September 30, 2020. The 2024 Notes and 2026 Notes were first convertible during the three months ended September 30, 2020. The convertible senior notes maturing in 2023 and 2025 are not redeemable or convertible as of September 30, 2020. The convertible senior notes maturing in 2020 (the “2020 Notes”) are convertible, at the option of the holder, and redeemable, at our option, as of September 30, 2020. Interest on the convertible notes is paid semi-annually in arrears. The estimated fair value of the convertible senior notes was determined through consideration of quoted market prices. The fair value is classified as Level 3 due to the limited trading activity for each of the convertible senior notes. The Notes are convertible into cash, shares of Class C capital stock or a combination thereof, at our election, and may be settled as described below. The Notes will mature on their respective maturity date, unless earlier repurchased, redeemed or converted in accordance with their terms. The following table summarizes the conversion and redemption options with respect to the Notes:
Maturity Date |  | Early Conversion Date |  | Conversion Rate |  | Conversion Price |  | Optional Redemption Date
September 1, 2026 |  | March 1, 2026 |  | 22.9830 |  | $ | 43.51 |  |  | September 5, 2023
May 15, 2025 |  | November 15, 2024 |  | 14.8810 |  | 67.20 |  |  | May 22, 2023
September 1, 2024 |  | March 1, 2024 |  | 22.9830 |  | 43.51 |  |  | September 5, 2022
July 1, 2023 |  | April 1, 2023 |  | 12.7592 |  | 78.37 |  |  | July 6, 2021
December 1, 2021 |  | September 1, 2021 |  | 19.0985 |  | 52.36 |  |  | December 6, 2019
The following table summarizes certain details related to the capped call confirmations with respect to certain of the convertible senior notes:
Maturity Date |  | Initial Cap Price |  | Cap Price Premium
September 1, 2026 |  | $ | 80.5750 |  |  | 150 | %
September 1, 2024 |  | 72.5175 |  |  | 125 | %
July 1, 2023 |  | 105.45 |  |  | 85 | %
December 1, 2021 |  | 69.19 |  |  | 85 | %
On May 15, 2020, we issued $500.0 million aggregate principal amount of 2.75% Convertible Senior Notes due 2025 (the “Initial 2025 Notes”) and on May 19, 2020 we issued $65.0 million aggregate principal amount of 2.75% Convertible Senior Notes due 2025 (the “Additional Notes” and, together with the Initial 2025 Notes, the “2025 Notes”). The Additional Notes were sold pursuant to the underwriters’ option to purchase additional 2025 Notes granted in connection with the offering of the Initial 2025 Notes. The net proceeds from the issuance of the 2025 Notes were approximately $553.3 million, after deducting underwriting discounts and commissions and offering expenses paid by Zillow Group. In May 2020, we used a portion of the net proceeds from the issuance of the 2025 Notes to repurchase $194.7 million aggregate principal of the 2021 Notes in privately negotiated transactions. The 2021 Notes were repurchased for $194.7 million in cash and 753,936 shares of Class C capital stock for an aggregate purchase price of $230.9 million. The repurchase of the 2021 Notes was accounted for as a debt extinguishment. We allocated $172.9 million of the repurchase price to the liability component based on the fair value of the liability component immediately prior to settlement. The fair value of the liability component was calculated using a discounted cash flow analysis with a market interest rate of a similar liability that does not have an associated convertible feature. The remaining consideration of $58.0 million was allocated to the equity component. As a result, we recognized a $179.3 million reduction to long-term debt representing the carrying value of the liability component as of the date of the partial repurchase of the 2021 Notes, a $58.0 million reduction to additional paid-in capital representing the equity component of the partially repurchased 2021 Notes and a $6.4 million gain on partial extinguishment of 2021 Notes representing the excess of the carrying value of the liability component over the fair value of the liability component of the repurchased 2021 Notes during the nine months ended September 30, 2020. In connection with the repurchase of a portion of the 2021 Notes, we partially terminated the capped call transactions entered into in connection with the issuance of the 2021 Notes for an amount corresponding to the aggregate principal amount of the 2021 Notes that were repurchased. As a result of the partial settlement of the capped call transactions, we received 317,865 shares of our Class C capital stock equal to a value of approximately $14.8 million based on the trading price of our Class C capital stock at the time of the unwind. Under applicable Washington State law, the acquisition of a corporation’s own shares is not disclosed separately as treasury stock in the financial statements and such shares are treated as authorized but unissued shares. We record acquisitions of our shares of capital stock as a reduction to capital stock at the par value of the shares reacquired, then to additional paid-in capital until it is depleted to a nominal amount, with any further excess recorded to retained earnings. We recorded an offsetting increase to additional paid-in capital for the partial unwind of the capped call transactions. Prior to the close of business on the business day immediately preceding November 15, 2024, the 2025 Notes are convertible at the option of the holders of the 2025 Notes only under certain conditions. On or after November 15, 2024, until the close of business on the second scheduled trading day immediately preceding May 15, 2025, holders of the 2025 Notes may convert the 2025 Notes at their option at the conversion rate then in effect, irrespective of these conditions. Zillow Group may redeem for cash all or part of the 2025 Notes, at its option, on or after May 22, 2023, under certain circumstances, at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date (as defined in the indenture governing the 2025 Notes, the “Indenture”). We may not redeem the 2025 Notes prior to May 22, 2023. We may redeem, for cash, all or any portion of the 2025 Notes, at our option, on or after May 22, 2023 if the last reported sale price per share of our Class C capital stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period. The conversion option does not meet the criteria for separate accounting as a derivative as it is indexed to our own stock. There are no financial covenants associated with the 2025 Notes. In accounting for the issuance of the 2025 Notes, we separated the 2025 Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the 2025 Notes. The difference between the principal amount of the 2025 Notes and the liability component represents the debt discount, which is recorded as a direct deduction from the related debt liability in the condensed consolidated balance sheet and amortized to interest expense using the effective interest method over the term of the 2025 Notes. The equity component of the 2025 Notes of approximately $154.8 million, net of issuance costs of $3.3 million, is included in additional paid-in capital in the condensed consolidated balance sheet and is not remeasured as long as it continues to meet the conditions for equity classification. For additional details related to our convertible senior notes, see Note 15 in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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