Fitch Ratings cut a trio of home builders deeper into junk territory Monday, pointing to a dismal outlook for new housing activity as well as liquidity pressures at the struggling home builders, according to the Wall Street Journal’s blog .
“We’re not suggesting things like imminent default,” said Fitch Ratings home-builder analyst Robert Curran. “We would rate it lower still if we thought that was the case. The point we’re making is that there are some ongoing significant pressures for the builders, and some of these builders are in a particularly bad situation, and it’s up to those builders and their management teams to fix that in the next few quarters.”
The ratings firm lowered Beazer Homes USA by two notches to triple-C, a move that pushes the homebuilder into highly speculative territory. As cause for the downgrade, Fitch cited its belief that new housing activity will remain weak through at least next year and that Beazer’s liquidity position is likely to erode in the next 18 months.
Builder KB Home’s rating also took a hit, as Fitch downgraded the company one notch to B-plus, putting it four levels into junk. The ratings firm pointed to the company’s recent underperformance relative to its peers, an overexposure to the credit-challenged entry level market, and upcoming cash flow pressures. In its most recent quarterly results, KB Home’s fiscal second-quarter loss was wider than expected as new home deliveries and orders tumbled.
Meanwhile, Fitch lowered its rating on Ryland Group one notch to double-B minus and cut Ryland’s outlook to negative from stable. Noting slimmer liquidity in the past year, Fitch said it believes pressures on liquidity are likely to continue over the next year and a half due in part to sizeable land and development spending.
Fitch also trimmed its rating on building materials maker USG Corp. by one notch to B-minus, placing if six levels into junk.
Alongside the slew of cuts Monday, Fitch affirmed its ratings for M.D.C. Holdings and Toll Brothers. Regarding MDC, the firm the company has noticeably improved its capital structure, among other benefits. For Toll, Fitch said the company’s liquidity position provides a buffer and supports the current ratings.
For more information: http://blogs.wsj.com/developments/2011/09/12/ratings-cuts-more-bad-news-...