Fitch Ratings has downgraded Pulte Homes' debt one notch from BBB+ to BBB with a negative outlook, but the downgrade seemed to be related more to the malaise besetting the entire home building sector than to Pulte in general.

The negative outlook for Pulte reflects the more challenging environment for all homebuilders, specifically including "the current and expected near-term deterioration in credit metrics which are similar to the trends being experienced by others in the industry, pressures from mortgage credit tightening (which particularly affect entry-level buyers), and continued high cancellation rates which add to speculative inventory totals," according to Fitch.

Fitch pointed out that Pulte has taken $1.24 billion worth of land-related charges in the first six months of this year, roughly 17.2% of total shareholders' equity.

On the positive side, "Pulte's liquidity remains healthy and provides flexibility," Fitch said. That's thanks to a relatively low percentage of debt-to-equity and a recent renegotiation of its unsecured line of credit to more favorable terms. The company decreased its credit line by $15 million, from $2.01 billion to $1.86 billion, and extended the maturity date from Oct. 2010 to June 2012. It also managed to get rid of an interest ratio coverage requirement that would have thrown the company into default if violated.

However, if the company's interest coverage falls below two times for two consecutive quarters, its 55% debt-to-capital ratio will be lowered. On June 30 the company had only $173 million outstanding on its $1.86 billion revolving credit line.

The new BBB rating applies to Pulte's Issuer Default Rating, its senior unsecured loans and its unsecured bank credit facility.