Fitch Ratings on Thursday lowered its Issuer Default Rating (IDR) on Beazer Homes USA, Inc. and adjusted other ratings on outstanding debt. Its rating outlook remained negative.
The IDR was lowered from 'CCC' from 'B-.' In a statement, Fitch said, "The downgrade reflects the current very difficult U.S. housing market and Fitch's expectations that the housing environment remains challenging for the remainder of the year and perhaps into 2010. ...The ratings changes also reflect persistent negative trends in Beazer's operating margins and further deterioration in credit metrics, notably leverage (with little debt reduction in recent years and erosion in tangible net worth from non-cash real estate charges and operating losses)."
Fitch predicted that Beazer's cash flow from operations will sharply decline in 2009, putting the company into negative cash flow exluding a second-quarter tax refund of $168 million. It also said the potential of further impairment charges and operating losses could prompt a breach in covenant compliance over the next 12-18 months. At Dec. 31, 2008, there was no debt outstanding, but $56 million of letters of credit were outstanding under the revolver. Fitch also noted that Beazer has limited near-term debt maturities, with $180 million maturing in May 2011.