Fitch Ratings on Tuesday followed Moody’s Investors Service’s Monday action in taking its ratings down on the debt of large public home builders.
Fitch issued downgrades on Beazer, Centex, D.R. Horton, Lennar, Meritage, M/I, Pulte and Ryland. At the same time, it affirmed its investment-grade ratings on Toll Brothers, NVR and M.D.C. and its junk ratings on KB Home and Hovnanian Enterprises.
Centex, D.R. Horton and Ryland all saw their Issuer Default Ratings lowered to junk status at BB+ from BBB-. Debt is normally considered non-investment grade, or “junk,” when ratings fall below BBB-. A BB+ is the highest junk rating.
Meritage and M/I were lowered further into junk status from BB- to B+. A BB- is considered speculative.Beazer was dropped from B+ to B, which is considered highly speculative. KB Home was affirmed at BB+, and Hovnanian was affirmed at B-, which is also considered highly speculative.
Fitch reiterated its “negative” outlook on the entire home building sector with the exception of NVR, which it rated as “stable.” It affirmed its investment-grade ratings of BBB on NVR, Toll Brothers and M.D.C.
In each of the ratings actions, Fitch cited the continued “difficult housing environment” that “will be even more challenging than previously anticipated during the balance of calendar 2008” and “will still be on the decline well into 2009.”
