Moody’s Investors Service said on Wednesday that it has lowered its ratings on home builder Ryland Group Inc. into “junk” status.
The service said in a statement that “Ryland’s bottom-line profits will remain under heavy pressure in 2008; given Moody’s expectation that land impairments and option abandonments will continue at a brisk pace.”
But, the service also added that it “expects investment-grade companies, even in cyclical industries, eventually to return to profitability, even with charge-offs.”
Ryland would not comment on how the downgrade would affect business going forward but traditionally, when companies are downgraded into “junk” status, it is more difficult for them to borrow money on the open market and also costs them more to do so.
Moody’s also cut competing homemaker D.R. Horton Inc.’s rating below investment grade.
Shares in Ryland closed down 66 cents but gained 1.5 percent in after-market trading Wednesday to $27.30. Shares in Ryland have lost more than half of their value so far this year.
