Moody’s Downgrades KB Home

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Moody’s Investors Service on Monday downgraded all its ratings of KB Home on the expectation that the Los Angeles homebuilder will continue to post operating losses and its pace of cash generation will slow as inventory reduction becomes more challenging.

The downgrade includes KB Home’s corporate family rating, its probability of default rating and its senior notes rating. Moody’s outlook for the company remains negative.

Analysts noted that the company’s pace of cash generation slowed over the last 12 months to $422 million of cash flow from operations during the trailing 12-month period ended Feb. 28, compared with $1.4 billion in the comparable period the year before.

The negative rating outlook reflects risks associated with general economic weakness that may continue to hamper new home purchases, an industrywide lack of pricing power, and large inventory of unsold homes including foreclosures in most markets.

KB Home’s stock closed up 19 cents, or 1.4 percent, to $13.60 on the New York Stock Exchange and fell 1 percent in after-market trading.

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