Aug. 24, 2009 (Business Wire) -- Fitch Ratings has affirmed Pulte Homes, Inc.'s (NYSE: PHM) ratings as follows:

--Issuer Default Rating (IDR) at 'BB+';

--Senior unsecured at 'BB+';

--Unsecured bank credit facility at 'BB+'.

Fitch has also upgraded and removed Centex Corp.'s (CTX) ratings from Rating Watch Positive as follows:

--IDR to 'BB+' from 'BB';

--Senior unsecured to 'BB+' from 'BB'.

In addition, Fitch has withdrawn the following ratings for CTX:

--Short-term IDR at 'B';

--Commercial paper at 'B'.

The Rating Outlook is Negative.

The affirmation of PHM's ratings and the upgrade of CTX's IDR and unsecured notes are consistent with Fitch's actions in April 2009 when the merger was initially announced. At that time, Fitch affirmed PHM's ratings and placed CTX's IDR and unsecured debt ratings on Rating Watch Positive.

Following the Aug. 18, 2009 closing of the merger, CTX became a wholly owned subsidiary of PHM. Fitch equalized the IDRs of PHM and CTX based on the guarantees provided by each of the companies' homebuilding material operating subsidiaries to both of the issuing entities. PHM assumed CTX's unsecured notes, which will now benefit from the guarantees of PHM's homebuilding operating subsidiaries. Similarly, PHM's unsecured notes and revolving credit facility will also have the guarantees of CTX's homebuilding operating subsidiaries.

The rating affirmation for PHM acknowledges that while the company's leverage increases moderately as a result of the merger, the combined company has a strong liquidity position, a more diversified product line, an expanded market presence in top markets, and the potential for significant cost savings from operating efficiencies. Furthermore, the ratings affirmation incorporates the expectation that PHM will likely be able to improve its leverage profile by year-end 2009 with the recently announced tender offer for $1.5 billion of debt as well as the repayment of $211 million of senior notes coming due in September. However, the erosion of shareholder's equity from potential significant non-cash inventory impairment charges could impede the company's ability to lower its leverage despite the expected debt paydown.

On a pro forma basis as of June 30, 2009, the combined company had a debt to capitalization ratio of 65.6% and a net debt to capitalization ratio of 48.6%. PHM has an established track record of financial discipline as leverage has historically remained below 45% (on an annual basis). However, the erosion of shareholder's equity from non-cash real estate charges and deferred tax valuation allowances led to untypically high leverage in 2008. PHM's long term targeted leverage range is 35%-45%. The combined company has a strong liquidity position with $3.08 billion of cash on the balance sheet.