(Source: Business Wire)
Fitch Ratings expects to assign a 'B+/RR1' rating to Beazer Homes USA, Inc.'s (Beazer) proposed private offering of $160 million of 12% second lien senior secured notes due 2017. The company intends to use the net proceeds from the offering to fund the repurchase of senior unsecured notes and/or to replenish cash that has been used to fund open-market repurchases of outstanding senior unsecured notes.
Fitch has also affirmed the following ratings:
--Issuer Default Rating (IDR) at 'CCC';
--Secured revolving credit facility at 'B+/RR1';
--Senior unsecured notes at 'CC/RR5';
--Convertible senior notes at 'CC/RR5';
--Junior subordinated debt at 'C/RR6'.
The Rating Outlook is Negative.
The Recovery Rating (RR) of 'RR1' on the proposed second-lien secured notes and the company's secured revolving credit facility indicates outstanding recovery prospects for holders of this debt issue. The 'RR5' on Beazer's senior unsecured notes indicates below-average recovery prospects for holders of these debt issues. Beazer's exposure to claims made pursuant to performance bonds and joint venture debt and the possibility that part of these contingent liabilities would have a claim against the company's assets were considered in determining the recovery for the unsecured debt holders. The 'RR6' on Beazer's junior subordinated notes indicates poor recovery prospects in a default scenario. Fitch applied a liquidation value analysis for these RRs.
The ratings and Outlook for Beazer reflect the current very difficult U.S. housing market and Fitch's expectations that the housing environment remains challenging for the remainder of the year. Nevertheless, there are more positive signals and developments for housing and related industries now than at any time previously in the downturn. Of course, challenges remain or are on the horizon that may not prevent a near-term bottom, but are likely to meaningfully moderate the early stages of a recovery.
Through the first nine months of its fiscal year 2009, Beazer repurchased, in several individual open-market transactions, $115.5 million of its outstanding senior notes for a purchase price of $58.2 million plus accrued and unpaid interest. These repurchases resulted in a gain on extinguishment of debt of $55.2 million. Subsequent to the end of its fiscal third quarter (3Q'09; ended June 30, 2009), the company repurchased (or agreed to repurchase) approximately $139.3 million in aggregate principal amount of its outstanding senior notes for an aggregate purchase price of $102.5 million plus accrued and unpaid interest.
