Approximately $1 billion of rated debt securities affected
New York, March 26, 2021 -- Moody's Investors Service ("Moody's") changed the outlook for Beazer Homes
USA, Inc. ("Beazer") to positive from stable. Moody's
also affirmed Beazer's existing ratings, including the B3
Corporate Family Rating, B3-PD Probability of Default Rating,
and B3 ratings on the company's senior unsecured notes. The
SGL-2 Speculative Grade Liquidity Rating was maintained.
The positive outlook reflects Moody's expectation that Beazer will
continue to benefit from strong tailwinds in the homebuilding sector in
the next 12 to 18 months. Moody's expects the company to
improve gross margin, generate higher earnings and reduce debt by
approximately $75 million during fiscal 2021. This will
contribute to a reduction in Beazer's debt to capitalization toward
60%. Moody's also expects positive cash flow from
operations, good liquidity and improvement in interest coverage
to 2.5x.
"Beazer's strong backlog of approximately $1.16
billion at December 31, 2020 and good new order bookings will contribute
to its top line growth over the next 12 to 18 months," says
Natalia Gluschuk, Moody's Vice President -- Senior Analyst.
The following rating actions were taken:
Affirmations:
..Issuer: Beazer Homes USA, Inc.
.... Corporate Family Rating, Affirmed
B3
.... Probability of Default Rating,
Affirmed B3-PD
....Senior Unsecured Regular Bond/Debenture,
Affirmed B3 (LGD4)
Outlook Actions:
..Issuer: Beazer Homes USA, Inc.
....Outlook, Changed To Positive From
Stable
RATINGS RATIONALE
Beazer's B3 Corporate Family Rating reflects the company's:
1) high homebuilding debt to book capitalization of about 65% at
December 31, 2020; 2) exposure to cost pressures affecting
the sector, including building materials, land and labor;
3) exposure to the cyclicality of the homebuilding industry, protracted
volume declines and land impairments; and 4) share repurchase program,
although significant repurchases are not anticipated.
At the same time, the credit profile is supported by the company's:
1) considerable size and scale and geographic diversity; 2) focus
on the first-time homebuyer segment for approximately half of total
closings, which is expected to benefit from supportive demographic
trends; 3) commitment to debt reduction and focus on strengthening
the balance sheet; and 4) conservative approach to land investments
and increasing the proportion of optioned lots, which contributes
to positive cash flow from operations.
Beazer's SGL-2 Speculative Grade Liquidity Rating reflects
the company's good liquidity, supported by $245 million
of cash at December 31, 2020, Moody's expectations of
positive cash flow from operations, and availability under a $250
million senior secured revolving credit facility.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be upgraded if the company's homebuilding debt
to book capitalization trends toward 60% and EBIT to interest coverage
approaches 2.0x, while gross margin improves and good liquidity
is maintained.
The ratings could be downgraded if the company's homebuilding debt
to book capitalization is sustained above 70%, EBIT to interest
coverage weakens below 1.0x, the company experiences net
losses on an annual basis or a deterioration in its liquidity profile.
The principal methodology used in these ratings was Homebuilding And Property
Development Industry published in January 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1108031.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Beazer Homes USA, Inc., headquartered in Atlanta,
Georgia, is a US homebuilder operating across three geographic regions:
West, East and Southeast. The company has presence in 13
states, including Arizona, California, Nevada,
Texas, Indiana, Maryland, Delaware, Tennessee,
Virginia, Florida, Georgia, North Carolina and South
Carolina. Beazer targets entry-level, move-up,
and active adult homebuyers, and in fiscal 2020, the company
delivered 5,492 homes. Total revenue and net income for the
LTM period ended December 31, 2020 were approximately $2.1
billion and $61 million, respectively.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Natalia Gluschuk
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Dean Diaz
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
