Approximately $950 million of debt securities affected
New York, August 12, 2021 -- Moody's Investors Service (Moody's) upgraded Beazer Homes USA, Inc.'s
(Beazer) Corporate Family Rating to B2 from B3 and Probability of Default
Rating to B2-PD from B3-PD. The rating on the company's
senior unsecured notes was affirmed at B3. The SGL-2 Speculative
Grade Liquidity Rating was maintained. The outlook was changed
to stable from positive.
The ratings upgrade reflects the strengthening in Beazer's credit
metrics, including leverage, interest coverage and gross margin,
which Moody's expects to continue over the next 12 to 18 months.
"The company's credit profile is expected to benefit from
strong tail winds in the homebuilding sector along with the expected debt
repayments, including through the accelerated amortization of its
unsecured term loan," says Natalia Gluschuk, Moody's
Vice President -- Senior Analyst. At June 30, 2021,
Beazer's homebuilding debt to capitalization ratio stood at 62%,
with its gross margin exceeding 18% and homebuilding EBIT to interest
coverage approaching 3.0x.
The stable outlook reflects Moody's expectation that Beazer will
benefit from favorable sector trends, increase revenue and improve
its credit ratios, while maintaining good liquidity.
The following rating actions were taken:
Upgrades:
..Issuer: Beazer Homes USA, Inc.
.... Corporate Family Rating, Upgraded
to B2 from B3
.... Probability of Default Rating,
Upgraded to B2-PD from B3-PD
Affirmations:
..Issuer: Beazer Homes USA, Inc.
....Senior Unsecured Regular Bond/Debenture,
Affirmed B3 (LGD4)
Outlook Actions:
..Issuer: Beazer Homes USA, Inc.
....Outlook, Changed To Stable From
Positive
RATINGS RATIONALE
Beazer's B2 Corporate Family Rating is supported by the company's:
1) considerable size and scale, with revenue of $2.2
billion and geographic diversity; 2) focus on the first-time
homebuyer segment for about half of total closings, which is expected
to benefit from favorable demographic trends; 3) commitment to debt
reduction and focus on strengthening the balance sheet; and 4) conservative
approach to land investments and increasing proportion of optioned lots,
which contributes to positive cash flow from operations.
At the same time the rating reflects the company's: 1) high
homebuilding debt to book capitalization ratio; 2) share repurchase
program, although significant repurchases are not anticipated;
3) risk related to owned land supply that could be subject to impairment
during a market weakening; and 4) exposure to the cyclicality of
the homebuilding industry and protracted revenue declines.
The B3 rating on senior unsecured notes, one notch below the Corporate
Family Rating, reflects the presence of secured debt in the capital
structure.
The SGL-2 Speculative Grade Liquidity Rating reflects Beazer's
good liquidity. Liquidity is supported by $358 million of
cash at June 30, 2021, Moody's expectation of positive
cash flow from operations, availability under the company's $250
million senior secured revolving credit facility, and the expectation
of covenant compliance.
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 approaches 50%, tangible net worth
exceeds $1 billion, EBIT to interest coverage is maintained
above 3.0x, while industry conditions remain favorable,
gross margin continues to improve and good liquidity is maintained.
The ratings could be downgraded if the company's homebuilding debt
to book capitalization is sustained above 60%, EBIT to interest
coverage declines below 2.0x, if industry conditions weaken
causing meaningful declines in revenue, gross margin and result
in net losses, or if liquidity were to weaken.
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 in 13 states across three
geographic regions: West, East and Southeast. Beazer
targets entry-level, move-up, and active adult
homebuyers. In the LTM period ended June 30, 2021,
the company generated approximately $2.2 billion in revenue
and $97 million in net income.
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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.
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
Gretchen French
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
