Moody's assigns KB Home notes B2

Moody's Investors Service said it assigned a B2 rating to KB Home's proposed unsecured notes due 2019 and changed the rating outlook to positive from stable.

The agency also affirmed the company's B2 corporate family rating, B2-PD probability of default rating, B2 rating on the existing senior unsecured notes and SGL-2 speculative-grade liquidity rating.

In conjunction with the proposed issuance of $300 million of unsecured notes, KB Home is proposing to issue $125 million of common equity. Proceeds are expected to be used for growth initiatives such as land purchases.

Moody's said the outlook change reflects its expectation for the company's credit metrics to continue to improve over the next year as it benefits from increasing demand for new homes. In addition, the company's willingness to issue equity shows a commitment to reducing the debt to capitalization ratio from current levels. The debt leverage will further improve at the end of this year from the expected reversal of the valuation allowance against deferred tax assets of around $800 million, the agency said.

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