Moody's ups KB Home senior notes to Ba1

Moody's Investors Service said it confirmed the senior implied rating of KB Home at Ba1 and raised the ratings on its senior notes to Ba1 from Ba2 and on its senior subordinated notes to Ba2 from Ba3.

Moody's raised the company's $175 million of 7.75% senior notes due Oct. 15, 2004 to Ba1 from Ba2 and the $200 million of 8.625% senior subordinated notes due Dec. 15, 2008, the $300 million of 7.75% senior subordinated notes due Feb. 1, 2010, and the $250 million of 9.5% senior subordinated notes due Feb. 15, 2011 to Ba2 from Ba3.

The outlook is stable.

Moody's said the upgrades on the notes reflect KB Home's decision to attach the guarantees of its major homebuilding subsidiaries to its note issues. Previously, the senior notes and senior subordinated notes did not carry subsidiary guarantees and thus were notched below the senior implied rating.

The ratings reflect KB Home's improving financial results and profile, success at reducing its earnings concentration in California, leading share position in many of the markets that it serves, successful track record both in de novo expansions and in integrating acquisitions, strong liquidity, and long history.

At the same time, the agency said the ratings consider the financial and integration risks that accompany an aggressive expansion strategy, the still-sizable concentration of land inventory values and profits in California and the large, ongoing share repurchase program.

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