Moody's rates KB Home notes B1

Moody's Investors Service said it assigned a B1 rating to KB Home's $265 million of 9.1% senior unsecured notes and affirmed the company's ratings, including the B1 corporate family, probability-of-default and senior notes ratings and the SGL-2 speculative-grade liquidity rating.

The outlook remains negative.

The proceeds will be used to retire up to $250 million of the company's 6 3/8% senior unsecured notes due 2011.

The B1 rating reflects Moody's expectation that the company will continue to post operating losses, remains exposed to asset impairment charges, will see its cash generation slow as further inventory reduction grows more challenging and that its debt leverage will increase and cushion under financial covenants will narrow.

At the same time, the ratings acknowledge the company's large cash position relative to its debt and assets, the agency said, and that with the refunding of up to $250 million of the 2011 senior notes, the company will have only $100 million remaining of these notes due in 2011 and nothing else before 2014.

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