Fitch rates KB Home notes B+/RR4

Fitch Ratings said it assigned a B+/RR4 rating to KB Home's $250 million senior notes due 2022.

The outlook is negative.

The issuance extends a meaningful portion of the company's maturities to 2022 and improves the ratio of cash to remaining 2013 to 2016 maturities, although at the cost of higher interest rates, the agency noted.

Proceeds will be used to fund the company's cash tender offers for its 5¾% senior notes due 2014, and up to $150 million principal amount, less the amount of 2014 notes accepted for purchase, of its 5 5/8% senior notes due 2015 and 6¼% senior notes due 2015. Any remaining proceeds will be used for general corporate purposes, which may include the purchase from time to time of any remaining 2014 and 2015 notes.

The ratings reflect the moderately stronger prospects for the housing sector in 2012 as well as the successful execution of its business model, its leadership role in constructing and marketing energy efficient homes, its conservative building practices, its effective utilization of return on invested capital criteria as a key element of its operating model, and the resolution of the South Edge liabilities, the agency noted.

The ratings also consider the company's sharp contraction in liquidity since the end of fiscal 2010, the agency added.

KBH's most recent credit metrics remain stressed with debt to EBITDA, excluding real estate impairments, of 28.0x times as of March 31, down from 37.0x at the end of 2011.

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