Fitch puts KB Home on negative watch

Fitch Ratings said it placed KB Home's BB+ issuer default rating, BB+ senior unsecured debt and revolving credit facility ratings and BB- senior subordinated debt rating on Rating Watch negative due to the company's inability to file its 10-Q report for the quarter ended Aug. 31 with the Securities and Exchange Commission on time and consequent need to negotiate waivers with its banks and seek a similar consent from the senior unsecured bondholders.

The delay in filing the 10-Q report is due to the KB Home's ongoing investigation of its historical stock option grants, the preliminary conclusion of which is that the actual measurement dates for financial accounting purposes of certain stock option grants likely differ from the recorded grant dates. As such, additional non-cash charges for stock-based compensation related to these grants may need to be recorded. Fitch said it will continue to monitor KB Home's ability to secure an amendment to the senior notes indenture and deal with potential issues relating to other debt tranches. Resolution of the Rating Watch will be based on the company's ability to file the 10-Q report within the allocated cure period to avoid an event of default under its revolving and term loan agreements.

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