Fitch rates KB Home notes BB-

Fitch Ratings said it assigned a BB- rating with RR4 recovery rating to KB Home's offering of $300 million 6 7/8% senior unsecured notes due 2027.

The notes will be guaranteed by certain of KB Home's subsidiaries that have guaranteed KB Home's other outstanding senior notes, Fitch said.

The proceeds, plus a $100 million add-on to its existing 7 5/8% senior notes due 2023, will be used to redeem its $400 million 4¾% senior notes due 2019.

The offering will be equal in right of payment with all other senior unsecured debt, Fitch noted.

The ratings reflect the company's position as a top six homebuilder with geographic and customer diversity, the agency said.

The company operates in 38 markets across eight states and has a top 10 position in 13 of the 50 largest metro markets in the United States, Fitch said.

The agency said it expects higher land and development spending in 2019 as the company continues to build its community count.

Despite this, Fitch said it expects cash flow from operations to remain positive.

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