S&P cuts Kimball Hill

Standard & Poor's said it lowered its corporate credit rating on Kimball Hill Inc. to B+ from BB- and the rating on the company's senior subordinated notes to B- from B.

The outlook remains negative.

According to the agency, the downgrade reflects expectations that the company's weak profitability will persist, straining internal liquidity. Continued high incentives and cancellation rates, inventory impairments and lot option write-downs are contributing to expectations for very weak profitability and operating cash flow during the remainder of 2007 and likely into 2008, S&P said.

Supporting the ratings are Kimball Hill senior management's long and conservative operating history and last year's equity offering that de-leveraged the company's balance sheet and bolstered liquidity, the agency said.

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