Moody's ups, rates LGI Homes notes Ba2

Moody's Investors Service said it upgraded LGI Homes, Inc.'s corporate family rating to Ba2 from Ba3, probability of default rating to Ba2-PD from Ba3-PD and the rating on the company's senior unsecured notes to Ba2 from Ba3. Moody's also assigned a Ba2 rating to LGI's proposed $300 million of senior unsecured note offering due 2029. The company's SGL-2 speculative grade liquidity rating is maintained.

LGI will use the proceeds to retire the outstanding 6 7/8% senior notes.

“The rating upgrade to Ba2 reflects Moody's expectation that LGI will operate with conservative debt leverage in the range of 30% to 35%, maintain its strong gross margin around 25%, benefit from solid underlying conditions in the homebuilding market, including strong demand for more affordable entry-level homes which the company focuses on, and continue to expand its scale and market share as the 10th largest builder by homes sold in the country. The refinancing of LGI's senior unsecured notes is leverage neutral but is expected to lower the company's interest expense and improve pro forma homebuilding interest coverage toward 15x,” the agency said in a press release.

The outlook is stable.

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