Fitch affirms Meritage, view stable

Fitch Ratings said it affirmed Meritage Homes Corp.'s issuer default rating at BB, senior unsecured rating at BB and unsecured bank credit facility at BB. The rating applies to about $479 million in senior notes and the $850 million revolving credit facility.

The outlook has been changed to stable from positive.

A positive outlook was assigned on the assumption that credit metrics would further improve and generally maintained for a reasonable period of time. Prospects of that occurring over the next few quarters or even next the 12 months appear unlikely due to the broadly deteriorating housing market, Fitch said.

The housing sector is in the midst of a meaningful, multi-year downturn. Meritage has been increasing its sales and marketing efforts, focusing on reducing speculative inventory, reducing its lot supply, reassessing land positions, renegotiating option contracts and reducing overhead and direct construction costs.

The ratings are based on the company's successful execution of its business model, conservative land policies and geographic and product-line diversity, Fitch said.

Risk factors include the inherent cyclicality of the homebuilding industry. The ratings also manifest the company's aggressive, yet controlled growth strategy and Meritage's capitalization and size, the agency added.

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