Fitch upgrades Meritage, rates notes BB

Fitch Ratings said it upgraded Meritage Homes Corp.’s long-term issuer default rating to BB from BB-, upgraded its senior debt to BB/RR4 from BB-/RR4, assigned a BB/RR4 rating to its senior notes due 2027 and revised the outlook to stable from positive.

Proceeds will be used to repay outstanding borrowings under the company’s revolving credit facility and for general corporate purposes, which may include the repurchase, tender for or redemption of all or part of the company's $126.5 million 1.875% convertible senior notes due 2032.

The agency said the upgrade reflects the company's execution of its business model in the current moderately recovering housing environment, conservative land policies, geographic diversity and healthy liquidity position.

The ratings and outlook also take into account Fitch's expectation of further moderate improvement in the housing market in 2017 and 2018 and Meritage’s ongoing emphasis on the entry level/first-time buyer, which is expected to continue to gradually represent a higher portion of home purchases after not being as prominent during most of this upcycle.

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