Moody's lowers Ashton Woods

Moody's Investors Service said it downgraded Ashton Woods USA LLC's corporate family and probability-of-default ratings to B2 from B1 and senior subordinated notes ratings to Caa1 (LGD5, 87%) from B3. The agency also affirmed the issuer's speculative grade liquidity of SGL-3.

The outlook was changed to negative from stable.

The downgrades and negative outlook reflect Moody's expectation for weak cash flows relative to debt balances for fiscal 2007 and 2008, and the relaxed interest coverage covenant of 1.75 times, the agency said. The company also has a short operating history and geographic concentration.

The SGL-3 rating indicates adequate liquidity for the next 12 months and considers internal and external liquidity, covenant compliance and access to alternative liquidity sources, Moody's said.

Moody's said it could downgrade ratings further if the company's interest coverage ratio were to fall below 1.5 times or if leverage were to rise above 60% in fiscal 2008.

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