Moody's lowers Standard Pacific

Moody's Investors Service said it lowered Standard Pacific Corp.'s corporate family and probability-of-default ratings to Caa1 from B2, senior unsecured notes to Caa1 (LGD4, 50%) from B2 (LGD4, 53%) and senior subordinated notes to Caa3 (LGD6, 95%) from Caa1 (LGD6, 93%) and affirmed the speculative-grade liquidity rating at SGL-3.

This concludes the review for downgrade that began on Feb. 4, and the outlook is negative.

The downgrade reflects Moody's expectation that Standard Pacific's cash flow performance will weaken considerably in 2009 and be followed by an even weaker 2010. The agency said the company has picked the low-hanging fruit with regard to its cash flow generation and faces the additional pressure of having to collapse some of its joint ventures. Exacerbating these pressures is the fact that the company came in below its minimum operating cash flow-to-interest coverage ratio during the fourth quarter, Moody's said.

The agency said the ratings are supported by the company's unrestricted current cash position of about $500 million and absence of any material covenant compliance requirements, save for the cash flow coverage test.

The negative outlook reflects Moody's expectation that housing market conditions will worsen in 2009, government actions will be helpful largely at the margin, liquidity will remain tight, lender behavior will remain uncertain and 2009 will be a year of greatly reduced deliveries.

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