Moody's lowers Stanley-Martin

Moody's Investors Service said it lowered the ratings of Stanley-Martin Communities, LLC, including its corporate family rating to Caa1 from B2 and the senior sub notes rating to Caa2 from B3.

The outlook is negative.

Moody's said that the downgrade and negative outlook reflect its expectation that:

• i) A housing sector recovery does not begin before well into 2009 at the earliest, with any recovery likely be very restrained at the outset, thus prolonging the company's underperformance on key financial metrics vs. prior expectations;

• ii) The company's cash flow from operations in 2007 will be negative and it will be challenging for the company to move into positive cash flow territory in 2008;

• iii) Adjusted debt to capitalization could increase to above 80% in 2008;

• iv) Even though the company currently has modest headroom under its covenants, the cushion could erode very rapidly given the current industry conditions; and

• v) The company's relatively small size and-scale and limited geographic, product and price point diversity exacerbate the effects of the Washington, DC housing downturn.

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