Fitch downgrades Technical Olympic

Fitch Ratings said it downgraded Technical Olympic USA, Inc.'s issuer default rating to B- from B+, secured revolving credit facility to B+/RR1 from BB, senior unsecured notes to CCC+/RR5 from B and senior subordinated debt to CCC-/RR6 from CCC+.

The ratings remain on Rating Watch negative.

The agency noted that the RR1 recovery rating assigned to the revolver would typically warrant a three-notch upgrade to BB- from B-, but Fitch assigned a B+ rating to the revolver to reflect the very weak housing environment in most of Technical Olympic's key markets.

The downgrade reflects the continued challenging market conditions in most of the company's markets, negative trends in operating margins and credit metrics and the potential for Technical Olympic to incur significant additional debt associated with the proposed global solution for the company's Transeastern joint venture, Fitch said.

The Rating Watch negative takes into account Fitch's expectation that the challenging housing environment will continue to put pressure on the company's operating results and credit metrics and that Technical Olympic will likely need to seek further amendments to its secured revolving credit facility if a resolution is reached with regards to its Transeastern joint venture.

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