S&P affirms Toll Brothers on acquisition news

Standard & Poor's said it affirmed the BB+ corporate credit rating on Toll Brothers Inc. and its subsidiary, Toll Brothers Finance Corp.

The agency also said it affirmed the BB+ ratings on the company's senior notes. The recovery rating is unchanged at 3, indicating 50% to 70% expected default recovery.

The outlook is stable.

The ratings follow news that the company agreed to acquire Shapell Industries Inc. for $1.6 billion in cash, S&P said.

The agency said it expects the acquisition to close in the first quarter of 2014, subject to customary closing conditions and regulatory approvals, the agency said.

The ratings reflect the homebuilder's satisfactory business risk profile, which is supported by a leading market position in the luxury housing segment, S&P said.

Toll's emphasis on move-up and luxury new home buyers has enabled it to generally achieve higher gross margins than most of its peers, in part due to higher average sales prices and lower cancellations, the agency said.

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