Fitch applies BBB- to Toll Brothers notes

Fitch Ratings said it assigned a BBB- rating to Toll Brothers, Inc.'s $300 million senior unsecured notes offering due 2028.

The outlook is stable.

This issue will be rated on a pari passu basis with all other senior unsecured debt.

Net proceeds will be used for general corporate purposes, which may include repayment of debt.

“Toll's debt/capitalization ratio improved from 46.6% at fiscal year-end (FYE) 2015 (ending Oct. 31) to 45.7% at FYE16 and 40.6% at FYE17. Net debt/capitalization (excluding $250 million of cash classified by Fitch as not readily available for working capital) increased slightly from 41.6% at FYE15 to 42.9% at FYE16 and fell to 36.8% at FYE17,” the agency said in a news release.

“Management indicated it is comfortable with gross debt/capitalization in the mid-to-upper 40% range and net debt/capitalization in the low 40% area. Debt/EBITDA improved from 5.1x at FYE15 to 4.7x at FYE16 and 3.0x at FYE17 while interest coverage increased to 6.0x at FYE17 from 4.6x at FYE16.

“The improved metrics for FY17 were driven by lower debt, improved gross margins and higher cash distributions of earnings from unconsolidated joint ventures,” Fitch added in the release.

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