Moody’s upgrades Weekley Homes

Moody’s Investors Service said it upgraded the senior unsecured notes of Weekley Homes, LLC to B1 from B3, the corporate family rating to B1 from B2 and the probability of default rating to B1-PD from B2-PD. The outlook remains stable.

The upgrade of the senior unsecured notes follows the refinancing of Weekley Homes’ secured bilateral lines of credit with a new $400 million syndicated unsecured, unrated revolver. In doing so, the company shifted to a 100% unsecured debt strategy and cut the expected losses on the unsecured notes in a default scenario, the agency said.

The upgrade of the CFR considers Moody’s expectation that leverage will continue to trend down in 2020, to 44% through increased retained earnings, and interest coverage will increase to 4.4x, in part due to lower pricing on the new revolver.

The upgrade also recognizes substantial improvement in operating results over the past three years. This has resulted in a strengthening in key credit metrics, including a reduction in homebuilding debt to homebuilding capitalization to 49.3% at Sept. 30, down from 58.3% in 2016, while homebuilding EBIT to interest coverage grew to 3.8x for the last 12 months period ended Sept. 30, from 3.3x in 2016.

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