Moody's affirms William Lyon Homes

Moody's Investors Service said it affirmed William Lyon Homes, Inc.'s corporate family and probability-of-default ratings at B1 and its $150 million senior notes due 2012, $247 million senior notes due 2013 and $150 million senior notes due 2014 at B3.

The outlook is stable based on Moody's expectation that the company will continue to manage its inventory effectively, thereby improving its cash flow generation, and use the excess cash flow to pay down debt and lower its interest burden.

The affirmation reflects the company's good inventory management and improvement in cash flow from operations, the agency said. William Lyon's inventories grew a modest 3.8% in the third quarter of 2006 to $1.65 billion, and its cash flow from operations for the last 12 months ended Sept. 30 was $144 million, making the company one of only six homebuilders that was cash flow positive for that reporting period, according to the agency.

At the same time, Moody's said the ratings are constrained by declining interest coverage, geographic concentration, long land supply and the continued presence of secured debt, albeit reduced, in the capital structure. The company's interest coverage (homebuilding EBIT to interest incurred) for the last 12 months ended Sept. 30 was 4.3x, down from 5.6x at the end of 2005.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.