Moody's ups Adams Homes 2028 notes

Moody's Ratings said it upgraded the rating of Adams Homes, Inc.'s senior unsecured notes due 2028 to B1 from B2 and downgraded the rating on its senior unsecured notes due 2025 to B3 from B2. Concurrently, Moody's affirmed Adams Homes' B2 corporate family rating and B2-PD probability of default rating.

The upgrade of the 2028 notes reflects the loss absorption provided by the issuance of an unrated $200 million shareholder note due 2029 in the fourth quarter of 2023, Moody’s said. The shareholder note is contractually subordinate to both the company's 2028 senior unsecured notes and unrated $325 unsecured revolving credit facility, which gain from the loss absorption provided by this new, junior debt.

“The downgrade of the 2025 senior unsecured notes reflects diminished recovery for this security in the capital structure relative to the 2028 unsecured notes, given that the shareholder note is not subordinate to the 2025 senior unsecured notes. Given the relatively small amount of the 2025 notes outstanding, we applied a one-notch positive override to the loss-given default for speculative-grade companies methodology outcome for the 2025 notes,” the agency said in a press release.

The outlook is maintained at stable.

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