S&P Cuts Beazer Homes Deeper Into "junk" Territory

NEW YORK (AP) — Standard & Poor's Ratings Services on Tuesday cut its corporate credit rating on Beazer Homes USA Inc. further into junk territory on concerns the Atlanta-based homebuilder will breach financial covenants without refinancing.

S&P lowered its corporate credit rating on Beazer to "CCC" from "CCC+," and cut its ratings on the company's senior unsecured notes to "CCC-" from "CCC." The outlook is negative.

The ratings are both considered below investment grade, or "junk" status.

The outlook is negative.

The downgrades follow a larger-than-anticipated loss during for Beazer's second quarter, which Beazer posted in early May. While the loss included "a significant number of noncash and nonrecurring items that did not impair the company's liquidity position," and the company has made progress toward resolving outstanding legal issues, S&P credit analyst James Fielding said "a sharp reduction in shareholders' equity and tangible net worth outweighed these positive factors."

Beazer's lower tangible net worth led to tripping one covenant governing its secured revolving credit facility, Fielding wrote, and the company "appears more likely to breach other financial covenants barring some form of recapitalization."