TEXT-S&P rates Beazer Homes USA's proposed notes 'B'

Wed Jul 11, 2012 10:58am EDT

July 11 - Standard & Poor's Ratings Services today assigned its 'B' rating
and '2' recovery rating to Beazer Homes USA Inc.'s proposed $275 million
senior secured notes due 2018. Our '2' recovery rating indicates our expectation
for a substantial recovery (70%-90%) in the event of default. The company
intends to use proceeds from the debt offering to refinance existing,
higher-cost secured debt. The proposed financing follows a recent equity
offering of common equity and tangible equity units that raised an aggregate
$164 million.

Substantially all of the company's existing subsidiaries will jointly and 
severally guarantee the proposed senior secured notes. The collateral for the 
notes and guarantees will be secured by most of the company's tangible and 
intangible assets and will be effectively subordinated to the company's 
existing revolving credit facility. 

The company intends to use proceeds from both note offerings to fund or 
replenish cash that we expect Beazer to, in turn, use to redeem Beazer's 12% 
senior secured notes due 2017.

Our current ratings on Beazer reflect the homebuilder's "vulnerable" business 
risk profile, which mirrors our expectations for a slow and uneven recovery in 
the U.S. housing sector that we believe will constrain profitability over the 
next 12 months. We consider Beazer's financial risk profile to be "highly 
leveraged," given the company's heavy debt load. The company's currently 
adequate liquidity position has been further supported by the recent equity 
offering, in our view, and the proposed debt refinancing could moderately 
reduce Beazer's current heavy interest burden.

Our current rating outlook on Beazer is negative. We would consider a 
downgrade if the company's EBITDA growth fails to meet our expectations or if 
the downturn in the housing market lingers longer than we expect and unit 
volume remains depressed. Alternatively, we would consider a stable outlook if 
Beazer comfortably meets our base-case expectations for operating results, 
addresses any potential covenant pressures, and maintains adequate liquidity.

For additional information on Beazer, please see "Summary: Beazer Homes USA 
Inc.," published June 29, 2012, and "Recovery Report: Beazer Homes USA Inc.'s 
Recovery Rating Profile," published July 9, 2012, on RatingsDirect on the 
Global Credit Portal, at www.globalcreditportal.com

RELATED CRITERIA AND RESEARCH

     -- The Credit Overhang: The Differing Recovery Trajectories Of U.S. Auto 
Companies and Homebuilders, published May 21, 2012.
     -- Capital markets Update: Homebuilder Bond Spreads May Foretell U.S. 
Housing Price Trends, published April 20, 2012.
     -- Industry Report Card: Operating Performance For U.S. Homebuilders Is 
On The Mend, But Risks Remain, published April 10, 2012.
     -- Issuer Ranking: U.S. Homebuilders, Strongest To Weakest, published 
April 10, 2012.
     -- Key Credit Factors: Global Criteria For Single-Family Homebuilders, 
Sept. 28, 2011.
 
Ratings List

Beazer Homes USA Inc.
 Corporate credit rating                   B-/Negative

New Ratings

Beazer Homes USA Inc.

 $275 million sr secured notes due 2018    B
  Recovery rating                          2
 

Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.
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