TEXT-S&P says PulteGroup rating unaffected by cash tender offer
Oct 25 - Standard & Poor's Ratings Services today stated that its rating on PulteGroup Inc. (BB-/Stable/--) is not affected by the company's recently announced cash tender offers for an aggregate $1 billion of debt securities. We expect the successful completion of the proposed debt tenders to accelerate improvement in the company's key credit metrics. However, upward rating momentum is dependent on the company's ability to sustain sales growth and profitability gains over the next year. We will also assess PulteGroup's ability to reinvest sufficient capital to support $4.5 billion to $4.75 billion in sales in 2013, while maintaining adequate liquidity to meet remaining 2014 through 2016 debt maturities. We currently believe that PulteGroup will deliver high single-digit year-on-year sales volume growth for full-year 2012. We also expect a 4% to 5% increase in average sales price as PulteGroup continues to shift its product mix and derive a significant proportion of sales from move-up and active adult communities in 2012. Having posted significant year-over-year operating margin improvements through the first nine months of this year, we expect PulteGroup to achieve EBITDA margins of 10% to 11% for full-year 2012. As a result, we believe debt-to-EBITDA will be less than 7x at year-end 2012, down from 10x at year-end 2011. Additional debt reduction from PulteGroup's recently announced debt tender offers will accelerate improvement in leverage metrics. We expect revenue and EBITDA to grow more modestly in 2013, because of a shrinking community count and our expectation that absorption rates will only improve modestly from 2012.
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