January 4, 2013 / 8:56 PM / 5 years ago

TEXT - S&P may raise TMM Holdings LP rating

Jan 4 () -    (The following statement was released by the rating agency)

     -- Taylor Morrison Home Corp. has filed a registration statement to raise 
equity through an initial public offering, the proceeds of which it will use 
to purchase a partnership interest in TMM Holdings L.P. 
     -- Taylor Morrison intends to use proceeds from the proposed offering for 
working capital and general corporate purposes, which may include the 
repayment or repurchases of debt and to fund acquisitions.
     -- We placed our 'B+' corporate credit rating on Taylor Morrison on 
CreditWatch with positive implications. Our 'BB-' issue-level ratings on the 
company's unsecured senior notes remain unchanged.

Rating Action
On Jan. 4, 2012, Standard & Poor's Ratings Services placed its 'B+' corporate 
credit rating (CCR) on TMM Holdings L.P. (Taylor Morrison) on CreditWatch with 
positive implications (see list). Our 'BB-' issue-level rating on the 
company's unsecured senior notes remains unchanged. Since our recovery 
criteria generally limits recovery ratings on unsecured debt issued by 
corporate entities with corporate credit ratings of 'BB-' or higher to no 
higher than a '3' recovery rating, we would not expect Taylor Morrison's 
issue-level ratings to change if we raise our CCR on the company. However, 
while we expect that Taylor Morrison will likely implement capital structure 
changes in conjunction with its IPO that may impact recovery prospects, we do 
not currently expect these changes to affect our issue-level ratings, 
including a downgrade below the corporate credit rating.

The positive CreditWatch placement follows the recent filing of an S-1 
registration statement with the SEC, indicating the homebuilder's intention to 
raise equity through an initial public offering (IPO). The company will use 
proceeds from the proposed equity offering for working capital and general 
corporate purposes, which may include the repayment or repurchases of debt and 
to fund acquisitions. 

In our view, we expect the successful completion of an IPO to be positive for 
credit quality. Taylor Morrison will be subject to SEC reporting requirements 
and disclosures as a public company, which will further bolster transparency, 
particularly surrounding financial policy. Longer term, completion of the IPO 
transaction could also provide a potential exit strategy for the company's 
current private equity sponsors that would not impair credit quality, and 
would bolster liquidity by providing access to additional capital sources. We 
do not expect an IPO to cause significant deleveraging since we believe the 
company will use the majority of the IPO proceeds to fund investment in land 
and inventory in anticipation of higher revenue growth over the next several 

We plan to resolve the CreditWatch placement once Taylor Morrison has 
completed its IPO and finalized its capital structure. The CreditWatch 
placement reflects our expectation that we could raise our CCR on Taylor 
Morrison by one notch if the proposed IPO transaction closes as planned. 
Issue-level ratings on the homebuilders' senior unsecured notes, which we 
currently rate 'BB-' (one notch higher than the corporate credit rating), 
would likely remain unchanged since Standard & Poor's general criteria 
guidelines generally limit recovery ratings on unsecured debt issued by 
corporate entities with CCRs of 'BB-' or higher to no higher than a '3' 
recovery rating. This limitation is designed to account for the risk that 
recovery prospects for higher rated issuers are at greater risk of being 
impaired by the issuance of additional secured or pari passu debt prior to 
default. (Please see "Criteria Guidelines For Recovery Ratings On Global 
Industrials Issuers' Speculative-Grade Debt," published on Aug. 10, 2009.) At 
this time, we do not expect any potential capital structure changes to cause 
our issue-level ratings on Taylor Morrison to be notched down below the CCR, 
but we will monitor the company's progress toward completion of the IPO and 
potential additional capital markets activities over the next few months.

Temporary telephone contact numbers: Susan Madison (201-259-1034); Jaime 
Gitler (212-438-1000).

Related Criteria And Research
     -- Industry Report Card: U.S. Homebuilders Pivot Toward Growth, Oct. 17, 
     -- Issuer Ranking: U.S. Homebuilders, Strongest To Weakest, Oct. 12, 2012
     -- Credit FAQ: Knowing The Investors In A Company's Debt And Equity, 
April 4, 2006
     -- Use Of CreditWatch And Outlooks, Sept. 14, 2009
     -- Key Credit Factors: Global Criteria For Single-Family Homebuilders, 
Sept. 27, 2011

Ratings List

CreditWatch Action
                                        To                 From
TMM Holdings L.P.
 Corporate Credit Rating                B+/Watch Pos/--    B+/Stable/--

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below