August 1, 2007 / 9:16 PM / in 12 years

S&P cuts Beazer Homes' ratings on weak earnings

NEW YORK, Aug 1 (Reuters) - Standard & Poor’s on Wednesday cut its ratings for Beazer Homes USA Inc. (BZH.N) and may cut again, citing weak earnings and further weakness in the home builder’s operations.

“The downgrades reflect further deterioration in Beazer’s home-building operations, which prompted additional noncash charges and another quarterly earnings loss,” S&P said in a statement.

Beazer posted a quarterly loss last week as it took charges for inventory and goodwill impairments and abandonment of land option contracts. [ID:nN26429179].

“The ongoing investigation related to the company’s mortgage operations and the potential for distractions at this very difficult point in the housing cycle also contributed to the rating actions,” S&P said.

Rumors swirling around Beazer spooked U.S. markets at midday on Wednesday. Beazer’s stock fell as much as 42 percent before paring losses to trade 18 percent lower after Beazer said talk that it would file for bankruptcy was unfounded. For details, see [ID:nN01350718].

S&P lowered Beazer’s corporate credit and senior unsecured debt ratings one notch to “BB-minus,” three levels into junk territory, from “BB.”

The outlook remains negative, which means S&P could cut again in the next two years.

Beazer’s 8.375 percent notes maturing in 2012 fell 6 cents to 78 cents on the dollar on Wednesday, according to MarketAxess.

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