NVR Inc. Ratings Raised to 'B+' by S&P;Outlk Pos

Business Wire, Oct 7, 1997

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 10/7/97 -- Standard & Poor's today raised its corporate credit and senior unsecured debt ratings of NVR Inc. to single-'B'-plus from single-'B'.

The outlook remains positive.

The rating acknowledges NVR's strong market position, its prudently managed inventory position, and very solid cash flow protection measures, which are offset to some extent by its geographic concentration and moderate tangible book leverage.

McLean, Va.-based NVR is a holding company that, through its subsidiaries, operates two business segments -- home building through Ryan Homes and NVHomes, and financial services through NVR Mortgage Finance, Inc. NVR is ranked eighth among national homebuilders (sixth, excluding two manufactured home builders) in terms of 1996 home building revenues ($1,046 million), and it is the leading builder in its core Washington, D.C. and Baltimore, Md. markets. While the company has expanded its operations into new markets (including New Jersey, Eastern Pennsylvania, Ohio, South Carolina, and Tennessee), the large majority of its business (66% of 1996 new orders) is still derived from the Washington, D.C./Baltimore region. The company's geographic concentration has improved from last year's level (69%), and the company expects this concentration to continue to decline as NVR penetrates its newer markets. NVR's prudent inventory management does help to offset this concentration risk and should also provide NVR with some stability during a housing slowdown. The company holds minimal unsold inventory and it controls all its lots via option. This provides for excellent efficiencies, as NVR's inventory turns averaged greater than 5.0 times (x) over the previous three years, which is the strongest in the home building sector.

While book leverage below 50% is moderate for the rating, leverage levels rise to around 67%, if adjusted to tangible book equity (i.e., net of $84.8 million excess reorganization value as of June 30, 1997). However, coverage measures are excellent at greater than 4.0x (EBIT/interest incurred) and remain very strong for the rating category. Internal ($40 million cash) and external ($60 million bank revolver) liquidity sources should provide for adequate financial flexibility.

OUTLOOK: POSITIVE

The outlook acknowledges management's adherence to a fairly conservative financing plan since emerging from bankruptcy four years ago. Future ratings improvements will be dependent on NVR's success in managing future geographic expansion, maintaining a conservative stance with regard to inventory management, and sustaining tangible book leverage at a moderate level. -- CreditWire

CONTACT: Elizabeth Campbell, New York (1) 212-208-8807

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