S&P Upgrades Ratings on NVR Inc

Business Wire, May 23, 2000

Business Editors

NEW YORK--(BUSINESS WIRE)--Standard & Poor's

May 23, 2000-- Standard & Poor's today upgraded its corporate credit rating on NVR Inc. In addition, outstanding ratings were raised on the company's senior unsecured notes, and preliminary ratings were raised on the company's shelf registration (see list). The outlook has been revised to stable from positive.

The upgrades acknowledge NVR's strengthened financial measures and financial flexibility as the company continues to modestly improve its geographic diversification. NVR has a solid market position, a prudently managed inventory, and strong cash flow protection measures. These strengths are offset by the company's modest, but growing, tangible book equity.

McLean, Va.-based NVR operates two business segments: Home building through Ryan Homes, NVHomes, and Fox Ridge Homes; and financial services through NVR Mortgage Finance Inc. and NVR Settlement Services Inc. NVR ranks sixth among national homebuilders in terms of 1999 home building revenues (US$1.9 billion), and is the leading builder in its core Washington, D.C. and Baltimore, Md. markets. While the majority of NVR's business (54% of 1999 new orders) is still derived from the Washington, D.C./Baltimore region, this geographic concentration has improved from recent levels (57% in 1998 and 61% in 1997). As the company pursues increased penetration of its newer markets, geographic concentration in the Washington D.C./Baltimore region is expected to decline further. NVR's prudent inventory management helps to offset this concentration risk and should also provide the company with some stability during a housing slowdown.

The company holds minimal unsold inventory and controls all of its lots through options. This provides for excellent efficiencies, as NVR's inventory turns averaged greater than 5.0 times (x) over the previous six years, which is the strongest in the home building sector. Coverage measures are excellent, with EBIT (earnings before interest and taxes) to interest incurred at greater than 15.0x overall presently and a strong 9x average over the previous three years. NVR does not capitalize interest in its inventory, further enhancing the strength of its coverage measures.

Tangible book equity (net of US$70 million excess reorganization value and goodwill) reached US$151.5 million in the first quarter of 2000 and is expected to continue to benefit from increased retained earnings at this point in the homebuilding cycle. While book leverage of about 41% is moderate for the rating, leverage levels would rise to 50% if adjusted to tangible book equity. This adjusted leverage level has improved from 64% at year-end 1998. Internal cash (US$108 million at the homebuilding division) and external liquidity sources (US$100 million unsecured revolving credit facility, expiring May 2002, of which US$60 million is currently committed) provide ample financial flexibility. The addition of a US$400 million shelf (US$255 million remaining balance) contributes to external liquidity.

OUTLOOK: STABLE

Management has adhered to a conservative financing plan, while reducing geographic exposure over the prior six years. NVR is expected to demonstrate continued success in managing modest geographic expansion and maintaining a conservative stance with regard to share repurchases, inventory management, and leverage levels, Standard & Poor's said.---CreditWire

OUTSTANDING RATINGS REVISED

                                    Rating
NVR Inc.                          To      From
Corporate credit rating           BB      BB-
US$145 million senior
    notes due 2004                BB      BB-
US$400 million shelf
    registration                  BB/B+   BB-/B