Correction - Fitch Downgrades TOUSA, Inc's IDR to 'C'; Ratings Still on Watch Negative

Business Wire, Nov 16, 2007

NEW YORK -- This is a correction for a message issued on Nov. 15, 2007. Ratings other than the IDR remain unchanged and on Rating Watch Negative.

Fitch Ratings has downgraded TOUSA, Inc. (TOUSA) (NYSE:TOA) Issuer Default Rating (IDR) to 'C' from 'CC'. The IDR remains on Rating Watch Negative. Also, the following ratings remain on Watch Negative:

--Secured revolving credit facility at 'CCC/RR2';

--First lien secured term loan at 'CCC/RR2';

--Second lien secured term loan at 'C/RR5';

--Senior unsecured notes at 'C/RR6';

--Senior subordinated notes at 'C/RR6';

--Preferred stock at 'C/RR6'.

Fitch's Recovery Rating (RR) of '2' on TOUSA's $700 million secured revolving credit facility and $200 million secured first lien term loan indicates superior (70%-90%) recovery prospects for holders of this debt issue. The 'RR5' on TOUSA's $300 million secured second lien term loan indicates below average recovery prospects (10%-30%) in a default scenario. The 'RR6' on TOUSA's senior unsecured notes, senior subordinated notes and preferred stock issuance indicates poor (0%-10%) recovery prospects. Fitch applied a liquidation value analysis for these recovery ratings.

TOUSA announced yesterday a net loss of $619.7 million, which included a $40.7 million increase in the pre-tax loss contingency relating to its Transeastern JV settlement and $530.6 million of pretax charges resulting from goodwill impairments and the write-down of assets including, inventory impairments of investments in unconsolidated joint ventures, and write-off of deposits and abandonment costs. As of Sept. 30, 2007, TOUSA had stockholders' equity of $48.3 million.

The downgrade of TOUSA's IDR reflects the substantial doubt about the company's ability to continue as a going concern. The company is considering all available in and out of court restructuring and reorganization alternatives, including a possible Chapter 11 filing. Such alternatives include, among other things, restructuring its capital structure through the exchange of some or all of its outstanding indebtedness for equity in the company. TOUSA's ability to continue as a going concern will depend upon its ability to restructure its capital structure including exchanging a large portion of the company's outstanding indebtedness for equity. The company has asked its bondholders to organize as a group in order to discuss such restructuring and reorganization alternatives and the company has commenced discussions with its representatives, although these discussions are at a very early stage.

TOUSA's ratings remain on Rating Watch Negative for the possibility of further actions. The company continues to face challenging housing conditions in most of its markets and a turn-around in the near term is unlikely. The completion of the Transeastern JV global settlement left TOUSA in a highly leveraged position at a time when housing market conditions are extremely depressed. The company's liquidity position also remains uncertain as the company faces further possible covenant violations under its bank credit agreements and bond indentures.

Fitch's Recovery Ratings (RR) are a relative indicator of creditor recovery prospects on a given obligation within an issuers' capital structure in the event of a default.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.