Fitch: Preserving Liquidity a Vital Building Block for U.S. Homebuilders

Business Wire, Oct 1, 2007

NEW YORK -- With U.S. homebuilders positioning themselves reasonably well as to liquidity amid the sharper than expected housing downturn, maintaining those levels will be an important factor in helping the sector withstand the current overall market decline, according to Fitch Ratings in a new report.

'Though the public homebuilders cannot significantly influence profitability, they can manage their balance sheets and their liquidity,' said Managing Director Bob Curran. 'Most builders have generated meaningful free cash flows while terming out borrowings and maintaining access to committed bank facilities, providing ample room to handle maturities and fund working capital needs.'

Generating cash on the balance sheet has been a plus for the sector, with about $3.1 billion of cash on builders' balance sheets through June 2007 and approximately $6 billion expected at year-end 2007 and $6 billion for 2008 (compared to $5.4 billion for 2006). Total balance sheet cash continues to rise as debt coming due continues to decline, with the aggregate debt maturity schedule consisting of approximately $1.4 billion in 2007 and $764.3 million in 2008.

Though refinancing risk has surfaced as a concern for the broader corporate markets due to growing market volatility, that does not seem to be the case for homebuilders, who, according to Curran, 'did a very good job of pushing out debt maturities during the 2003-2006 period, plus revolving credit facility maturity dates are now typically 2010 or beyond.'

This report is part of a larger global liquidity review initiated by Fitch in May 2007 of its rated issuers across corporate finance as a number of liquidity-based sensitivities in the market continue to influence both issuer and investor decisions. The review's goal is to gain a better perspective on the magnitude of maturities that would be coming due over the next 24 months per each North American corporate sector, and what organic and contingent sources were available to meet these obligations during this period of the credit cycle.

'Reassuring Liquidity Strength for Most U.S. Homebuilders' is available on the Fitch Ratings web site at www.fitchratings.com.

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.