Fitch Downgrades TOUSA, Inc.'s IDR to 'D'

Business Wire, Jan 29, 2008

NEW YORK -- Fitch Ratings has downgraded TOUSA, Inc.'s Issuer Default Rating (IDR) to 'D' from 'C' following today's announcement that the company filed for Chapter 11 bankruptcy protection. The following ratings have been affirmed:

--Secured revolving credit facility at 'CCC/RR3';

--First lien secured term loan at 'CCC/RR3';

--Second lien secured term loan at 'C/RR6';

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

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

--Preferred stock at 'C/RR6'.

Fitch's Recovery Rating (RR) of '3' on TOUSA's secured revolving credit facility ($150 million outstanding and $213.9 million of letters of credit outstanding as of Sept. 30, 2007) and $200 million secured first lien term loan indicate good (50%-70%) recovery prospects for holders of this debt issue. TOUSA's exposure to performance / surety bonds and the possibility that part of these contingent liabilities would have a claim against the company's assets were considered in determining the recovery for the first lien debt holders. The 'RR6' on TOUSA's second lien term loan, 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, Inc. today filed for Chapter 11 bankruptcy protection. Citigroup will provide TOUSA with $150 million in debtor-in-possession financing during the bankruptcy reorganization. TOUSA will have access to the funds to implement its restructuring plan and pay normal operating expenses, including employee wages, construction costs, and payments to suppliers. The financing will be senior to existing debt and requires Bankruptcy court approval. At the date of filing, TOUSA had approximately 2,500 homes in backlog.

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.