Fitch puts Technical Olympic on watch

Fitch Ratings said it placed Technical Olympic USA, Inc.'s ratings on ratings watch negative, including its B+ issuer default rating , BB- senior unsecured debt and revolving credit facility with recovery ratings of RR3 and B- senior subordinated debt with a recovery rating of RR6.

The agency said the rating watch placement stems from the severe slowdown in Technical Olympic's major markets and financial difficulties being experienced by the company's Transeastern joint venture. Technical Olympic recently announced that the joint venture is exploring options to provide sufficient liquidity, including restructuring land bank obligations and requesting waivers from its lenders regarding events of default and permitting future advances under the revolver.

Currently, Technical Olympic and its joint venture partner do not intend to contribute capital under the existing capital structure, and the debt of the joint venture is non-recourse to Technical Olympic. However, Fitch said this joint venture is significant to Technical Olympic and the company is unlikely to fully distance itself from it. Furthermore, there is a potential for an asset impairment charge relating to Technical Olympic's investment in the Transeastern joint venture that totals about $130 million to $140 million, the agency said.

Technical Olympic's debt to EBITDA was 2.2x for the last 12 months ended June 30.

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