Moody's lowers KB Home

Moody's Investors Service said it downgraded KB Home's corporate family and probability-of-default ratings to Ba3 from Ba2, senior unsecured notes rating to Ba3 (LGD4, 54%) from Ba2 (LGD4, 51%) and senior subordinated notes rating lowered to B2 (LGD6, 95%) from B1 (LGD6, 93%).

The speculative grade liquidity rating was affirmed at SGL-2.

The outlook remains negative.

Moody's said the downgrades reflect expectation that the relatively easy period of cash flow generation, from sharp declines in land purchases, land development expenditures and in completed and unsold homes in inventory, is largely behind the company.

Ratings acknowledge that the company has been cash flow positive on a trailing 12-month basis for eight consecutive quarters, the agency said. The issuer is the second-most aggressive company in the industry in booking land impairments and has no debt maturities before 2011, Moody's said.

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