Moody's rates Ryland notes Ba3

Moody's Investors Service said it assigned a Ba3 (LGD4, 53%) rating to the proposed $300 million 6 5/8% senior unsecured notes due 2020 of Ryland Group, Inc. and affirmed its corporate family and probability-of-default ratings at Ba3, senior unsecured notes at Ba3 (LGD4, 53%) and speculative-grade liquidity rating at SGL-2.

The outlook is stable.

Proceeds from the new notes will be used to call the remaining $200 million outstanding of Ryland's senior notes due 2012, with a portion of the remainder used to finance some of its senior notes due 2013 and 2015.

The agency said the Ba3 corporate family reflects continued weakness in several of Ryland's key credit metrics but acknowledges that each of these metrics should show some modest improvement in 2010 and 2011. In addition, the ratings recognize that the company's ability to generate robust cash flow from inventory reduction and tax refunds has largely come to an end and that it will need to begin generating most of its cash flow from actual earnings, Moody's said.

Lastly, the ratings incorporate the company's ongoing operating losses, its small size relative to its peer group and the cyclicality of the homebuilding industry, the agency added.

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