S&P puts William Lyon Homes on developing watch

Standard & Poor's said it placed William Lyon Homes' B+ corporate credit rating and B senior unsecured debt rating on CreditWatch with developing implications following the announcement that the company's chairman, chief executive officer and controlling shareholder, William Lyon, has proposed taking the company private.

Lyon and certain trusts, of which his son is sole beneficiary, control nearly 75% of the company's common shares. Lyon has offered to acquire the outstanding publicly held minority stake in the company for $93 per share in cash, without interest and less any required withholding taxes, representing a 23% premium over the March 16 pre-offer closing price. Lyon intends to finance this transaction through a $267 million secured loan from Lehman Commercial Paper Inc. and Lehman Brothers Inc.

S&P said the tender offer expires April 13, unless extended, and is subject to a non-waivable condition that at least a majority of the shares held by the unaffiliated stockholders be tendered pursuant to the offer. If the tender is successful, the agency said it expects the rated senior notes will remain outstanding and believes management will not deviate from its existing business and financial policies.

The ratings on the company reflect its good market position, albeit a concentrated geographic business and its improved balance sheet and liquidity, which have contributed to improved flexibility and reduced reliance on joint ventures, the agency said.

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