Builder Debt Offering Gets "BB" Rating

Fitch Ratings, New York has assigned a 'BB' rating to D.R. Horton's $450 million offering of convertible senior notes due 2014 and placed a negative ratings outlook on the company. "This offering was an opportunistic access of the capital markets which might not be as accessible to homebuilders in the future. Liquidity was enhanced at a lower cost than the debt it is likely to replace with limited constraints from covenants," the ratings agency said. When Fitch issued its statement, the offering was for only $400 million; Ft. Worth-based Horton increased its size by $50 million in addition to an option for the underwriters to purchase $50 million to cover overallotments. The initial conversion rate for the notes is 76.5697 shares of Horton common stock per $1,000 principal amount of notes (representing an initial conversion price of approximately $13.06 per share of common stock), subject to adjustment in certain events. Citi acted as sole book-running manager in connection with the offering, and J.P. Morgan, UBS Investment Bank and Wachovia Securities acted as joint lead managers.