Will KB Homes Restructure Its Debt?
KB Homes is not out of the homebuilders’ wilderness just yet. Chief executive Jeffrey Mezger admitted on the third-quarter earnings call that economic conditions continue to work against KB Homes, and the profit outlook for the builder remains negative going forward into 2010. In addition, although management has worked hard to better its capital structure during this housing downturn, a review of the earnings quarterly filed with the SEC suggests an increased probability of default on its family of $1.8 billion in debt. KB Homes, the fifth largest U.S. homebuilder, has focused on entry-level and first-step trade-up housing. First-time buyers now account for 80 percent of sales, up from 40 percent back in 2006. Not withstanding improvements in housing…
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