KB Home

More importantly, KB has repaid rather than refinanced multiple tranches of debt, a rarity in the industry over these past few years. Indeed, although we believe the company currently has the capacity to prepay its $450 million in senior notes when they mature later this year, we expect it to repay the bonds at their December maturity. The stable outlook reflects revenue improvements in 2021 that we expect to generate more than $900 million in EBITDA, amid robust overall demand. This strong EBITDA growth and declining interest costs should further enhance coverage ratios. We expect debt to EBITDA to remain firmly below 3x and EBITDA to cover interest by almost 8x this year. We could raise our rating on KB

...KB Home continues to prioritize debt reduction. Despite EBITDA declining to just over $500 million in fiscal 2020 (ending November) from almost $600 million two years prior (fiscal 2018), KB's net borrowings have been cut by nearly a third over this same span, to less than $1.3 billion. KB Home now carries higher cash balances and minimizes drawings on its bank line. In fact, the company has not drawn on its credit facility since 2019. More importantly, KB has repaid rather than refinanced multiple tranches of debt, a rarity in the industry over these past few years. Indeed, although we believe the company currently has the capacity to prepay its $450 million in senior notes when they mature later this year, we expect it to repay the bonds at their December maturity. The company's build-to-order business model, though costly in the early COVID-19 recovery, should show benefits in a protracted downturn, which we do not forecast. In hindsight, the company missed the opportunity to make sales...

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