OVERVIEW Los Angeles-based KB Home reported weaker-than-expected results in its first quarter ended Feb. 29, 2012. In particular, the results reflected weaker orders due in part to challenges related to the company's transition to a new preferred mortgage provider. We lowered our corporate credit rating on KB Home to 'B' from 'B+', reflecting our belief that full-year results will fall below our prior base-case estimate and slow the company's rebound in profitability and key credit metrics. We also lowered the ratings on the company's senior notes to 'B' from 'B+'. Our ratings primarily reflect the company's highly leveraged financial profile stemming from the severe housing downturn that has substantially reduced KB Home's revenues and EBITDA. The negative outlook reflects the
