Mattamy Group Corp.

The stable outlook reflects credit measures that currently provide cushion against moderate deterioration should housing demand reflect more moderate consumer spending patterns over the next 12 months. Leverage would have to increase by more than a full turn before crossing our 4x downgrade threshold at the current rating. Additionally, homebuilder cash flows tend to increase during slower periods, even as EBIDTA contracts, because lot purchases are curtailed and inventory is liquidated. This provides funds to service and repay debt. We could raise our rating over the next 12 months if leverage sustainably declined below 2x EBITDA because economic recovery in the U.S. and Canada is much stronger than we expect and foot traffic and sales return to 2019 levels. This

...Mattamy holds the leading market share in the Greater Toronto Area, the largest housing market in Canada. In S&P Global Ratings' view, Mattamy Group's position in the GTA, Canada's largest market, gives it a competitive advantage over its peers due to government-imposed land development restrictions and Mattamy's ample supply of land in the region. This combination not only supports the company's long-term growth but also makes it increasingly difficult for competitors to expand their operations in the GTA. We note that this exposes Mattamy to concentration risk, and a housing downturn in the Canadian markets, particularly in the GTA, could drastically affect Mattamy's earnings and credit ratios. Our assessment of Mattamy also takes into account the company's gross margins, which we view as stronger than peers. Mattamy's adjusted gross margin of about 25% is solidly higher than peers Brookfield Residential Properties Inc. (B/Negative/--), Meritage Homes Corp. (##/Positive/--), and Taylor...

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