Research Update: Shea Homes L.P. Outlook Revised To Stable From Negative; Ratings Affirmed

Walnut, Calif.-based Shea Homes L.P.'s credit profile is strengthening largely because of profit improvements we expect to result from the sharply higher backlog at the beginning of 2021. Complementing these higher anticipated profits are land strategies that help reduce capital outlays and limit direct land-based risks. We revised our outlook on Shea to stable from negative. At the same time, we affirmed the 'B+' issuer credit rating on the company and the 'BB-' issue-level rating on its senior unsecured notes. The stable outlook reflects our expectation that debt to EBITDA will decline to 3.5x in 2021, as the EBITDA margin climbs to 25% with no change in its level of debt. Our stable outlook on Shea Homes reflects our forecast

...- Walnut, Calif.-based Shea Homes L.P.'s credit profile is strengthening largely because of profit improvements we expect to result from the sharply higher backlog at the beginning of 2021. - Complementing these higher anticipated profits are land strategies that help reduce capital outlays and limit direct land-based risks. - We revised our outlook on Shea to stable from negative. At the same time, we affirmed the 'B+' issuer credit rating on the company and the '##-' issue-level rating on its senior unsecured notes. - The stable outlook reflects our expectation that debt to EBITDA will decline to 3.5x in 2021, as the EBITDA margin climbs to 25% with no change in its level of debt....

Research Update