Lennar Corporation
(
LEN
) announced that it intends to issue senior notes worth $350
million due on November 15, 2022 to initial purchasers, who
resold senior notes to qualified institutional buyers. The senior
notes, which carry an interest rate of 4.75% are expected to be
delivered and paid for on October 23, 2012.
Lennar intends to use the net proceeds for working capital and
other corporate expenditures, which may include repurchase or
repayment of its other outstanding Senior Notes or any
other debt.
Most of the company's short-term financing, such as expenses for
land acquisition and development activities and other general
operating needs are met with cash generated from operations and
proceeds from debt issuances.
Lennar Corporation's debt position has deteriorated recently.
Homebuilding debt amounted to $3.67 billion as of August 31, 2012
versus $3.47 billion as of May 31, 2012, reflecting a net
debt-to-capitalization ratio of 47.7%. Lennar had cash and cash
equivalents of $692.0 million from homebuilding as of August 31,
2012, compared with $667.1 million as of May 31, 2012.
Our Recommendation
Currently, we have a Neutral recommendation on Lennar
Corporation, a peer of
KB Home
(
KBH
). The company holds a Zacks #2 Rank (short-term 'Buy'
rating).
Lennar has witnessed solid year-over-year growth for new home
orders, average selling prices and home closings in all the three
quarters of 2012. Margins have also been above average, despite
rising costs, driven by strong operating leverage. Lennar also
appears to be well positioned for growth in the rest of the
fiscal year. We believe that the company is performing better
than its peers by increasing sales prices, reducing incentives,
improving volumes and by making opportunistic land acquisitions.
However, we would like to remain on the sidelines until we see a
broad-based housing recovery, which is currently concentrated in
high-end communities.
KB HOME (KBH): Free Stock Analysis Report
LENNAR CORP -A (LEN): Free Stock Analysis
Report
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