) announced that it intends to issue senior notes worth $350
million due on December 15, 2017 to initial purchasers, who resold
the 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 July 20, 2012.
Lennar intends to purchase its outstanding 5.95% senior notes due
2013 in the immediate future with a portion of the net proceeds
from the sale of these senior notes. The rest of the net proceeds
will be used for working capital and other corporate expenditures.
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 strategically focuses on
acquiring higher margin well- positioned communities, in order to
increase margins and sales orders.
However, Lennar Corporation's cash and debt positions have
deteriorated. Lennar had homebuilding cash and cash equivalents of
$667.1 million as of May 31, 2012 compared with $1.02 billion as of
November 30, 2011.
The average outstanding debt of the company was $3.5 billion for
the six months ended May 31, 2012, versus $3.1 billion for the six
months ended May 31, 2011. Net debt from homebuilding amounted to
$2.80 billion as of May 31, 2012, reflecting a net
debt-to-capitalization ratio of 46.9%.
Currently, we have a Neutral recommendation on Lennar
Corporation. The company holds a Zacks #2 Rank (short-term Buy
Overall, we are encouraged by the company's impressive first
half results and improved profitability. We believe Lennar is
performing better than its peers by increasing the prices of its
products, reducing incentives, improving volumes and investing in
well positioned high margin communities. However, despite
management's optimism regarding improving home demand trends, we
believe that the overall housing recovery will be slow and the
company needs to focus on improving its cash position.
LENNAR CORP -A (LEN): Free Stock Analysis
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Based in Miami, Florida, Lennar Corporation is engaged in
homebuilding and financial services in the US. Lennar offers multi
level residential buildings, single-family attached and detached
homes, communities and suburban communities, communities with golf
course and more.