A $600 million dividend recap for Rhodes Homes hit the market last Tuesday with Credit Suisse First Boston driving the deal. The deal consists of a five-year, $450 million term loan "B" and a five-and-a-half year, $150 million second-lien term loan. Pricing could not be determined. Based in Las Vegas, Rhodes develops communities in Nevada.
Moody's Investors Service assigned a Ba3 rating to the term loan and a B1 rating to the second lien. The ratings are based on Moody's expectation that the company will maintain level collateral coverage through 2007 and be able to reduce debt/total value starting in 2008, the rating agency says in the report. It also anticipates that $280 million cash on hand the company will have following the close of the deal will be used for seasonal working capital needs and for future land purchases, which will add to the collateral package. The ratings also take into account the company's aggressive pro forma adjusted debt leverage, relatively small size and scale, limited geographic reach and the cyclic nature of the homebuilding development industry. Calls to the company were not returned.