Several new issuers are expected to tap the high-yield homebuilding sector on the back of improving credit quality, according to two analysts who follow the sector. The whole sector is set to be moved up a notch by the rating agencies, says Rob Manowitz, analyst at UBS Warburg and a first-teamer on the 2002 Institutional Investor All-America Fixed-Income Team. Upgrades to existing issuers will open up the lower rungs of the ratings ladder to smaller regional players that may view the high-yield market as an opportunity to secure long-term fixed capital, Manowitz says. "There are probably something like a half dozen issuers out there that fit the characteristics the high-yield market is looking for," he argues. He declined to volunteer company names that fit this description.
Bob Curran, analyst at Fitch Ratings, says that while no new issuers have come across his desk to date, he would not be surprised if they do. "It seems logical that as other higher-rated homebuilders have come to market...others would come who are lower-rated, including initial issuers," he says. Curran argues that low interest rates and continued growth in the sector continue to make it attractive to raise capital.