If HOV subprime, what is SPF?
If HOV is forced to raise capital at 11 1/2% immediately following a $150 million dollar equity offering and its rating is Baa, how will SPF raise money with the downgrade tonight by S&P to CCC.
HOV has twice the backlog as SPF and is in compliance with its debt covenants. It has not been cut off from its mortgage facility and has much less JV exposure. Further, it has less debt than SPF and better geographical diversification.
With homebuilding margins at current levels, how can any builder reasonably sustain paying 11 1/2%.
By keeping America's public builders overleveraged, it forces them to build to keep cash coming in, even if it is negative cashflow. This is just what America needs with the current oversupply of housing and default notices increasing dramatically.
And we cheer this behavior on.................?