Fitch Ratings affirmed the issuer default rating of Toll Brothers Inc. at BBB-.
The outlook is stable.
Fitch also affirmed a rating of BBB- on Toll's senior unsecured debt, unsecured revolving credit facility and unsecured term-loan facility.
The affirmation and outlook come on the back of Toll's market position as the "preeminent" public builder of luxury homes, the successful implementation of its operating model and relatively stable debt-protection measures, according to Fitch's report.
Fitch cited the homebuilder's improved debt/capitalization ratio of 40.6% as at Oct. 31, 2017, compared to 45.7% in fiscal year 2016, as well as an improved debt/EBITDA ratio of 3.0x in fiscal 2017, compared to a ratio of 4.7x in 2016, as factors influencing the rating decision.
The agency assumes that these credit metrics will remain relatively stable in the 2018 fiscal year ending Oct. 31, with net debt/capitalization estimated at under 40% and debt/EBITDA projected at 3.0x to 3.5x.
Fitch also anticipates that Toll's investment in land and development activities during the ongoing 12-month term will be higher, leading to cash flow from operations between $250 million and $350 million.
