Fitch Ratings upgraded the ratings of Lennar Corp., including the company's long-term issuer default rating to BBB- from BB+, while revising its outlook to stable from positive.
Earlier in 2018, Lennar completed its merger with CalAtlantic Group Inc. in a deal worth about $9.7 billion, creating the largest homebuilder in the U.S. in terms of revenues.
The rating agency said it believes that the combined entity's scale is an advantage in local metro markets, as home builders seek buying efficiencies amid increasing costs.
Lennar's senior unsecured debt and unsecured revolving credit facility ratings were also upgraded to BBB- from BB+/RR4. Fitch also upgraded and withdrew CalAtlantic's long-term issuer default rating to BBB- from BB+, and its convertible senior notes to BBB- from BB+/RR4, while revising the company's outlook to stable from positive.
Fitch expects Lennar's credit metrics will keep improving amid the integration of the merged entities and as the company uses free cash flow to settle debt.