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Fitch upgrades KB Home rating, changes outlook

Fitch Ratings upgraded KB Home's long-term issuer default rating to BB- from B+ and revised the homebuilder's rating outlook to stable from positive.

The rating agency also affirmed KB Home's senior unsecured debt at BB- and changed its recovery rating to RR4 from RR3.

Fitch said Aug. 31 that the BB- rating was driven by the fact that KB Home is larger by size and has greater geographic diversity than M/I Homes Inc. and Meritage Homes Corp. It added that KB Home's credit metrics are comparable to most of its homebuilding peers, although they are weaker than Meritage Homes.

The rating agency also argued that KB Home largely caters to first-time home buyers, despite having a diversified customer and product focus, has meaningful exposure to the California market and generally adopts a low-risk homebuilding approach.