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Moody's downgrades Realogy ratings

Moody's downgraded its corporate family rating on Realogy Holdings Corp. unit Realogy Group LLC to B1 from Ba3.

The rating agency also downgraded Realogy's probability of default rating to B1-PD from Ba3-PD, senior secured bank credit facility rating to Ba2 from Ba1 and senior unsecured note rating to B3 from B2, while affirming the speculative-grade liquidity rating at SGL-2. It kept the rating outlook at negative.

The rating agency attributed the action to its expectations that Realogy's debt-to-EBITDA will remain high and competitive pressures will continue to escalate amid uncertain economic conditions. The company has high leverage at 6.8x debt-to-EBITDA, while its free cash flow-to-debt ratio is only about 5%, as of June 30, Moody's said.

Moody's noted that the company's brokerage operations have faced greater competitive strain over the past two years. The rating agency said it expects stable or declining interest rates and better existing home sale volume and average sales prices in 2020.

The negative outlook is based on Moody's concerns that pressure from increased competition and continued weakness in existing home sales could delay the company's path to lower financial leverage and higher free cash flow, according to the rating agency.