Moody's may downgrade Pulte, Centex

Moody's Investors Service said it placed the Ba3 corporate family, probability-of-default and senior unsecured debt ratings of Pulte Homes, Inc. and Centex Corp. under review for possible downgrade.

This review follows the announcement by the two companies of their impending estimated $3 billion stock-for-stock merger, with Pulte as the surviving entity.

The review will focus on the increased risks that the combined entity will be assuming. Specifically, the agency said it will assess how the combined land positions of the two companies will impact the combined company in an industry that is reeling under the weight of excess and slow-moving inventories, declining orders, elevated cancellation rates, significant and continuing pricing pressures and massive impairment charges and that is trying to buck the stiff headwinds bestowed by low consumer confidence, rising unemployment and credit markets that remain a major hurdle to a significant cohort of potential homebuyers.

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