S&P lowers Centex to junk

Standard & Poor's said it lowered Centex Corp.'s corporate credit and senior unsecured debt ratings to BB+ from BBB-.

The outlook remains negative.

The agency said the downgrade acknowledges Centex's very weak profits from ongoing operations and sizable noncash charges, which have materially eroded shareholder equity and compelled the homebuilder to seek additional covenant relief. S&P expects that, while lenders will be accommodative, Centex will likely be forced to accept more restrictive terms.

Additionally, the agency said it is probable that Centex's borrowing capacity will be reduced, which would heighten S&P's growing concern regarding the company's financial flexibility given its disappointing operating cash flows thus far during the housing correction.

That being said, the agency expects Centex's cash position to improve during the company's typically seasonally strong fourth quarter ending March 31 and that the company's aggressive efforts to trim overhead and land holdings will position Centex more competitively than many smaller peers when the housing market eventually stabilizes.

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