Lennar Sells Senior Notes

Lennar Corporation ( LEN - Analyst Report ) recently sold senior notes worth $50 million due on Nov 15, 2022 to initial purchasers, who in turn will resell the senior notes to qualified institutional buyers. The senior notes, which carry an interest rate of 4.75%, were sold at a price of 98.25% and generated total outstanding principal amount of $575 million. The principal amount is expected to be delivered and paid for on Apr 17, 2013.

Prior to this, Lennar had sold its senior notes due 2022 worth $175 million on Feb 4, 2013 and $350 million worth of notes on Oct 23, 2012.

Lennar intends to use the net proceeds for working capital and other corporate expenditures, which may include repurchase or repayment of its other outstanding senior notes or any other debt.

Most of the company’s short-term financing, such as expenses for land acquisition and development activities and other general operating needs are met with cash generated from operations and proceeds from debt issuances.

Lennar Corporation’s debt position remains very weak. Net homebuilding debt amounted to $3.39 billion as of Feb 28, 2013 versus $2.86 billion as of Nov 30, 2012, reflecting a 370 basis point increase in net debt-to-capitalization ratio of 49.3%. Lennar had cash and cash equivalents of $1.11 billion from homebuilding as of Feb 28, 2013 compared with $1.15 billion as of Nov 30, 2012.

However, Lennar beat the Zacks Consensus Estimate on both the top and bottom lines in the first quarter of 2013. Home closings, new orders and backlog were all up in double digits from the year-ago period. The company expects to continue to achieve further profitability in fiscal 2013 on the back of rising home prices, strong liquidity position, solid backlog, strategic land acquisitions and new community openings.

Lennar carries a Zacks Rank #2 (Buy).

Stocks in the homebuilding sector that are performing well and deserve a mention include Ryland Group Inc. ( RYL - Snapshot Report ) and D. R. Horton Inc. ( DHI - Analyst Report ) carrying a Zacks Rank #1 (Strong Buy), and Hovnanian Enterprises Inc. ( HOV - Snapshot Report ) , carrying a Zacks Rank #2 (Buy).