Citing expectations the housing downturn will extend into next year, Moody’s Investors Service downgraded real estate giant Realogy’s corporate credit and probability of default ratings on Friday.The downgrade prompted a sell-off Realogy’s senior notes Friday. Realogy owns real estate brokers Century 21 and Coldwell Banker, as well as a number of housing relocation and title service providers.
Moody’s lowered the Parsippany, N.J., company’s corporate credit rating and probability of default ratings further into subprime status, from B3 to Caa1.
“The downgrade reflects the severe nature of the current residential real estate downturn, a highly leveraged capital structure and modest covenant cushions,” Moody’s said in its report. “The ratings anticipate further revenue declines over the next few quarters as the real estate downturn continues into 2009.”
The rating agency said Realogy may have to seek a waiver on its financial covenants in coming quarters, which could be expensive and difficult given the tough credit environment.Following the downgrade, Realogy’s 12.375% subordinated notes due 2015 traded down one point Friday, to about 45 cents on the dollar, according to Standard & Poor’s Leveraged Commentary & Data News. The company’s 10.5% notes due 2014 also fell a point, to about 62 cents on the dollar, LCD News said