$100 million bond offering completed by Ryland Group Homebuilding

July 25, 1996|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Ryland Group Inc. said yesterday that it completed a $100 million bond offering that will provide greater financial flexibility and halve the outstanding balance on a revolving credit line.

But the 10.5 percent unsecured senior notes and the 10-year term they offer will come at a price: The new debt's interest rate is more than 3 percentage points higher than the floating-rate bank line that Ryland is paying down.

"This was a transaction to reduce risk on our balance sheet," said Bruce Haase, Ryland's treasurer. "You pay up for flexibility. When you go from a floating interest rate to a fixed one with a 10-year commitment, it's worth it. We didn't want to have to continually face the risk of having to refinance the debt we use from our credit line." He added that the interest rate on the $400 million bank credit line fluctuates seasonally, depending on Ryland's cash flow and other factors.

With the bond offering by the nation's third-largest homebuilder, the outstanding balance on its credit line through Chase Manhattan and NationsBank Corp. will be reduced to $91 million. Ryland's total debt level will still be $1.1 billion, according to a prospectus associated with the bond offering.

The bonds, rated BB by Standard & Poor's Corp. and Ba2 by Moody's Investors Service Inc., were purchased by institutional buyers such as Fidelity Investments, Haase said.

"This will help in that, long-term, it will lower their interest expense," said Matthew Roswell, a Legg Mason Wood Walker Inc. analyst who tracks Ryland. "But their positive first-quarter results also helped, because it's easier to sell something when you can point to positive changes. A lot of the market is perception, and the perception on Wall Street is that Ryland is coming around."

Pub Date: 7/25/96

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