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KB Home Sells $400 Million in Bonds


monopoly   KB Home sold $400 Million in bonds in a declining market according to this Bloomberg, March 2104 article –KB Home Sells $400 Million in Bonds. This represented almost 1/3 of KB Home’s cap rate (1.46 Billion).  Why would KB Home borrow so much in a declining market?    From KB Home’s 2014 10-K filing with the SEC.  


We have a substantial amount of indebtedness in relation to our tangible net worth -which may restrict our ability to meet our operational and strategic goals – could limit our ability to obtain financing for working capital or pay debt service requirements or business needs.” 

Could things end like they did in 2010 when J.P. Morgan Chase filed an involuntary bankruptcy against a consortium  48% owned by KB Home?  The Las Vegas Review Journal Wrote:

Chase said South Edge reneged on its commitment.  “Chase said in the court document, the project can endure neither the insiders’ persistent neglect, self-dealing and abuse…”  (more here- Lenders file bankruptcy) 


If the market turned sour again would KB Home executives take care of themselves as well as they did in 2008?  According to the LA Times KB Home’s CEO Jeffrey Mezger received $9.6 million in compensation.  This was a cut from the $16.4 million he received in 2007, the same year KB Home lost 41% of its value or almost one billion dollars.   Do these guys know how to run a company or what?  I think we can all see how they build a house!

 Posted by at 10:26 pm