KB Home is missing out on the biggest rally in homebuilder bonds in more than two years as rising prices and the loss of MetLife Inc. as its financing partner stymie potential sales at its housing developments.
Credit-default swap traders are now betting that it’s more likely than not the Los Angeles-based homebuilder will fail over the next five years. The company’s implied default odds jumped to 52 percent, up from 41 percent a month ago, after KB Home struggled to close deals in its first quarter, when 36 percent of transactions fell through, compared with the industry average of 23 percent, according to debt researcher Gimme Credit LLC.
Founded as the Kaufman & Broad Building Co. in 1957, the company became the first homebuilder to be listed on the New York Stock Exchange in 1963, according to Hoover’s Inc., the provider of historical business information. It was started by accountant-turned-philanthropist Eli Broad and the late Donald Kaufman, who founded the KB Toys retail chain.
“We’ve seen some pretty decent improvement from many of their peers,” George Skoufis, an analyst at S&P, said in a telephone interview. “People were expecting better performance in the first quarter.”