S&P Downgrades Century Communities Rating
S&P Global Ratings downgraded Century Communities Inc. (NYSE: CCS) from a "BB" rating to "BB-" and assigned a negative outlook. The agency also lowered the issue‑level rating on the company’s senior unsecured notes to "BB-" from "BB" while maintaining a "3" recovery rating, indicating an expected 50%‑70% recovery in the event of default.
The downgrade reflects expectations that the Denver‑based homebuilder will operate with adjusted debt‑to‑EBITDA well over 3x for the next 12‑18 months, with S&P projecting adjusted leverage could remain at 4x or slightly higher, offering minimal cushion against the revised 4x downside threshold for the rating. Core and supplemental debt‑to‑EBITDA, EBITDA interest coverage, and operating cash‑flow‑to‑debt ratios are forecast to fall within weighted‑average ranges of 3x‑4x, 3x‑6x, and 15%‑25% respectively, while debt to capital is expected to sit at 35%.
S&P expects the 30‑year conventional mortgage rate to stay approximately 6.4% through the third quarter of 2026, with an annual average of 6.2% in 2026 and 5.6% in 2027. Unemployment is projected to rise to 4.6% in 2027 from 4.4% in 2026. The agency anticipates year‑over‑year EBITDA margin growth to 8%‑9% from the current mid‑7% area, supported by historically strong third‑ and fourth‑quarter earnings.
Housing starts are projected to decline by 400,000 units in 2026 and a further 500,000 units in 2027 as residential activity remains a drag until mortgage‑rate expectations shift.
S&P warned that the rating could be further downgraded to "B+" within the next 12 months if debt‑to‑EBITDA does not fall below 4x, which could happen if EBITDA deteriorates materially below $350 million without foreseeable recovery or if adjusted debt rises above $1.5 billion with no improvement in EBITDA. Conversely, the outlook could be revised to stable if debt‑to‑EBITDA falls below 4x and operational profitability metrics show signs of steadying in the latter half of the year.