OREANDA-NEWS. S&P Global Ratings raised its corporate credit rating on Columbus, Ohio-based M/I Homes Inc. to 'B+' from 'B'. The outlook is stable.

At the same time, we raised our issue-level rating on the company's senior unsecured notes to 'BB-' from 'B+'; the recovery rating on the notes is '2', which indicates that we expect a substantial (70% to 90%; high end of the range) recovery to debtholders in the event of default. We also raised our issue-level rating on the company's senior subordinated convertible notes to 'B-' from 'CCC+'; the recovery rating for these notes is '6', indicating our expectation of minimal (0% to 10%) recovery if a default occurs. We are also raising the rating on its preferred stock to 'CCC-' from 'CC'.

Our rating outlook on M/I Homes Inc. is stable. The outlook incorporates our view that the single-family housing recovery will continue at a tempered pace and that M/I will improve EBITDA as the company's strong backlog and improving sales pace drive home closing volume growth in the next two years, while maintaining gross margins of approximately 20% or more and adequate access to liquidity.

Although we currently view it as unlikely, we may consider a downward rating action in the next 12 months if a slowdown in the U. S. housing market causes growth to underperform substantially compared to our forecast, or if stagnant pricing and more severe cost increases than we anticipate cause the company's gross margin to deteriorate, causing us to believe debt to EBITDA may remain above 5x.

We also view a positive rating action as unlikely over the next 12 months given the recent upgrade, but may consider it if the company's profitability profile improves materially and revolving debt balances are paid down such that the company's debt-to-EBITDA ratio is comfortably below 4x while still able to fund adequate land investment to support continued volume growth.