Homebuilder Debt Carries Fewer Investor Protections

Homebuilders, beset by almost five years of declining sales, are proving the most likely U.S. industry to sell junk bonds without provisions typically included to protect buyers, Moody’s Investors Service said.

Lennar Corp., the third-largest homebuilder by revenue, and Los Angeles-based KB Home are among companies that sold high-yield, high-risk bonds since 2008 and didn’t include restrictions on the companies issuing new debt or curbs on dividends they could pay, Moody’s New York-based analysts Matthew Musicaro and Alex Dill said yesterday in a report.