Contech Construction Products Inc. Assigned 'BB-' Corporate Credit and Bank Loan Ratings
NEW YORK (Standard & Poor's) Oct. 22, 2004--Standard & Poor's Ratings
Services said today it assigned its 'BB-' corporate credit rating to
Middletown, Ohio-based Contech Construction Products Inc.
At the same time, Standard & Poor's assigned its 'BB-' bank loan rating
and '3' recovery rating to the company's proposed first-lien $125 million
revolving credit facility and $225 million term loan B. The revolving
credit facility and term loan are rated the same as the corporate credit
rating; the '3' recovery rating indicates that bank lenders can expect
meaningful recovery of principal (50% to 80%) in the event of default. The
outlook is stable.
"The ratings on Contech reflect its modest sales base, exposure to the
cyclical commercial and residential construction sectors, volatile
raw-material costs, low barriers to entry, and very aggressive financial
policy," said Standard & Poor's credit analyst Lisa Wright. Partially
offsetting these risks are the company's low degree of operating leverage,
relatively stable operating margins and strong market shares in niche and
local markets.
Contech plans to use the proceeds of the proposed bank loans to pay a
$175 million dividend to its shareholders, private equity sponsor Butler
Capital and company management. The remaining proceeds will be used to
refinance existing debt and to finance working capital.
Contech, with sales of about $500 million, manufactures and distributes
products for the U.S. civil engineering infrastructure sector. The company
is engaged in three main businesses: pipes and drainage systems, which
constitute over half of sales, bridges, and earth control. Its products
include: corrugated metal and plastic pipes, pedestrian and vehicular
bridges as well as concrete retaining walls and geosynthetic earth
retention products. The company operates 45 small manufacturing locations
throughout the U.S. and has limited geographic concentration.
Complete ratings information is available to subscribers of
RatingsDirect, Standard & Poor's Web-based credit analysis system, at
www.ratingsdirect.com. All ratings affected by this rating action can be
found on Standard & Poor's public Web site at www.standardandpoors.com;
under Credit Ratings in the left navigation bar, select Find a Rating,
then Credit Ratings Search.
| Primary Credit Analyst: | Lisa Wright, CPA, New York (1) 212-438-3121; lisam_wright@standardandpoors.com |
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