Moody's lifts Building Materials note to B2, rates loan B2, note Caa1

Moody's Investors Service said it assigned a B2 rating with a loss-given-default assessment of LGD3 (46%) to Building Materials Corp. of America's $975 million guaranteed senior secured term loan B due 2014, assigned a provisional Caa1 (LGD5, 89%) rating to the company's $325 million second-lien notes due 2015 and upgraded its $250 million 7¾% senior secured notes due 2014 to B2 (LGD3, 46%) from B3 (LGD4, 69%).

The agency also confirmed the corporate family and probability-of-default ratings at B2 and the $100 million 8% senior secured notes, series B, due 2007 and $155 million 8% senior secured notes due 2008 at B3 (LGD4, 69%).

This concludes the review begun on Feb. 1, and the outlook is negative.

Building Materials plans to acquire ElkCorp for $43.50 per share, which equals a purchase price of $1.1 billion or 10.4x adjusted EBITDA. Moody's said the ratings consider Building Materials' market position, revenue mix and expected synergies associated with the acquisition of ElkCorp.

The upgrade of the company's existing 7¾% notes reflects the notes being pari passu to the new proposed term loan B facility, and the provisional Caa1 rating assigned to the new notes reflects the company's plan to fund the acquisition with a bridge loan and then pay off the bridge loan with the proceeds from the new notes, the agency said.

The negative outlook considers the high acquisition multiple and an expected debt-to-EBITDA ratio of just under 6x at close, Moody's said.

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