S&P lowers LBM, rates loan B-

S&P said it lowered the ratings on LBM Acquisition LLC and its senior secured term loan (including the $800 million add-on) and existing delayed draw facility to B- from B and its senior unsecured notes and Holdco PIK toggle notes to CCC from CCC+. The agency also assigned a B- rating to the new $400 million delayed-draw term loan facility. The loan will be used to help finance acquisitions.

“The proposed debt-financed acquisitions led us to revise our adjusted leverage expectation to 7x- 8x for the next 12 months from 6x-7x. We believe the incremental debt to finance acquisitions will add pressure to the credit measures, which were already weakened following the dividend recapitalization in early 2021. Our view also reflects LBM's financial sponsors' aggressive financial policies, wherein the company has pursued large debt-financed acquisitions and dividend distributions within a short period under the new ownership. For instance, adjusted-debt levels will now be about $4 billion from $2.2 billion at the close of the Bain acquisition in December 2020,” S&P said in a press release.

LBM plans to issue an $800 million add-on to the senior secured term loan, $270 million in unsecured debt, and fully draw down its $300 million delayed-draw term loan. The company will also have the new $400 million facility and an $800 million ABL facility, both undrawn at close, to fund future acquisitions and for liquidity purposes.

The outlook is stable.

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