Moody's puts Headwaters on review for upgrade

Moody's Investors Service said it placed the ratings for Headwaters Inc. (senior implied of B1) under review for possible upgrade, including the company's B1 rated senior secured credit facility.

Headwaters announced plans to issue additional common shares and use proceeds to repay all its senior subordinated debentures ($20 million) and a portion of its senior secured debt. Remaining proceeds will be used for general corporate purposes, including funding for acquisitions.

Since acquiring ISG Resources Inc. and receiving its initial Moody's ratings in July 2002, Headwaters has retired $50 million of bank debt. Moody's said its review will look at the sustainability of Headwaters' cash flow, its long-term business strategy, and its expected long-term capital structure, realizing that the company will continue to look for acquisitions that reduce its dependence on businesses and technology related to synthetic fuels and Section 29 tax credits.

Moody's said its review will also re-examine the company's Covol Fuels business in light of recent events regarding the IRS investigation of coal-based synfuels and its decision to resume issuing private letter rulings to producers of synfuel, including Covol Fuel's customers.

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