Moody's rates McJunkin B1, cuts loans to Ba3

Moody's Investors Service said it assigned a B1 corporate family rating to McJunkin Red Man Corp. and downgraded its proposed $650 million senior secured asset-based revolving credit facility to Ba3 (LGD3, 33%) from Ba1.

Moody's confirmed the B2 (LGD5, 75%) rating on the $575 million senior secured term loan facility, which concludes the review that began in July.

Proceeds from the upsized facility will fund the merger between McJunkin Corp. and Red Man Pipe and Supply Co.

According to Moody's, the corporate family rating reflects the company's modest operating margins, an assumed moderate downturn in the volatile energy sector, modest tangible asset coverage and the potential for acquisitions.

The agency said the ratings also recognize the company's stable operating margins and cash flow primarily due to margin-based and cost-plus customer contracts, the countercyclical nature of working capital and minimal capital expenditures.

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