S&P puts Metals USA on positive watch

Standard & Poor's said it placed the B+ corporate credit rating on Metals USA Holdings Corp. on CreditWatch with positive implications.

This follows news that the company has agreed to be acquired by Reliance Steel & Aluminum Co.

The CreditWatch is based on Metals USA's potential acquisition by higher-rated Reliance, S&P said, and an expectation that its existing debt will likely be refinanced by Reliance at the closing of the transaction.

Under the terms of the acquisition, Reliance will acquire all outstanding shares of Metals USA for $20.65 per share in cash or an enterprise value of about $1.2 billion, S&P said.

Reliance expects to fund the transaction and refinance Metals USA's existing debts from Reliance's existing $1.5 billion credit facility and with new debt, the agency said.

The company's ratings reflect its weak business risk and aggressive financial risk, highlighted by the significant volatility associated with the company's end markets and cash flows, S&P said, and its thin operating margins.

Nevertheless, the company has an adequate liquidity position that benefits from a variable cost structure and ability to generate cash flow from working capital during periods of soft end markets, the agency said.

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