Moody's rates Mueller Water loans Ba3, notes B3

Moody's Investors Service said it affirmed Mueller Water Products, Inc.'s B1 corporate family and probability-of-default ratings, assigned a B3 (LGD5, 89%) rating to the company's proposed $350 million senior subordinated notes due 2017 and assigned Ba3 (LGD3, 37%) ratings to its proposed $1.09 billion senior secured credit facility, which will include a $300 million senior secured bank credit facility due 2012, a $150 million senior secured term loan due 2012 and a $640 million senior secured term loan due 2014.

The outlook was changed to positive from stable.

The agency said the ratings and positive outlook are reflective of Mueller's success at keeping operating margins healthy in spite of a weak residential housing market as demand remains strong from repair and replacement and new commercial construction, the company's strong market position in North America and existing industry barriers to entry, competitive strength generated from its economies of scale and cost savings being realized through strategic facility closings and restructuring.

Also incorporated into the ratings are the company's aggressive financial profile, increased administrative expense as a result of becoming a standalone company, lower volumes associated with the weakness in the residential housing market and higher raw material costs, Moody's said.

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