S&P affirms National Waterworks ratings

Standard & Poor's said it affirmed its BB- corporate credit and senior secured bank loan ratings on water and wastewater transmission distributor National Waterworks Inc. and its B subordinated debt ratings on the company.

The outlook is stable.

S&P said the ratings actions reflect the company's withdrawal of a consent solicitation to amend a covenant in National Waterworks' subordinated bond indenture to allow for the payment of a dividend. However, the company plans to continue to consider payment of a special dividend to the extent permitted by the indenture governing the subordinated notes.

In addition, payment of dividends will be subject to certain financial ratio tests as well as maximum amounts allowable under the company's $75 million revolving credit facility.

S&P said the ratings reflect National Waterworks' aggressive financial policies, weak cash flow protection, and high debt leverage, tempered by the company's average business position as the largest distributor of water products in the United States.

Business risk is reduced somewhat by the company's low capital expenditure requirements, strong national distribution capabilities, sophisticated management information systems, balanced product and customer diversity, and recurring revenue base.

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