Moody's cuts National Waterworks

Moody's Investors Service said it downgraded the senior implied rating of National Waterworks Inc. to B2 and affirmed all other credit ratings following the announcement by National Waterworks that its parent, National Waterworks Holdings Inc., plans to issue $250 million of unsecured senior notes (not rated by Moody's) with an optional PIK feature.

The net proceeds from the senior notes offering, together with a portion of National Waterworks' existing cash, are expected to be used to make a distribution to its shareholders.

The outlook is stable.

Moody's downgraded National Waterworks' senior implied rating to B2 from B1. Moody's affirmed National Waterworks' $233 million senior secured term loan B due 2009 at B1, $75 million senior secured revolving credit facility due 2008 at B1, $200 million senior subordinated notes due 2012 at B3 and senior unsecured issuer rating at B2.

Moody's said the downgrade of the senior implied rating reflects the significant increase in leverage and weaker credit metrics of the company pro forma for the financing. For the latest 12-month period ended June 25, debt to EBITDA was about 3.9x and would increase to over 6x on a pro forma basis.

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