S&P puts NCI Building on developing watch

Standard & Poor's said it placed NCI Building Systems Inc.'s BB senior secured bank loan rating with a recovery rating of 3 on CreditWatch with developing implications after the company announced plans to acquire Robertson-Ceco Corp. for $370 million. S&P said the BB corporate credit rating is not immediately affected and its outlook remains stable.

NCI Building plans to fund the acquisition with $170 million from its prior convertible senior note offering and by increasing its existing term loan by $200 million.

S&P said its initial assessment is that the transaction should somewhat strengthen NCI Building's business position by improving manufacturing efficiency and expanding the dealer network and geographic sales area within the United States and Canada. Additionally, there is room at the current ratings for a moderate increase in debt leverage to fund the acquisition.

Pro forma for the acquisition, the agency predicted that NCI Building's total debt to EBITDA ratio will increase to the low to mid-3x range from 3x at Oct. 29.

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