Moody's changes Armstrong outlook to negative

Moody's Investors Service said it changed Armstrong World Industries, Inc.'s outlook to negative from positive following the company's announcement that it is separating its flooring business from its ceilings (building products) business, creating two independent publicly traded companies.

The agency also affirmed Armstrong's corporate family rating at B1, probability of default rating at B1-PD, speculative grade liquidity rating at SGL-2 and senior secured revolving credit facility due 2018, senior secured term loan A due 2018 and senior secured term loan B due 2020 at B1 (LGD3).

The change in outlook reflects the uncertainty surrounding Armstrong's new capital structure, earnings, free cash flow potential and future liquidity profile once the flooring business is separated from the ceilings business, Moody’s said.

The agency said a downgrade could occur if Armstrong's new debt capital structure results in adjusted credit metrics such that leverage is sustained at 5.5x, interests coverage is 1.5x or there is a deterioration in the company's liquidity.

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