Moody's rates Armstrong World loans Ba2

Moody's Investors Service said it assigned a Ba2 corporate family rating, a Ba3 probability-of-default rating and a speculative grade liquidity rating of SGL-1 to Armstrong World Industries, Inc. The company's new guaranteed senior secured credit facility - which includes $300 million revolving credit facility due 2011, $300 million term loan A due 2011 and $500 million term loan B due 2013 - received a Ba2 rating and a loss-given default rating of LGD2 (30%).

The outlook is stable.

The agency said the ratings reflect the company's low leverage, strong cash flow, brand name and geographic presence. The company's initial leverage is about 2.1 times, while its free cash flow divided by funded debt should be over 12% for 2007, depending on the homebuilding slowdown.

The company's free cash flow available for debt repayment is being reduced by a large capital expenditure program that is anticipated to be around $150 million for 2007, Moody's noted. This compares with $165 million in anticipated depreciation. Were the slowdown to meaningfully affect Armstrong's sales, its capital expenditure program is expected to be reduced.

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