Moody's: Quikrete loans B1, B3

Moody's Investors Service said it assigned a B1 corporate family rating and a B1-PD probability of default rating to Quikrete Holdings, Inc., a B1 (LGD3, 49%) rating to its proposed $1.23 billion senior secured term loan B due 2020 and a B3 (LGD6, 92%) rating to its proposed $190 million second-lien senior secured term loan due 2021. The outlook is stable.

Proceeds from the term loans, some cash on hand and borrowings under the company's new $200 million asset-based revolving credit facility (unrated) will be used to acquire CBP Holding Corp. for about $765 million from Kelso & Co. and to refinance about $680 million of existing debt.

The agency said Quikrete's B1 corporate family rating reflects the company's healthy operating margins; its variable cost structure, which gives it added flexibility to size its work force relatively quickly to meet changing demands and to maintain its margins; and its good liquidity. Quikrete should also reap some benefits from future growth prospects in the repair and remodeling market and new housing construction, Moody's predicted.

Constraining the rating is the company's pro forma leveraged capital structure. The agency calculates the pro forma leverage at June 30 to be about 5.5 times. Also, a majority of Quikrete's future revenues are through the big box retailers, representing a significant distribution concentration, Moody's said.

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