S&P says Walter still on watch

Standard & Poor's said that its ratings on Walter Industries Inc. (BB-/Watch negative/--) and Mueller Water Products Inc. (B+/Watch negative/--) remained on CreditWatch with negative implications.

The original CreditWatch listings on June 20 followed Walter's announcement that it would acquire Mueller Water Products for about $1.9 billion. After the acquisition, Walter will also own Mueller's wholly owned subsidiary, Mueller Group Inc. (B+/Watch negative/--).

S&P said that based on this preliminary information, which did not include a review of final legal documents (particularly with regard to potential leakage of cash between the business segments), S&P would expect to lower the ratings on Walter Industries by one notch. Walter's corporate credit rating would decline to B+ from BB-. S&P said it would also assign a stable outlook.

S&P said it also expects to affirm Mueller Group's and Mueller Water Products' ratings, including the B+ corporate credit ratings. Both would receive a negative outlook.

Lastly, S&P said it would likely assign a B+ rating and a 3 recovery rating to Walter's proposed $625 million secured bank credit facility and a B+ rating and 2 recovery rating to Mueller's proposed $1.175 billion secured bank credit facility.

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