TEXT-S&P keeps Martin Marietta Materials on watch negative

Mon Jun 11, 2012 10:32am EDT

June 11 - Overview	
     -- U.S. aggregates producer Martin Marietta Materials Inc. recently
lost its bid to overturn a Delaware Court ruling that barred the company from 	
pursuing its bid and proxy contest for Vulcan Materials Co. until mid 	
September. 	
     -- The ratings on Martin Marietta, including the 'BBB+' corporate credit 	
rating, remain on CreditWatch with negative implications, where they were 	
initially placed on Dec. 13, 2011. 	
     -- We will resolve our CreditWatch after meeting with management to 	
review its financial policy and operating performance expectations.	
	
Rating Action	
On June 11, 2012, Standard & Poor's Ratings Services said its ratings on 	
Raleigh, N.C.-based Martin Marietta Materials Inc., including the 'BBB+' 	
corporate credit rating, will remain on CreditWatch with negative 	
implications, where they were initially placed on Dec. 13, 2011, following 	
Martin Marietta's announcement of its unsolicited offer to acquire Vulcan 	
Materials Co. 	
	
Rationale	
The continued CreditWatch listing is despite recent court rulings that 	
effectively prohibit Martin Marietta from pursuing its bid of Vulcan Materials 	
for at least four months and potentially for a significantly longer period 	
given timing and cost considerations of restarting such efforts after the 	
court's ruling expires.	
	
Despite Martin Marietta's unsolicited bid for Vulcan being terminated for at 	
least the next several months and perhaps longer, we remain concerned 	
regarding the combination of Martin Marietta's future financial policy given 	
its willingness to assume more debt leverage in the Vulcan acquisition, as 	
well as the impact that continued weak aggregates markets will have on its 	
overall financial risk profile.	
	
Despite the greatly reduced likelihood of a combination of Martin Marietta and 	
Vulcan Materials, the continued CreditWatch listing reflects our concern 	
regarding Martin Marietta's financial risk policies given its recent 	
willingness to significantly increase debt leverage to over 6x (before 	
synergies) in conjunction with the Vulcan bid. In addition, we believe the 	
company's overall financial risk profile will continue to be negatively 	
affected by the ongoing weak aggregates and construction markets, which we 	
believe will prevent credit measures from improving to levels consistent with 	
the 'BBB+' rating.	
	
CreditWatch	
In resolving the CreditWatch, which we expect to occur within the next 45 	
days, we will meet with management and review its financial policies and 	
operating expectations, given still weak construction markets and continued 	
uncertainty over the timing and size of Federal and State infrastructure 	
spending, including prospects for an extension and increase in existing 	
Federal highway appropriations. 	
	
We believe a lowering of he rating is likely to be limited to one notch. 	
	
	
Related Criteria And Research	
     -- Key Credit Factors: Business And Financial Risks In The Global 	
Building Products And Materials Industry, Nov. 19, 2008 	
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008	
	
Ratings List	
Ratings On CreditWatch Negative	
	
Martin Marietta Materials Inc.	
 Corporate Credit Rating                BBB+/Watch Neg/A-2 	
 Senior Unsecured                       BBB+/Watch Neg     	
 Commercial Paper                       A-2/Watch Neg      	
	
	
	
Complete ratings information is available to subscribers of RatingsDirect on 	
the Global Credit Portal at www.globalcreditportal.com. All ratings referenced 	
herein can be found on Standard & Poor's public Web site at 	
www.standardandpoors.com. Use the Ratings search box located in the left 	
column.
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.