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