TEXT-S&P keeps Interline Brands ratings on watch

Overview
-- The parent of U.S.-based distributor Interline Brands Inc. is
seeking to issue $365 million senior holding company notes in part to fund its
acquisition by affiliates of GS Capital Partners LP and P2 Capital Partners
LLC.
-- We are assigning a 'B+' corporate credit rating to Interline Brands
Inc. (Delaware Corp.), the parent of Interline Brands Inc., and are assigning
a 'B-' issue rating to its proposed $365 million holding company notes.
-- The ratings on Interline Brands Inc. remain on CreditWatch until the
proposed acquisition is completed.
-- Assuming the transaction is completed as currently proposed, we would
lower the rating on Interline's existing $300 million senior notes to 'B+'.

Rating Action
On July 11, 2012, Standard & Poor's Ratings Services assigned its 'B+'
corporate credit rating to Interline Brands Inc. (Delaware Corp.), the parent
company of Interline Brands Inc. The rating outlook is stable.

In addition, we assigned a 'B-' issue rating to Interline Brands Inc.
(Delaware Corp.)'s proposed $365 million holding company notes. The recovery
rating on the notes is '6', indicating our expectation for negligible recovery
(0% to 10%) in the event of payment default.

Interline Brands Inc. (Delaware Corp.) is a holding company with no direct
operations and depends on cash flow from subsidiary Interline Brands Inc. to
meet its debt obligations. As a result, we view Interline Brands Inc. as a
consolidated enterprise.

The ratings on Interline, including the 'BB' rating on the company's $300
million senior notes and the 'BB' corporate credit rating, remain on
CreditWatch, where we placed them with negative implications on May 30, 2012.

Rationale
The rating actions follow the parent company's announcement that it is seeking
to issue $365 million of proposed senior holding company notes to fund its
acquisition by affiliates of GS Capital Partners LP and P2 Capital Partners
LLC (not rated). Total consideration for the acquisition is $1.1 billion,
including a $369 million equity contribution, a $250 million revolving credit
facility, the proposed $365 million holding company notes, and Interline's
existing $300 million operating company notes.

The rating on Interline Brands Inc. (Delaware Corp.) reflects Interline's
weaker credit metrics following the increase in debt to support the
acquisition. Our base-case scenario for 2012 assumes that Interline's revenue
growth will be in the mid-single digit area, given improved occupancy and
increasing rents among multifamily REITs, a key market for Interline. However,
we previously assumed that leverage would be about 3x by year-end 2012, given
approximately $300 million of existing balance sheet debt. As a result of the
significant increase in debt associated with the leveraged recapitalization,
leverage will likely rise to about 6x by year-end 2012 and about 5.5x by
year-end 2013, which we believe to be more in line with an "aggressive"
financial risk profile and a lower rating.

Assuming the transaction is completed as currently proposed, we would lower
the rating on Interline's existing $300 million senior notes to 'B+'. The
recovery rating on the existing notes would remain '4', indicating our
expectation for average (30% to 50%) recovery in the event of payment default.

Interline acts primarily as a distributor and direct marketer of broad-line
maintenance, repair, and operations (MRO) products that serve facilities
maintenance, specialty distributors, and professional contractor markets.
Interline competes against numerous local and regional players--some of which
are significantly larger and financially stronger--and other traditional sales
channels, including retail outlets and large warehouse stores.

Recovery analysis
For the complete recovery analysis, please see our recovery report on
Interline to be published following this report.

CreditWatch
We expect to resolve our CreditWatch listing upon completion of GS Capital
Partners LP's and P2 Capital Partners LLC's proposed acquisition of Interline.

Related Criteria And Research
-- Issuer Ranking: North American Building Materials Companies, Strongest
To Weakest, April 13, 2012
-- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
-- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded,
May 27, 2009
-- Key Credit Factors: Business And Financial Risks In The Global
Building Products And Materials Industry, Nov. 19, 2008

Ratings List
New Rating; Outlook Action

Interline Brands Inc. (Delaware Corp.)
Corporate Credit Rating B+/Stable/--

New Rating

Interline Brands Inc. (Delaware Corp.)
Senior Unsecured US$365 mil nts due 2018 B-
Recovery Rating 6

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the Global Credit Portal at www.globalcreditportal.com. All ratings referenced
herein can be found on Standard & Poor's public Web site at
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