S&P rates Owens Corning's new senior notes 'BBB-'

Wed Oct 17, 2012 10:10am EDT

Oct 17 - Standard & Poor's Ratings Services said today that it assigned its
'BBB-' issue-level rating to Owens Corning's new senior unsecured notes
due 2022. The company is offering the notes under its shelf registration filed
Feb. 16, 2012.

The company plans to use net proceeds from the sale of the notes to purchase 
up to $250 million of its $650 million 6.5% senior notes due 2016 and up to 
$100 million of its 9% senior notes due 2019. Owens Corning plans to use the 
remaining proceeds to reduce revolving credit borrowings and for general 
corporate purposes.

After adjusting for the proposed transactions and for pension and other 
obligations, we expect the company will have debt of about $2.6 billion at 
year end. This implies that leverage, as measured by debt-to-EBITDA, will 
increase to about 4x by year-end 2012. We expect funds from operations 
(FFO)-to-debt to drop below 20% to the high teens, which we consider somewhat 
weak for the current rating.

However, we expect operating results and credit measures to improve in 2013 
under our baseline scenario, which takes into account our economists' 
projections of:

     -- 930,000 housing starts in 2013, compared with 760,000 in 2012;
     -- Modest GDP growth near 2% over the next 15 months; and
     -- Nonresidential construction holds flat (up 0.6%) for 2013.
 
We further assume that Owens Corning will benefit from cost-cutting measures 
and new plant efficiencies in its composites segment in 2013. Under this 
scenario, we expect sales to increase about 5% in 2013 to $5.5 billion and 
EBITDA to improve to $700 million or higher, resulting in debt-to-EBITDA of 
3.5x and FFO-to-debt of about 20%, both of which we would consider to be in 
line with the current rating.

Owens Corning is a leading manufacturer and distributor of asphalt- and 
fiberglass-based roofing shingles, fiberglass insulation, and composite 
fiberglass materials, the latter of which has wide product applications in 
industrial segment.

For the corporate credit rating rationale, see the research update on Owens 
Corning published Oct. 10, 2012)

RATINGS LIST

Owens Corning
 Corporate credit rating       BBB-/Stable

New Rating

Owens Corning
 Senior unsecured notes        BBB- 

RELATED CRITERIA AND RESEARCH

     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008


Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action 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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