TEXT-S&P affirms and drops 'BB/B' ratings on HeidelbergCement

Thu Nov 22, 2012 4:38am EST

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Nov 22 -

Rating Action

On Nov. 22, 2012, Standard & Poor's Ratings Services affirmed its 'BB' long-term and 'B' short-term corporate credit ratings on Germany-based heavy materials group HeidelbergCement AG . We subsequently withdrew these ratings at the issuer's request. The outlook was stable at the time of the withdrawal.

At the same time, we affirmed at 'BB' and then withdrew our issue ratings on the various unsecured bonds issued by HeidelbergCement and its subsidiaries HeidelbergCement Finance B.V. , Hanson Ltd., and Hanson Australia Funding Ltd. Our recovery rating on these debt instruments was '3' at the time of the withdrawal, indicating our expectation of meaningful (50%-70%) recovery prospects in the event of a payment default.

At the same time, we affirmed and then withdrew the 'B' issue rating on HeidelbergCement's commercial paper program.

Rationale

At the time of the withdrawal, the ratings reflected our view of HeidelbergCement's business risk profile as "satisfactory" and financial risk profile as "aggressive." They were supported by the group's leading positions in the global building materials industry, high degree of vertical integration, and end-market diversity. These positives were tempered by the company's reliance on currently somewhat weak developed countries, and still substantial leverage, despite management's track record in protecting profitability and allocating discretionary cash flow to debt reduction.

Related Criteria And Research

-- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012

-- Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011

-- Criteria Guidelines For Recovery Ratings On Global Industrials Issuers' Speculative-Grade Debt, Aug. 10, 2009

-- Key Credit Factors: Business And Financial Risks In The Global Building Products And Materials Industry, Nov. 19, 2008

Ratings List

Ratings Affirmed; Ratings Withdrawn

To From

HeidelbergCement AG

Corporate Credit Rating NR BB/Stable/B

Senior Unsecured NR BB

Recovery Rating NR 3

Commercial Paper NR B

HeidelbergCement Finance B.V.

Hanson Ltd.

Hanson Australia Funding Ltd.

Senior Unsecured* NR BB

Recovery Rating NR 3

*Guaranteed by HeidelbergCement AG.

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