TEXT-S&P keeps Atrium Cos ratings on watch negative
Overview -- U.S.-based aluminum and vinyl window and door manufacturer Atrium Cos. Inc.'s cushion under covenants governing its credit agreements is less than 10% and is scheduled to tighten, potentially constraining liquidity to support operations if covenants are not amended or waived. -- The ratings on Atrium Cos., including the 'CCC+' corporate credit rating, remain on CreditWatch with negative implications. -- In resolving the CreditWatch listing, we will monitor Atrium's progress in re-negotiating covenant requirements and will update our near-term performance expectations for the company. Rating Action On Dec. 13, 2012, Standard & Poor's Ratings Services said its ratings on Dallas-based Atrium Cos. Inc., including the 'CCC+' corporate credit rating, will remain on CreditWatch with negative implications, where they were initially placed on Sept. 21, 2012, following a tightening of its senior secured leverage covenant. Rationale We are maintaining the CreditWatch on Atrium despite approximately $5.7 million in equity contributions by the company's owners. While the equity infusion provides near-term covenant relief, operating performance will need to improve as the senior secured leverage covenant steps down to 5.5x on Jan. 1, 2013, and we estimate that covenant headroom will still be below 10% unless the covenant requirements are re-negotiated. The corporate credit rating on Atrium also reflects what Standard & Poor's considers to be its "highly leveraged" financial risk profile and its "vulnerable" business risk profile. Risks include a double-digit debt to EBITDA ratio as of Sept. 30, 2012, and the company's presence in the highly competitive and fragmented windows industry and its exposure to volatile raw material costs, especially resin and aluminum. CreditWatch In resolving the CreditWatch listing, we will meet with management and assess its plans to re-negotiate its covenant requirements and enhance its liquidity. We could affirm the ratings if the company successfully negotiates covenant relief. We would lower our rating if covenant relief efforts are not successful and a covenant default appears likely. Related Criteria And Research -- Criteria For Assigning 'CCC+', 'CCC','CCC-', And 'CC' Ratings, Oct. 1, 2012 -- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012 -- Key Credit Factors: Business And Financial Risks In The Global Building Products And Materials Industry, Nov. 19, 2008 Temporary contact numbers: Maurice Austin, 917-574-5258; Tom Nadramia, 252-353-0098 Ratings List Ratings On Watch Negative Atrium Cos. Inc. Corporate Credit Rating CCC+/Watch Neg/-- Senior Secured CCC+/Watch Neg Recovery Rating 3 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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