TEXT-S&P keeps Atrium Cos ratings on watch negative

Thu Dec 13, 2012 4:01pm EST

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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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