TEXT - S&P cuts Guardian Industries rating to BBB-plus

(The following statement was released by the rating agency)

Overview
-- U.S.-based glass manufacturer Guardian Industries Corp. has disclosed
it has sold a substantial minority stake to a subsidiary of Koch Industries
Inc. (unrated; collectively Koch).
-- Guardian also has completed a planned partial redemption and exchange
of common shares resulting in a significant increase in leverage which is
likely to weaken forecasted credit metrics over the next 12 to 18 months.
-- We are lowering our rating on Guardian Industries, Corp., including
the corporate credit rating to 'BBB+' from 'A' to reflect the increase in
leverage to about 3.8x.
-- Our stable outlook is based on our expectation that Guardian's
forecasted free cash flow will result in debt repayment with leverage
declining to about 2.5x by the end of 2013.
Rating Action
On Dec. 26, 2012, Standard & Poor's Ratings Services lowered its corporate
credit rating on Auburn Hills, Mich.- based Guardian Industries Corp. to
'BBB+' from 'A'. At the same time, we lowered our short-term credit rating on
the company to 'A-2' from 'A-1'. The outlook is stable. All ratings were
removed from CreditWatch where they were place on Oct. 4, 2012, with negative
implications.
Rationale
Our lowering of the corporate credit rating to 'BBB+' from 'A' follows the
company's disclosure that it has completed a debt-financed redemption and
exchange of common shares as well as the sale of a significant minority
interest in the company to a subsidiary of Koch Industries Inc. As a result of
the transactions, Guardian has significantly increased its debt burden such
that debt to EBITDA (adjusted for operating leases and pension adjustments)
increased to about 3.8x from the prior 1.7x. Guardian does not disclose
financial information publicly.

Our ratings and outlook for Guardian also reflect our assessment of the
company's "strong" business risk profile which includes the company's wide
global footprint, diverse glass product offerings and low-cost manufacturing
operations. These strengths are partially offset by price and demand
volatility caused by cyclical construction and auto glass markets. We assess
the company's financial risk profile as "intermediate" reflecting the large
increase in transaction-related debt and our expectations that leverage will
decline from 3.8x to about 2.5x, levels consistent with the intermediate
financial risk profile, by the end of 2013.

For 2013, we expect Guardian will improve EBITDA to bring it more in line with
historical levels. The company will accomplish this through internal operating
improvements, the absence of one-time operating interruptions at several
plants, and because of gradually recovering construction and automotive
markets in the U.S., which we think will offset continuing recessionary
pressures in Europe. Our economists are forecasting 1.05 million housing
starts in 2013 and 1.34 million in 2014, which should help the company's
building products and glass businesses. Our economists also forecast over 15
million in new vehicles for 2013 and 2014, as well as a 3.6% increase in
nonresidential construction for 2013 followed by 6% growth in 2014. As a
result, our baseline scenario projects Guardian will be able to reduce
leverage to about 2.5x by the end of 2013 while maintaining FFO to debt of 30%
or higher. Assuming the company meets its targets and dedicates free cash flow
to debt repayment as planned, we think leverage can be below 2x by the end of
2014 with FFO to debt reaching 40%, which if achieved, would be reflective of
a "modest" financial risk profile as previously maintained by the company.
Risks to our forecast include further deterioration in European economic
conditions, a stalled housing recovery in the U.S. and a deterioration in
glass prices.

Liquidity
Our 'A-2' short-term rating on Guardian incorporates our assessment of the
company's liquidity as "strong". Our view of the company's liquidity
incorporates the following:

-- We expect liquidity sources to exceed uses by at least 1.5x over the
next year and at least 1x in year two. We expect that liquidity sources will
continue to exceed uses, even if forecasted EBITDA were to decline by 30%.
-- Compliance with financial maintenance covenants likely would survive a
30% drop in forecasted EBITDA, without the company breaching covenant test
measures.
-- In our assessment, the company has solid relationships with its banks
and a generally high standing in the credit markets.

We expect Guardian will maintain excess cash balances of several hundred
million at all times. In addition, Guardian has a $600 million revolving
credit facility that matures in November 2017. We expect that discretionary
free cash flow after capital expenditures will be positive over the next 12
months. We expect capital expenditures to decrease in 2013 as the company has
completed its new plant in Russia as well as other growth initiatives. In our
view, debt maturities are manageable over the next several years.

We do not expect significant acquisition activity (historically Guardian has
expanded organically as opposed to acquisitions). Nor do we expect any
meaningful distributions to shareholders for the foreseeable future given the
recent large redemption of shares and more restrictive terms of the company's
agreements with Koch.

Outlook
Our stable rating outlook incorporates our expectation that post-transaction
leverage for Guardian should improve as a result of better operating results
in 2013, coupled with post-transaction debt repayment from free cash flow. We
expect Guardian to rapidly bring credit measures in line with the current
rating. Specifically, we expect debt to EBITDA leverage to improve well below
3x and FFO to debt in the 30% area in 2013. Our improved 2013 earnings outlook
reflects higher margin glass production capabilities coming on line, expanded
capacity in high-growth regions and a continuing gradual recovery of U.S.
construction markets offsetting anticipated weakness in European end markets.
We think further de-leveraging could take place in 2014 with debt to EBITDA
improving to about 2x and FFO to debt to 40% by the end of 2014, levels that
would be more in line with a "modest" financial risk profile and strong for
the current rating.

We could downgrade the company if operating results do not improve as we
expect, due to renewed recessionary pressures in Europe or the U.S., delaying
debt reduction and causing leverage to stay above 3x in 2013.

We could upgrade the company if markets improved more quickly than we expect,
allowing for accelerated debt repayment and leverage that trends under 2x in
2013. We also could raise our rating to incorporate implied support resulting
from the substantial ownership of Koch in Guardian once the potential of
Koch's financial, strategic and managerial influences are more fully
determined. While Koch Industries Inc. is unrated, it has certain highly-rated
subsidiaries, including Koch Resources LLC (AA-/Stable/A-1+) and
Georgia-Pacific LLC (A/Stable/--).

Related Criteria And Research
-- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18,
2012
-- Methodology: Short-Term/Long-Term Ratings Linkage Criteria For
Corporate And Sovereign Issuers, May 15, 2012
-- Principles of Credit Ratings, Feb. 16, 2011
-- Stand-Alone Credit Profiles: One Component Of A Rating, Oct. 1, 2010
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

Ratings List
Downgraded; Off CreditWatch; Outlook Stable
To From
Guardian Industries Corp.
Corporate Credit Rating BBB+/Stable/A-2 A/Watch Neg/A-1

Guardian Europe S.A.R.L.
Commercial Paper A-2 A-1/Watch Neg

(Caryn Trokie, New York Ratings Unit)