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