Oct 17 - Standard & Poor's Ratings Services said today that it assigned its
'BBB-' issue-level rating to Owens Corning's new senior unsecured notes
due 2022. The company is offering the notes under its shelf registration filed
Feb. 16, 2012.
The company plans to use net proceeds from the sale of the notes to purchase
up to $250 million of its $650 million 6.5% senior notes due 2016 and up to
$100 million of its 9% senior notes due 2019. Owens Corning plans to use the
remaining proceeds to reduce revolving credit borrowings and for general
After adjusting for the proposed transactions and for pension and other
obligations, we expect the company will have debt of about $2.6 billion at
year end. This implies that leverage, as measured by debt-to-EBITDA, will
increase to about 4x by year-end 2012. We expect funds from operations
(FFO)-to-debt to drop below 20% to the high teens, which we consider somewhat
weak for the current rating.
However, we expect operating results and credit measures to improve in 2013
under our baseline scenario, which takes into account our economists'
-- 930,000 housing starts in 2013, compared with 760,000 in 2012;
-- Modest GDP growth near 2% over the next 15 months; and
-- Nonresidential construction holds flat (up 0.6%) for 2013.
We further assume that Owens Corning will benefit from cost-cutting measures
and new plant efficiencies in its composites segment in 2013. Under this
scenario, we expect sales to increase about 5% in 2013 to $5.5 billion and
EBITDA to improve to $700 million or higher, resulting in debt-to-EBITDA of
3.5x and FFO-to-debt of about 20%, both of which we would consider to be in
line with the current rating.
Owens Corning is a leading manufacturer and distributor of asphalt- and
fiberglass-based roofing shingles, fiberglass insulation, and composite
fiberglass materials, the latter of which has wide product applications in
For the corporate credit rating rationale, see the research update on Owens
Corning published Oct. 10, 2012)
Corporate credit rating BBB-/Stable
Senior unsecured notes BBB-
RELATED CRITERIA AND RESEARCH
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
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