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TEXT - S&P rates The Hillman Group new term loan
January 18, 2013 / 8:31 PM / in 5 years

TEXT - S&P rates The Hillman Group new term loan

Jan 18 - Standard & Poor's Ratings Services said today that it assigned a
'B+' issue-level rating and '2' recovery rating to The Hillman Group Inc.'s
(B/Stable/--) delayed draw term loan of $76.8 million due 2016. The '2' recovery
rating indicates our expectation that lenders would receive substantial
(70%-90%) recovery in the event of a payment default.

The 'CCC+' issue-level rating on the company's 10.875% senior notes due 2018 
is unchanged following the add-on of $65 million. The recovery rating on the 
notes is unchanged at '6', indicating our expectation for negligible (0% to 
10%) recovery in the event of payment default. 

The 'B' corporate credit rating and stable outlook remain unchanged. (For the 
latest corporate credit rating rationale, see the summary analysis on Hillman 
published Oct. 19, 2012, on RatingsDirect.)

Hillman raised this additional debt to fund its acquisition of H. Paulin & Co. 
Ltd., a Toronto-based manufacturer and distributor of fasteners, fluid system 
products, automotive parts, and screw machine components. Pro forma for this 
pending acquisition, we estimate leverage (as measured by the ratio of debt to 
EBITDA) will remain near 7x. However, we expect this ratio to fall to the 
mid-6x area by year-end 2013 because of relatively stable operating 
performance and because litigation expenses incurred in 2012 won't likely 
repeat in 2013. 

The delayed draw term loan decreases the recovery prospects for the company's 
total senior secured debt but not enough to impact our existing recovery 
ratings, which remain '2'. The unsecured debt recovery rating is unchanged at 
'6' because we estimate the larger amount of priority claims leaves a 
negligible amount for the senior unsecured note holders. (For the complete 
recovery analysis, see our revised recovery report on Hillman, to be published 
following this report on RatingsDirect.)

The 'B' corporate credit rating on Hillman reflects our assessment of the 
company's "highly leveraged" financial risk profile, reflecting its high debt 
burden and aggressive financial policy. Although we recognize the company's 
generally steady demand for its lower-price-point hardware and related product 
offerings, we view the company's business risk profile as "weak" because of 
its narrow product focus and high customer concentration.
     -- Business Risk/Financial Risk Matrix Expanded, Sept 18, 2012
     -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
     -- Key Credit Factors: Business and Financial Risks in the Branded 
Consumer Products Industry, Sept. 10, 2008
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

The Hillman Group Inc.
 Corporate credit rating                        B/Stable/--

New Ratings
The Hillman Group Inc.
 Senior secured 
  $76.8 mil. delayed draw term loan due 2016    B+
    Recovery rating                             2

Ratings Unchanged
The Hillman Group Inc.
 Senior unsecured
  $265 mil. 10.875% notes due 2018              CCC+
    Recovery rating                             6

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