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10 Mar 2011
Approximately $1.0 billion of debt affected
New York, March 10, 2011 -- Moody's Investors Service assigned a B1 rating to Armstrong World Industries,
Inc.'s ("Armstrong") Senior Secured Term Loan B due 2018,
and affirmed its B1 Corporate Family Rating and B1 Probability of Default
Rating. Proceeds from this credit facility will be used to reduce
an equal amount of the company's existing Senior Secured Term Loan
B due May 23, 2017. The outlook is stable.
The following ratings/assessments were affected by this action:
Corporate Family Rating affirmed at B1;
Probability of Default Rating affirmed at B1;
$250 million Senior Secured Revolving Credit Facility 11/23/2015
affirmed at B1 (LGD3, 42%);
$250 million Senior Secured Term Loan A due 11/23/2015 affirmed
at B1 (LGD3, 42%);
$550 million Senior Secured Term Loan B due 05/23/2017 affirmed
at B1 (LGD3, 42%); and,
$550 million Senior Secured Term Loan B due 2018 assigned B1 (LGD3,
The company's speculative grade liquidity rating remains SGL-2.
The B1 rating assigned to the proposed $550 million Senior Secured
Term Loan B due 2018, the same rating as the corporate family rating,
is secured by a first priority security in substantially all of the company's
domestic assets and is pari passu to the company's other senior
secured bank credit facilities. Proceeds from this credit facility
will be used to pay off company's Senior Secured Term Loan B due
2017 -- at which time the rating will be withdrawn - and cash
on hand will be used to pay related fees and expenses. Although
the proposed debt issuance will reduce cash interest costs up to $5.5
million per year, it will have minimal impact on the company's
credit metrics, but extends the maturity profile.
Armstrong's B1 Corporate Family Rating reflects its leveraged capital
structure following its special cash dividend of approximately $800
million that occurred in December 2010. For the twelve months through
December 31, 2010, debt-to-EBITDA was 5.1
times while free cash flow to debt approximated 8% (excluding the
dividend) for the same time period. The contributions from the
WAVE JV are critical to supporting the current rating, since Armstrong's
core operating margins remain weak. However, the company's
strong North American market position in providing flooring to the new
construction and remodeling end markets positions it to benefit from an
eventual economic and construction recovery. Armstrong's
good liquidity profile supports the rating too.
A rating upgrade appears unlikely over the intermediate term due to Armstrong's
low margins, its debt burden, and generally weak end market
demand. However, over time, if the company proved able
to drive EBITA-to-interest coverage towards 3.0 times,
and debt-to-EBITDA towards 3.5 times (all ratios
adjusted per Moody's methodology), through a mixture of operating
improvements and debt reduction a rating upgrade would be considered.
A rating downgrade could result from evidence that Armstrong is not benefiting
from its cost reduction programs or financial performance is negatively
impacted by an unexpected decline in the company's end markets.
EBITA-to-interest expense remaining below 1.5 times
or debt-to-EBITDA sustained above 4.5 times (all
ratios adjusted per Moody's methodology) for an extended period of time
could pressure the ratings. Future shareholder friendly activities,
or deterioration in the company's liquidity profile, or debt-financed
dividends, share repurchases or acquisitions may also stress Armstrong's
The last rating action was on November 15, 2010, at which
time Moody's downgraded Armstrong World Industries, Inc.'s
Corporate Family Rating to B1 from Ba2.
The principal methodologies used in this rating were Global Manufacturing
Industry published in December 2010, and Loss Given Default for
Speculative-Grade Non-Financial Companies in the U.S.,
Canada and EMEA published in June 2009.
Armstrong World Industries, Inc., headquartered in
Lancaster, PA, is a global producer of flooring products and
ceiling systems for use primarily in the construction and renovation of
residential, commercial and institutional buildings. The
company also designs, manufactures and sells kitchen and bathroom
cabinets for the U.S. market. Revenues for the twelve
months through December 31, 2010 totaled approximately $2.8
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
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Please see ratings tab on the issuer/entity page on Moodys.com
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Please see the ratings disclosure page on our website www.moodys.com
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of each rating category and the definition of default and recovery.
Corporate Finance Group
Moody's Investors Service
Glenn B. Eckert
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns B1 rating to Armstrong's proposed senior secured term loan
250 Greenwich Street
New York, NY 10007
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