Approximately $175 million of debt affected
New York, January 12, 2011 -- Moody's Investor Service assigned a first time B3 Corporate Family
Rating and B3 Probability of Default Rating to AS America, Inc.
In a related action, Moody's assigned a B3 rating to the proposed
Senior Secured Notes due 2016 of AS America, Inc. ASD Americas
Holding Corp., AS America, Inc.'s indirect
parent holding company (collectively "American Standard"),
and its material domestic subsidiaries are guarantors. The rating
outlook is stable.
The following ratings were assigned:
Corporate Family Rating assigned B3;
Probability of Default Rating assigned B3; and,
1st Lien Senior Secured Notes due 2016 rated B3 (LGD3, 48%).
RATINGS RATIONALE
American Standard's B3 Corporate Family Rating considers the company's
exposure to cyclical end markets including new home construction,
the repair and remodeling sector, and the commercial construction
industry. The company is also susceptible to revenue and operating
margin volatility. The rating also reflects significant distribution
channel concentration, with the big box retailers representing a
large percentage of sales. Intense competition with other manufacturers
of chinaware, faucets, and kitchen and bath products -
American Standard's primary products -- will drive the urgency
for new product introduction and pressure product pricing. American
Standard is also exposed to volatility in raw material prices and may
be unable to immediately pass through higher costs for commodities such
as linerboard, steel, copper and natural gas and oil,
which would have a negative impact operating margins.
Nonetheless, American Standard's portfolio of well-established
brand names especially, in chinaware, baths and plumbing fixtures,
is a credit strength. Moody's anticipates American Standard's
operating performance will improve over the next year as it benefits from
cost reduction actions and improved operating efficiencies. Once
American Standard completes its capital restructuring, it will have
manageable debt leverage with no near-term maturities. Revolver
availability supports the company's liquidity as well.
The B3 rating assigned to the proposed $175 million senior secured
notes due 2016 is at the same level as the corporate family rating,
reflecting the preponderance of secured debt in American Standard's
capital structure. These notes will have a first priority lien
on substantially all of American Standard's non-current assets
and a second priority interest in the proposes revolving credit facility's
security.
The stable outlook reflects Moody's expectations that American Standard's
operating margins and leverage metrics will improve, and that sufficient
revolver availability will help it contend with ongoing economic uncertainties
and the resulting impact on the residential and commercial end markets.
Although Moody's anticipates improving operating margins, an improvement
in the ratings will depend on the company's ability to generate
meaningful levels of free cash flow. Furthermore, over the
intermediate term, an improved liquidity profile and operating performance
that results in debt-to-EBITDA sustained below 4.0
times and EBITA-to-interest expense trending towards 2.5
times (all ratios adjusted per Moody's standard adjustments) could result
in a positive rating action.
Factors which might pressure the ratings include a decline in the company's
financial performance, debt financed acquisitions, any dividends
to shareholders or a deteriorating liquidity profile. Debt-to-EBITDA
remaining above 5.5 times or EBITA-to-interest expense
remaining below 1.5 times (all ratios adjusted per Moody's standard
adjustments) for an extended period of time would likely result in rating
pressures.
The principal methodologies used in this rating were the Global Manufacturing
Industry methodology published in December 2010 and the Loss Given Default
for Speculative-Grade Non-Financial Companies in the U.S.,
Canada and EMEA methodology published in June 2009.
AS America, Inc., headquartered in Piscataway,
NJ, is a North American manufacturer and distributor of bath and
kitchen products for use primarily in the repair and remodeling sector,
new home construction and commercial construction industries. The
U.S represents the majority of sales. Sun Capital Partners,
Inc. ("Sun"), through affiliated funds,
is the primary owner of American Standard. Bain Capital,
through its affiliated funds, is a minority owner.
REGULATORY DISCLOSURES
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
Analytics information.
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
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Peter Doyle
Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Brian Oak
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns B3 Corporate Family Rating to AS America, Inc.; outlook stable
