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Rating Action:

Moody's downgrades CRH to Baa2, Outlook changed to stable

20 Apr 2012

Frankfurt am Main, April 20, 2012 -- Moody's Investors Service has today downgraded the Baa1 ratings of CRH America, CRH Group Funding, CRH Finance (U.K.), CRH Finance BV and CRH Finance Limited and assigned a long term Baa2 issuer rating to CRH Plc, the ultimate parent of the CRH group. The rating outlook has been changed to stable from negative.

The ratings of CRH America, CRH Group Funding, CRH Finance U.K., CRH Finance B.V. and CRH Finance Limited are based on the guarantee provided by the parent CRH plc in favor of outstanding debt instruments.

Downgrades:

..Issuer: CRH America, Inc.

....Senior Unsecured Regular Bond/Debenture, Downgraded to Baa2 from Baa1

....Senior Unsecured Shelf, Downgraded to (P)Baa2 from (P)Baa1

..Issuer: CRH Finance (U.K.) plc

....Senior Unsecured Medium-Term Note Program, Downgraded to (P)Baa2 from (P)Baa1

....Senior Unsecured Regular Bond/Debenture, Downgraded to Baa2 from Baa1

..Issuer: CRH FINANCE B.V.

....Senior Unsecured Medium-Term Note Program, Downgraded to (P)Baa2 from (P)Baa1

....Senior Unsecured Regular Bond/Debenture, Downgraded to Baa2 from Baa1

..Issuer: CRH Finance Limited

....Senior Unsecured Regular Bond/Debenture, Downgraded to Baa2 from Baa1

..Issuer: CRH Group Funding Limited

....Senior Unsecured Medium-Term Note Program, Downgraded to (P)Baa2 from (P)Baa1

Assignments:

..Issuer: CRH plc

.... Issuer Rating, Assigned Baa2

Outlook Actions:

..Issuer: CRH America, Inc.

....Outlook, Changed To Stable From Negative

..Issuer: CRH Finance (U.K.) plc

....Outlook, Changed To Stable From Negative

..Issuer: CRH FINANCE B.V.

....Outlook, Changed To Stable From Negative

..Issuer: CRH Group Funding Limited

....Outlook, Changed To Stable From Negative

RATINGS RATIONALE

The downgrade was prompted by CRH's continued weak credit metrics for the current rating category with year-end 2011 RCF/Net debt of 18.8% compared to our requirement of above the mid twenties for the Baa1 rating category notwithstanding that 2011 metrics were impacted by FX movements and differences between P&L and cash flow taxes, which negatively impacted our Retained Cash Flow calculation (these effects accounted for approximately 2 percentage points of RCF/Net debt). In light of difficult market conditions, relatively high dividend payouts and the implementation of the group's external growth strategy, CRH has not been able to improve its credit metrics to levels commensurate with a Baa1 rating since August 2010 when Moody's assigned a negative outlook to the ratings. To the contrary its RCF/Net debt metric deteriorated modestly from 19.7% on an LTM June 2010 basis to 18.8% currently.

Moody's does not anticipate that CRH will be able to restore RCF/Net debt of above the mid twenties over the next 12 to 18 months as a result of continued challenging market conditions both in Europe and North America and the implementation of the group's external growth strategy with an M&A wallet generally comprised between EUR500 million and EUR1 billion per annum (depending on market conditions). Moody's however flags that CRH is better positioned than some other European building materials peers to sustain a stable operating performance in 2012 supported by its exposure to the light side of the building materials industry and to distribution which has been supportive of a stronger pricing power than pure heavy side players. Our expectation that CRH can post at least a stable operating performance in 2012 and improve its RCF/Net debt ratio to above 20% supports our stable outlook on the rating.

CRH's Baa2 long term issuer rating benefits from the group's strong liquidity profile mainly supported by high and stable cash balances and expectation of at least stable funds from operations over the next twelve months. The major external source of liquidity likely to be available -- e.g. in a stress scenario -- are multi-year credit lines of EUR1.9 billion that are currently undrawn, containing no repeating MAC clauses but financial covenants albeit with sufficient headroom. These cash sources are more than sufficient to cover committed cash outflows, such as capex, working capital changes or dividends. CRH has a well spread maturity profile with no major refinancing requirements over the next 18 to 24 months.

Given the company's strategy to seek further external growth and the still weak market outlook for the group's main markets in the US and Europe a rating upgrade is unlikely over the next twelve to eighteen months. It would be considered should CRH be able to achieve an RCF/net debt ratio above 25% on a sustainable basis.

Negative rating pressure would build if CRH's RCF/net debt ratio sustainably and materially remained below 20%.

The principal methodology used in these ratings was Global Building Materials Industry published in July 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Headquartered in Dublin, Ireland, CRH plc is one of the world's top six building materials companies with operations spread across more than 3,700 locations in 35 countries and around 80,000 employees. The group has grown through a series of more than 500 acquisitions since 1995, predominantly financed through solid free cash flows and occasional equity issues.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The ratings have been disclosed to the rated entities or their designated agent(s) and issued with no amendment resulting from that disclosure.

Information sources used to prepare each of the ratings are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these ratings.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings 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.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entities or their related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Stanislas Duquesnoy
Vice President - Senior Analyst
Corporate Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Matthias Hellstern
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's downgrades CRH to Baa2, Outlook changed to stable
No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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