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I AGREE
04 Mar 2011
Approximately $375 million of rated debt securities affected
New York, March 04, 2011 -- Moody's Investors Service affirmed the Caa1 corporate family rating of
Euramax International, Inc. (Euramax). Moody's
also assigned a Caa1 rating to the company's proposed $375
million senior secured notes due 2016. The rating action was prompted
by the company's recent refinancing of its existing indebtedness with
proceeds from the rated notes, ABL borrowings, and a new unrated
unsecured term loan used to repay its amended and restated secured term
loan due in 2013. Following the close of the transaction,
Moody's will withdraw the ratings on the existing secured term loan facility.
The rating outlook was changed to positive from stable.
Ratings Affirmed:
..Issuer: Euramax International, Inc.
....Corporate Family Rating, Caa1
....Probability of Default Rating, Caa1
Ratings Assigned:
..Issuer: Euramax International, Inc.
....Sr. Secured Notes, Caa1 (LGD4,
50%)
....Outlook, Positive from Stable
RATING RATIONALE
The affirmation and positive outlook reflect the company's improved
operating performance in 2010, prospects for 2011, and the
new capital structure, which extends the maturity profile by three
years, lowers interest expense, and eliminates restrictive
financial maintenance covenants. As a result, Moody's
believes the overall liquidity position has improved as a breach in financial
covenant compliance is no longer expected in the next 12-18 months.
Euramax amended its $70 million ABL revolving credit facility,
which now matures in 2015. Currently, aggregate outstanding
amounts are roughly $15 million, with availability of approximately
$30 million after considering the most recent borrowing base calculation.
The company also has approximately $25 million of cash on the balance
sheet. For the ABL facility, the company must maintain a
fixed charge ratio of 1.25 to 1 if availability falls under 15%
of the lesser of the borrowing base and the commitment. Moody's
believes the availability will not fall below this threshold in the next
12-18 months. The unrated unsecured term loan contains a
PIK toggle feature. At the company's option, but no
more than 6 payments over the life of the loan, Euramax can elect
to pay approximately 50% of the interest in cash, if liquidity
weakens.
The Caa1 corporate family rating considers the company's high adjusted
leverage, around 8.0x EBITDA, low adjusted interest
coverage (EBIT/Interest slightly below 1.0x), sluggish operating
performance due to the continued weakness of the residential and commercial
building markets, and the slow recovery of the global economy in
general. Moody's believes debt reduction over our rating
horizon will remain uncertain if demand levels fail to maintain traction.
Although Euramax's operating performance improved in 2010 and end-markets
show signs of additional recovery in 2011, Moody's expects credit
metrics to remain weak in 2011, primarily due to our expectation
of a slow economic recovery and the depressed state of the residential/commercial
building and recreational vehicle end markets. The ratings also
consider a limited ability to reduce debt, vulnerability to cyclical
end-use markets, exposure to volatile raw material costs
for commodities such as aluminum and steel, modest free cash flow
relative to debt levels, and significant customer concentration
risks with retail home centers.
The positive outlook reflects the company's improved liquidity position,
operating results in 2010, and prospects for additional gains in
2011. The company has shown recent revenue and cost improvement,
therefore, if Euramax sustains this improvement, an upgrade
would be warranted. Specifically, if operating results expand
sufficiently to sustain adjusted EBIT/Interest at 1.5x and adjusted
Debt/EBITDA below 6.5x, ratings will likely be raised.
The ratings may be downgraded should the company face significant price
and volume deterioration, persistent negative free cash flow,
or a material deterioration in liquidity arrangements.
Moody's last rating action was on August 6, 2009, when we
assigned Caa1 ratings to Euramax's corporate family and probability of
default ratings.
The principal methodology used in rating Euramax was Moody's Global Manufacturing
Industry Rating Methodology, published in December 2010.
Headquartered in Norcross, Georgia, Euramax International
Inc. is an international producer of value-added aluminum,
steel, vinyl and fiberglass products.
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, and confidential and proprietary Moody's
Investors Service 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
Frank Grbic
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Glenn B. Eckert
Senior Vice President
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 rates Euramax International's proposed notes Caa1; outlook positive
No Related Data.
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