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Rating Action:

Moody's revises Martin Marietta Materials, Inc's outlook to stable from negative

12 Jun 2013

Approximately $675 million of debt affected

New York, June 12, 2013 -- Moody's Investors Service revised the rating outlook for Marietta Materials, Inc.'s ("Martin Marietta") to stable from negative and affirmed its existing ratings, including its Ba1 corporate family rating and Ba1-PD probability of default rating.

The following ratings actions were taken:

Ba1 Corporate Family Rating, affirmed

Ba1-PD Probability of Default, affirmed

Ba1 on senior unsecured notes affirmed, LGD4- 58% revised to LGD4- 57%

Speculative grade liquidity rating of SGL-3, affirmed

RATINGS RATIONALE

The change in outlook to stable from negative reflects Moody's expectation that Martin Marietta will remain focused on debt reduction and deleveraging, and operating performance will improve over the next year as end markets begin to slowly improve, albeit from a weak base. The stable outlook also incorporates Moody's expectation that a large levering acquisition, similar to the Vulcan bid in 2012, is unlikely in the intermediate future.

Martin Marietta's Ba1 ratings benefit from the company's position as one of the North America's leading aggregates producers; typically stable operating performance in most, but not in all economic scenarios; and diverse end-markets including public, private residential and non-residential construction. However, Moody's notes its diversity did not fully mitigate against the nation-wide declines in private residential and non-residential construction experienced during the most recent recession. Elevated financial leverage and cyclical weakness constrain the rating. The company lacks multinational diversity, as it effectively derives all of its income from operations in North America. The company is smaller in scale than more highly rated multinational building materials companies. While private construction, primarily residential, has experienced an uptick in demand, weak public sector construction activity still presents credit risk.

SGL-3 speculative grade liquidity rating reflects Martin Marietta's adequate liquidity profile, supported by the availability of $237 million under its unsecured revolving credit facility due 2015, absence of near-term debt maturities, and Moody's expectation that the company will remain operating cash flow positive over the next twelve months. Liquidity, however, is constrained by a rather low cash balance of $37 million at March 31, 2013, moderate covenant clearance levels, and pending covenant test level tightening over the next several quarters.

The stable outlook presumes that the company will carefully balance its financial policy including maintaining acceptable liquidity and debt leverage and other credit metrics against its growth strategies, which may include various "tuck-in" acquisitions. Furthermore it reflects our expectations that Martin Marietta's operating performance will improve, as private sector construction continues to recover, and declines in public construction slow and eventually reverse.

Material debt reduction and improved and sustained operating margins and cash flow, would lead to upward rating consideration. Adjusted debt-to-EBITDA sustained comfortably below 2.5x and adjusted EBIT-to-interest expense consistently above 4.0x, and rebuilding abundant liquidity would support positive rating pressure.

Martin Marietta's ratings could be pressured in the event that the company's liquidity deteriorated or if stressed conditions in the end markets cause a negative impact on credit metrics, including adjusted debt-to-EBITDA exceeding 4.0x and adjusted EBIT-to-interest expense declining below 2.5x. The rating would likely be downgraded in the event that Martin Marietta completed an acquisition of Vulcan Materials company along the lines previously considered, or any other materially levering transaction.

The principal methodology used in this rating was the Global Building Materials Industry Methodology published in July 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Headquartered in Raleigh, North Carolina, Martin Marietta Materials, Inc. ("Martin Marietta") is one of the leading United States producers of aggregates for infrastructure, commercial, agricultural and residential construction. Aggregates account for nearly 90% of the company's revenues. The company also manufactures magnesia-based chemical products, and dolomitic lime in its Specialty Products segment. In the LTM period ending March 31, 2013 Martin Marietta generated approximately $2 billion in revenues.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain 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 certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Glenn B. Eckert
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Brian Oak
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's revises Martin Marietta Materials, Inc's outlook to stable from negative
No Related Data.
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