NCI Building Systems Inc. Rating Raised To #BB# From #BB-#, Outlook Is Other Rating Actions Taken

Stocks and Financial Services Press Releases Tuesday January 31, 2017 08:49
DALLAS--31 Jan--S&P Global Ratings
DALLAS (S&P Global Ratings) Jan. 30, 2017--S&P Global Ratings said today it raised its corporate credit rating on Houston-based NCI Building Systems Inc. to 'BB' from 'BB-'. The outlook is stable.

At the same time, we raised our issue-level rating on NCI's $238 million term loan due 2019 to 'BBB-' from 'BB+'. The recovery rating is unchanged at '1', which indicates our expectation of very high (90% to 100%) recovery for lenders in the event of a default.

We also raised our issue-level rating on NCI's $250 million unsecured notes due 2023 to 'BB' from 'BB-'. In addition, we revised the recovery rating on the notes to '3' from '4', which indicates our expectation of meaningful (50% to 70%, lower half of the range) recovery in the event of a default.

"The stable outlook reflects S&P Global Ratings' expectation that while growth rates in NCI's markets may decline marginally in 2017, they will remain positive and continue to outpace broader GDP growth rates," said S&P Global Ratings credit analyst Chiza Vitta. "We expect the company's leverage will remain below 3x over the next 12 months due to actions, including debt prepayments, taken over the past year, and sustained relatively elevated EBITDA margins. We also expect the company to continue to maintain strong liquidity based on its ABL revolving credit borrowing capacity, substantial cash on hand, and modest capital spending."

We could lower our rating on NCI if we expected leverage to approach 4x. This could happen if NCI decided to pursue a debt-financed acquisition or a more aggressive debt-financed stock repurchase program or if a moderate recession caused a reversal in nonresidential construction trends.

We could raise our corporate credit rating if CD&R further divested its ownership in NCI to below 40%, in accordance with our criteria regarding companies owned by financial sponsors, and maintained credit measures in the intermediate range, including adjusted leverage below 3x and FFO to debt above 30%, and if we began to see increased stability in operating results.

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