S&P rates 84 Lumber loan B+

S&P said it assigned a B+ corporate credit rating to 84 Lumber Co.

The agency also said it assigned a B+ rating and 3 recovery rating to the company's proposed $350 million seven-year senior secured term loan.

The 3 recovery rating indicates 50% to 70% expected default recovery.

Co-borrowers on the loan are 84 Properties LLC and Pierce Hardy LP.

The outlook is positive.

The proceeds, along with $350 million of proceeds from a new five-year $350 million asset-based lending facility, will be used to repurchase real estate assets previously sold through a sale leaseback transaction in 2007, refinance its existing $350 million ABL facility due 2018 and pay transaction fees and related costs, S&P said.

The ratings reflect the company's weak business risk profile and aggressive financial risk profile, the agency said.

The weak business risk profile reflects the still-fragmented nature of the building materials distribution sector, historically low profit margins inherent in building products distribution, vulnerability to cyclical housing cycles, narrow product focus and intense competition, S&P said.

Partially offsetting these business risks are 84 Lumber's scale and size as the third-largest building materials distributor in the United States with about $2.5 billion of annual revenue, the agency said.

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