Moody's lowers Norcraft notes, rates new notes B1

Moody's Investors Service said it assigned a B1 (LGD3, 38%) rating to the proposed second-priority senior secured notes due 2015 of Norcraft Cos., LP and lowered its 9% senior subordinated notes due 2011 to B3 (LGD5, 73%) from Ba3 (LGD2, 29%).

The agency also affirmed Norcraft Holdings, LP's corporate family and probability-of-default ratings at B2, affirmed its 9¾% senior unsecured discount notes due 2012 at Caa1 (LGD5) and changed the loss-given-default rate assigned to the notes to 87% from 82%.

The outlook was changed to stable from negative.

Norcraft announced that it is seeking approximately $150 million in new second-priority notes and will use the proceeds to redeem the notes due 2011 and some of the discount notes due 2012 and cash on hand to reduce the discount notes by an additional $35.0 million.

The agency said the B2 corporate family rating incorporates its view that Norcraft will be successful in accessing the capital markets but that credit metrics will likely remain weak over the near term despite the anticipated debt reduction. On a pro form basis through Sept. 30, leverage will improve to 6.3 times from 7.2 times.

The change in outlook results from the expectation that net cash on hand, some availability under the revolving credit facility and the refinancing of the 2011 maturing debt will result in a liquidity profile that provides Norcraft with greater financial flexibility to contend with ongoing pressures in the housing and remodeling sectors, Moody's said.

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