S&P ups Builders FirstSource, rates loan BB-, notes B-

Standard & Poor’s said it raised its corporate credit rating on Builders FirstSource Inc. to B+ from B. The outlook is stable.

S&P also raised its issue-level rating on Builders’ $350 million senior secured notes due 2021 to BB- from B and revised the recovery rating on the notes to 2 from 4. The 2 recovery rating indicates an expectation of substantial (70% to 90%; lower half of the range) recovery for bondholders in the event of a payment default.

At the same time, S&P assigned a BB- issue-level rating to the company’s proposed $550 million term loan due 2022. The recovery rating on the loan is 2, indicating an expectation of substantial (70% to 90%; lower half of the range) recovery.

Finally, S&P assigned a B- issue-level rating to Builders’ proposed $750 million senior unsecured notes due 2023. The recovery rating on the notes is 6, indicating an expectation of negligible (0% to 10%) recovery for bondholders in the event of a payment default.

“The stable outlook reflects our view that Builders FirstSource will continue to increase sales and EBITDA as U.S. residential construction continues to recover from an historic downturn and the company realizes significant synergies from the merger. As a result, we expect some improvement in the company’s leverage measures over the next 12 to 24 months while it maintains adequate liquidity,” said S&P credit analyst Pablo Garces in a news release.

“However, the company will remain highly leveraged, with debt to EBITDA well above 5x,” the agency added.

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