S&P downgrades Builders FirstSource
Standard & Poor’s Ratings Services has lowered its rating on the unsecured notes of Building FirstSource to ‘CC’ from ‘CCC-‘ and revised its recovery rating to ‘6’ from ‘5’ to reflect diminished recovery prospects, given a higher level of first-lien obligations, the credit rating company announced. The ‘6’ recovery rating indicates an expectation for a negligible (0% to 10%) recovery in the event of a payment default.
At the same time, S&P affirmed its corporate credit rating for the Dallas-based LBM chain, stating that the pro dealer has adequate liquidity after having bolstered cash balances with proceeds from a new first-lien term loan.
"Our vulnerable business risk opinion acknowledges that the company’s revenues are down nearly 70% from their cyclical peak. Recent sales improved modestly off of deep lows, but we do not anticipate a more-robust recovery until 2013 at the earliest," said Standard & Poor’s credit analyst James Fielding. "Our highly leveraged financial risk assessment reflects a heavy debt burden that was exacerbated by a new secured term loan. However, the cash proceeds from the new loan provided the company much needed financial flexibility, such that we now view its liquidity profile to be adequate despite our expectation for operating cash flow deficits over the next 12 months."
Builders FirstSource appears to be on track to generate $730 million to $740 million of revenue in fiscal 2011, up modestly from $700 million in 2010, according to S&P estimates. The company has significantly downsized its production capacity and overhead structure but is still likely to generate about $20 million of negative adjusted EBITDA for the year, the analyst note said. This will mark an improvement over a $37 million adjusted EBITDA deficit in fiscal 2010, however.
S&P’s baseline scenario for 2012 assumes that U.S. housing starts improve by about 17% and that Builders FirstSource’s revenues improve 20% as the company gains market share because several of its competitors have downsized or exited the business entirely. The negative rating outlook reflects the firm’s opinion that “extremely difficult operating conditions” won’t meaningfully abate for the LBM company until 2013 at the earliest.
Although it expects a larger jump in U.S. housing starts in 2013 – 29% — the ratings agency still questioned whether Builders FirstSource’s EBITA would be able to fully cover an estimated $37 million of annual interest expense.
Boise Cascade is hiring again
Boise Cascade announced Jan. 17 that it was adding 40 positions to its Western Oregon Region mills in Medford, White City and Willamina, according to an article in the Oregon Mail Tribune.
Company spokesman R.J. Roberts told the newspaper that the Idaho-based wood products supplier has increased market share for its plywood and engineered wood panels, both in domestic and Canadian markets.
"The current markets for our wood products, and the recent upturn in demand for the products we make using the veneer produced in our mills, have necessitated this hiring," Roberts said.
Supply is also tightening. Georgia-Pacific closed two Southern pine plywood plants, in Crossett, Ark. and in Hawthorne, Fla. last year. Then Latin American panel maker Celulosa Arauco experienced a fire in early January, halting production. Rebuilding efforts are estimated to take two years.
Roberts acknowledged that Boise’s market share gains, which include new contracts with Home Depot and some Canadian companies, came at the expense of competitors.
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ABC Supply names new national account exec
Building products distributor ABC Supply has promoted David Johnson to the position of director national accounts. In his new role, Johnson will lead the team that works with large national customers, partners and suppliers to provide the products and services these customers need. He has been part of the company’s national accounts department since 2008, serving as an account executive focused on storm contractors.
Johnson first joined ABC Supply in 1990, and his roles with the company have included operations manager for the Midwest region; sales manager for the Midwest region; manager of customer financial services for the Midwest region; branch manager in Green Bay, Wis.; and outside sales associate for Northeastern Wisconsin and the Upper Peninsula of Michigan.
Prior to ABC Supply, Johnson served as an estimator/salesperson for two commercial roofing firms, as a sales representative for a commercial roofing manufacturer, and as a technician for an engineering firm performing on-site inspections of roofing projects and lab analysis of roofing materials.
Headquartered in Beloit, Wis., ABC Supply was founded in 1982 and is the largest distributor of roofing materials in the United States. The company has more than 450 branches in 45 states and is dedicated exclusively to serving professional contractors.
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