Guardian Industries Corp. has been assigned an A2 senior unsecured issuer rating while Guardian Europe“s proposed EUR 300 million Euro-commercial paper program has received a Prime-1 short-term ratin…
Guardian Industries Corp. has been assigned an A2 senior unsecured issuer rating while Guardian Europe“s proposed EUR 300 million Euro-commercial paper program has received a Prime-1 short-term rating by Moody“s Investors Service. Guardian Europe“s Euro-commercial paper program is guaranteed by Guardian Industries Corp. Guardian Europe intends to use commercial paper proceeds to repay EUR 270 million in bank debt. The program is backed by a EUR 300 million three-year, syndicated revolving credit facility guaranteed by Guardian Industries Corp. Furthermore, Moody“s has affirmed the A2 senior unsecured rating of Guardian Industries V.P.S. de R.L. deon C.V., which is guaranteed by Guardian Industries and Guardian Industries“ Prime-1 short-term rating. The Prime-1 rating is based Guardian Industries“ A2 senior unsecured rating and the company“s strong liquidity position given reliable and significant cash flow generation and considerable cash balances resulting from the repatriation of foreign subsidiaries“ earnings under the American Jobs Creation Act 2005. Guardian“s A2 ratings are supported by the privately-held company“s position as one of the world“s leading producers of flat glass and fabricated glass products. The company“s operating performance is, nevertheless, exposed to intense competition, resulting in a continuing risk of price erosion, and the cyclical nature of the company“s crucial end-user markets: automotive products and commercial and residential construction. In particular, Moody“s says it is concerned about the company“s exposure to North American automotive manufacturers, whose poor performance has been offset by strength in the European automotive market and the United States construction market. The stable outlook is based on the maintenance of consolidated financial leverage below 1.0x debt-to-EBITDA, free cash flow-to-debt above 40%, and EBIT interest coverage above 10.0x. In addition, the stable outlook reflects the rating agency“s expectation that Guardian Europe“s debt will be largely amortized within 2 years and that cash balances at the US parent company will not be depleted before subsidiary debt has been fully amortized. A worsening of these indicators (e.g. if debt-to-EBITDA were to rise and remain above 1.0x, free cash flow-to-debt deteriorates below 40%, or EBIT interest coverage falls below 10.0x) could lead to a downgrade. Over the medium term, an upgrade of Guardian“s ratings is unlikely unless Moody“s becomes comfortable that a transfer of control through ownership succession, whenever it might occur, would not result in more aggressive financial policies.