NCI Building Systems Inc. (NCS) announced that it intends to launch private offering of $250 million worth of Senior Notes due 2023 to finance the acquisition of all of the general partnership interests of CENTRIA, inclusive of repayment of third party debt of CENTRIA and subject to working capital adjustment, and to pay fees and expenses associated with the acquisition.
On Nov 10, 2014, NCI Building entered in an agreement to acquire Pittsburgh-based CENTRIA for approximately $245 million. The acquisition, which is expected to close during the first quarter of fiscal 2015, is in line with NCI Building's strategic objective to target above-market growth through organic initiatives as well as synergistic and complementary acquisitions.
The CENTRIA acquisition will augment NCI Building’s leadership position while expanding the range of its cutting edge proprietary product offerings in the architectural metal panel market. NCI will benefit from CENTRIA’s command in the high-end IMP segment of the nonresidential wall and roof systems market.
Moody's Investors Service – the rating unit of Moody's Corp. (MCO) — assigned a B3 rating to the proposed new $250 million senior unsecured notes. Moody's also raised the rating of NCI Building’s senior secured term loan to Ba3 from B2 and the speculative grade liquidity (SGL) rating to SGL-2 from SGL-3.
However, the rating agency revised the rating outlook down to negative from stable, reflecting rise in the company's debt leverage. Apart from this, Moody's affirmed corporate family rating of B1 that reflects NCI Building’s adjusted debt leverage of 4.2x, which will rise to 5.9x, pro forma for the $250 million note offering. Moody's also reiterated probability of default rating at B1-PD.
Moody's also stated that the ratings could be raised if the company generates adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margins greater than 5%, adjusted EBITA-to-interest expense approaching 3x, and adjusted debt-to-EBITDA below 4x.
During the fourth quarter of fiscal 2014, NCI Building witnessed a 90% year-over-year surge in adjusted earnings led by a recent realignment of manufacturing operations and margin expansion across each of the company’s business units.
The company exited the quarter with cash and cash equivalents of $66.6 million compared with $77.4 million as of Nov 3, 2013. The company also generated cash flow from operating activities of $33.6 million in fiscal 2014 compared with $64 million in the prior fiscal year.
NCI Building intends to continue investing in growth initiatives. In addition, the recent booking trends are expected to drive growth. As growth in the nonresidential construction market continues to gain traction, the company remains committed to maintaining commercial discipline and operational efficiency.
Headquartered in Texas, NCI Building Systems is a leading integrated manufacturer of metal products in the North American non-residential construction industry.
Currently, NCI Building Systems carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Headwaters Inc. (HW) and USG Corp. (USG), both carrying a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment