MUMBAI (Thomson Financial) - Moody's Investors Service said it downgraded
U.S. Concrete Inc.'s corporate family rating and probability of default rating
to 'B2' from 'B1', concluding a review initiated for possible downgrade in
March, and said the rating outlook is stable.
The downgrade results from the company's high financial leverage, low
margins, ongoing pressure in residential construction, as well as slowing growth
in commercial and non-residential construction, Moody's said.
Increasing cost pressures from escalating diesel fuel prices and higher raw
material costs, along with further declines in volumes and the potential for
resistance to price increases for concrete products, are likely to pressure U.S.
Concrete's operating margins, given the fixed cost nature of the company's
business, Moody's added.
U.S. Concrete's 'B2' corporate family rating currently reflects the high
cyclicality of the company's construction end markets, heavy reliance on a
single product, relatively high financial leverage, fixed cost nature of the
business, lack of vertical integration, and growing challenges to further price
increases, Moody's said.
The company's credit metrics appear better positioned in the 'B2' rating
category, Moody's added.
The stable rating outlook reflects Moody's belief that relatively stable
public infrastructure and non-residential construction end market demand as well
as modest price increases can mitigate risks presented by falling volume and
cost pressures.
Moody's also cut its rating for the company's $285 million senior
subordinated notes due April 2014 to 'B3' from 'B2' and affirmed its 'SGL-2'
speculative grade liquidity rating.
Texas-based U.S. Concrete is a producer of ready-mixed concrete, precast
concrete and concrete-related products.
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