S&P rates Headwaters convertible B

Standard & Poor's said it assigned a B rating to Headwaters Inc.'s proposed $135 million 2.5% convertible senior subordinated notes due 2014.

The outlook is stable.

Proceeds from the notes will be used to repay a portion of the company's senior secured credit facility, which is rating BB- with a recovery rating of 2.

The agency said Headwaters' BB- corporate credit rating reflects meaningful business risks, including an aggressive acquisition strategy, an alternative energy business whose prospects are uncertain and cyclical demand for its products.

These factors overshadow Headwaters' strengths, in S&P's view, including the company's favorable position within selected niche businesses for construction materials, healthy operating margins, moderate capital spending requirements and demonstrated willingness to issue equity to help fund growth.

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