S&P raises Headwaters

Standard & Poor's said it raised its long-term corporate credit and senior secured bank loan ratings on Headwaters Inc. to BB- from B+ and raised its subordinated debt rating to B from B-.

At the same time, it affirmed all other ratings. The outlook is stable.

S&P said the upgrade reflects the substantial debt reduction that Headwaters has achieved since acquiring Tapco International Corp. in September 2004, expectations that earnings from its building products businesses will continue to grow via new products, further cross-selling opportunities through its extensive distribution network and expanded capacity.

The ratings on Headwaters reflect meaningful business risks, including an aggressive acquisition strategy, an alternative energy business whose prospects are uncertain and cyclical demand for its products, S&P said, adding that these factors overshadow Headwaters' strengths, including its favorable position within selected niche businesses, healthy operating margins, moderate capital spending requirements and demonstrated willingness to issue equity to help fund growth.

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