S&P drops Metals USA, gives notes CCC

Standard & Poor's said it lowered its ratings on Metals USA Holding Corp. and its subsidiary Metals USA Inc. to B- from B, following the company's announcement that it plans to increase leverage by issuing $300 million of senior unsecured pay-in-kind toggle notes at Metals USA Holding.

In addition, S&P said it assigned its CCC rating to the notes.

The outlook is stable.

Proceeds from the notes will be used to repay existing notes as well as to fund a special dividend to its private equity holders Apollo Management LP, the agency said.

According to S&P, the ratings on Metals USA Inc. reflect the significant volatility associated with its markets and cash flows, thin margins and very aggressive financial leverage and policy.

Ratings also reflect the company's variable cost structure, ability to generate cash flow from working capital during periods of soft end markets, low capital expenditures and a fair market position, the agency noted.

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