Moody's rates Erico notes B3

Moody's Investors Service said it has assigned a B3 rating to Erico International Corp.'s proposed $135 million senior subordinated note due 2012, a B1 senior implied rating, a B2 senior unsecured issuer rating, and a speculative grade liquidity rating of SGL-2.

Proceeds from the senior subordinated notes, along with $19.5 million from the company's $75 million secured revolving credit facility (not rated by Moody's), will be used to refinance $124.5 million of the company's existing debt and pay a $25 million cash dividend to the company's shareholders.

Moody's said the ratings reflect Erico's high leverage and weak balance sheet, its relatively small market focus, large exposure to the cyclical non-residential construction market, and the risk of further decapitalization that could constrain improvements in its credit profile.

On the other hand, the ratings recognize the company's relatively good performance through the recent severe downturn in the non-residential construction market, its strong market position in several niche product categories, good brand recognition, and a history of product innovation that has driven the company's growth.

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