S&P rates Formica loans B

Standard & Poor's said it assigned a B corporate credit rating to Formica Bermuda Holdings Ltd. and a B rating with a 3 recovery rating to Formica Corp.'s proposed senior secured bank facility, which includes a $60 million revolving credit facility due in 2012 and a $210 million first-lien term loan due in 2013.

The outlook is stable.

Proceeds from the new bank facility will be used to refinance existing bank debt incurred when Formica's U.S. subsidiaries emerged from bankruptcy in June 2004 and to pay a $30 million dividend to its equity holders, primarily Cerberus Capital Management LP and Oaktree Capital Management LLC.

S&P said the ratings reflect Formica's very aggressive financial policies and debt leverage; thin operating margins and cash flow; substantial business risks, including mature markets in North America and Western Europe, substitution risk and import competition; vulnerability to volatile raw material costs and commercial construction cycles and limited liquidity.

These risks outweigh the benefits of a well-known brand, good geographic manufacturing and sales diversity and recent success in lowering operating costs, the agency said.

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