Moody's rates Roper facility Ba2, converts B1

Moody's Investors Service said it has assigned for the first time ratings to Roper Industries Inc., a multi-industry company in the United States.

Rated B1 is the company's proposed $150 million of convertible senior subordinated notes due 2033; rated Ba2 is the company's proposed $175 million senior secured revolving credit facility due 2006, and rated Ba2 is the proposed $450 million senior secured term loan due 2008. The senior implied rating is Ba2.

The outlook is stable

Moody's said proceeds from the financing transactions, together with a planned $200 million common stock offering, will be used to fund the acquisition of Neptune Technology Group Holdings Inc., a major water meter manufacturer and meter reading technology provider, from Investcorp for $475 million (including refinancing about $265 million of Neptune's existing debt), to refinance $268 million of Roper's existing debt, and to pay fees and expenses.

Moody's said the ratings are supported by Roper's diversified industry and end-market exposures that help mitigate the cyclical nature of its industrial businesses, a portfolio of high margin and engineered products and services, a track record of strong cash flow generation at both Roper and Neptune, the company's moderate financial leverage and the use of equity capital in financing the Neptune acquisition.

On the other hand, the ratings are constrained by the company's highly acquisitive growth strategy, the associated integration and financial risks, and low tangible asset coverage.

Pro forma for the acquisition, Roper will be moderately leveraged, with total debt of about $622 million, or 3.4 times last-12-month EBITDA of about $185 million. Last-12-month EBITDA and EBIT would cover interest expenses about 6.8 times and 5.3 times, respectively.

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