Moody's cuts United Subcontractors, rates loans B2, Caa1

Moody's Investors Service said it downgraded United Subcontractors' corporate family rating to B2 from B1 and assigned a B2 rating to the company's proposed $335 million senior credit facility and a Caa1 rating to its proposed $65 million second-lien term loan.

The outlook is stable.

Proceeds from the $400 million credit facilities will primarily go toward refinancing the company's current debt balances, funding a $20 million dividend payment and the repurchase of $70 million of its preferred stock (including dividends).

This dividend payment would be the second made in 2005. The company had refinanced its debt balances in July 2005 to pay a $20 million dividend and fund an acquisition, the agency said.

The ratings downgrade reflects the company's aggressive balance sheet management policy as reflected by its proposed re-leveraging, high levels of goodwill, a growth strategy that relies on acquisitions and the likelihood of greater leverage, the agency said.

Moody's also said the ratings favorably consider the benefits of the company's leading market position in its key markets, its geographic diversity, positive cash flow and its variable cost structure.

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