S&P rates Reece loan BB+

S&P said it assigned a BB+ long-term issuer credit rating to Reece Ltd.

The outlook is stable.

The agency also said it assigned a BB+ rating and recovery rating of 3 to the proposed senior secured $1.14 billion term loan B issued by Hamilton HoldCo LLC and Reece International Pty Ltd.

The 3 recovery rating indicates a 55% expected default recovery.

The ratings reflect an assessment of Reece's modest scale of operations compared with global peers and leading position in the competitive and niche building materials distribution industry in Australia, S&P said.

The acquisition of Morsco Inc. is a significant event and will present execution risks associated with operating a business outside of Reece's home market, the agency said.

S&P said it views the U.S. marketplace as larger and more competitive and its scale is more fragmented.

However, Reece has a track record of stable profitability and free cash flow generation, driven by its leading Australian market position, the agency said.

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