NCI Building Systems Falls After S&P Downgrade

NEW YORK (AP) — Shares of NCI Building Systems Inc. fell after a credit rating agency Thursday lowered its rating of the metal construction materials provider on concerns of what amounts to a default.

Last week, NCI said private equity firm Clayton, Dubilier & Rice Inc. will invest $250 million in the Houston company by purchasing new convertible participating preferred shares.

NCI will use the proceeds to cut debt and fund an exchange of its senior subordinated convertible notes.

The company is considering revising its $400 million bank term loan, which has a current balance of $293 million, to a $150 million term loan with a five-year maturity. It also anticipates entering a $125 million five-year asset-based revolving credit agreement, which is expected to be unfunded at closing.

However, if less than 100 percent of lenders and 95 percent of noteholders agree to the revision and note exchange, respectively, NCI said it may do them anyway in a prepackaged Chapter 11 bankruptcy filing, S&P said.

"As a result, we view the exchange as tantamount to a restructuring and default, since failure to complete the exchange on stated terms will likely result in a bankruptcy filing," the agency said, cutting the company's rating further into non-investment grade status to "CC" from "CCC+."

Its outlook is "Negative."

An NCI representative was not immediately reachable for comment.

In afternoon trading, NCI shares fell 16 cents, or 4.3 percent, to $3.56.