American Builders&Contractors Supply Co. Inc.

The stable outlook on ABC Supply reflects our expectation that over the next 12 months the company will continue to generate positive free cash flow and maintain strong liquidity. At the same time, we expect it to maintain total leverage (including lease obligations) of 3.0x-3.5x. We expect ABC to reduce leverage over the next 12 months through debt reduction and earnings accretion. We could downgrade ABC within the next 12 months if the company's leverage trended above 4.0x. This could occur if the U.S. housing starts and consumer spending contracted in a recessionary environment (on which our economists place a 25%-30% probability). This, in our view, would mean at least a 200-bps decline in its EBITDA margin, which we consider

...(Editor's Note: On Jan. 28, 2020, we republished this article, originally published on Sept. 25, 2019, to correct incorrect descriptions of the financial risk and business risk scores. A corrected version follows.)...

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