Research Update: White Cap Supply Holdings LLC Outlook Revised To Negative From Stable; Ratings Affirmed; PIK Notes Rated 'CCC+'

U.S.-based specialty concrete accessories and construction products and services distributor White Cap Supply Holdings LLC plans to issue $300 million payment-in-kind (PIK) toggle notes due in 2026 to fund a dividend distribution to sponsors Clayton, Dubilier&Rice (CD&R) and The Sterling Group. We expect adjusted leverage will be elevated, above 7x, over the next few quarters. As a result, we are revising our outlook on White Cap to negative from stable and affirming all our ratings, including the 'B' issuer credit rating. At the same time, we are assigning our 'CCC+' issue-level and '6' recovery ratings to the proposed $300 million senior unsecured PIK toggle notes issued at holding company White Cap Parent LLC. The proposed notes will be

...- U.S.-based specialty concrete accessories and construction products and services distributor White Cap Supply Holdings LLC plans to issue $300 million payment-in-kind (PIK) toggle notes due in 2026 to fund a dividend distribution to sponsors Clayton, Dubilier & Rice (CD&R) and The Sterling Group. - We expect adjusted leverage will be elevated, above 7x, over the next few quarters. - As a result, we are revising our outlook on White Cap to negative from stable and affirming all our ratings, including the 'B' issuer credit rating. - At the same time, we are assigning our '###+' issue-level and '6' recovery ratings to the proposed $300 million senior unsecured PIK toggle notes issued at holding company White Cap Parent LLC. The proposed notes will be subordinated to all the secured debt facilities and senior unsecured notes. - The negative outlook reflects our view that the incremental debt burden will result in elevated leverage and small cushion to absorb continued COVID-19 pandemic-related...

Research Update