CHICAGO (AFX) - Fitch Ratings on Thursday downgraded the credit ratings of chemical company Georgia Gulf Corp., citing its recently completed acquisition and concerns about a slowing housing market.
Georgia Gulf on Tuesday completed its acquisition of Royal Group Technologies Ltd., a Canadian producer of home-improvement and building products, for 13 Canadian dollars ($11.63) per share and the assumption of 491 million Canadian dollars ($439.4 million) in debt.
Fitch said it lowered Georgia Gulf's issuer default rating to 'BB-' from 'BB,' its senior secured credit facility to 'BB+' from 'BBB-' and its existing senior unsecured notes to 'BB-' from 'BB.' The credit-rating agency said it also assigned a rating of 'BB-' to the company's new senior unsecured notes and 'B' for its new senior subordinated notes.
The rating outlook for Georgia Gulf, a maker of PVC, is negative.
Fitch said the acquisition will offer potential for bigger earnings and cash flow with less volatility. But the agency is concerned about high leverage, particularly as the housing market may be slowing, and its subsequent effect on PVC demand.
The ratings agency also said risks may be higher due to ongoing legal and regulatory investigations at Royal Group.
Georgia Gulf shares closed up $1.31, or 4.9 percent, at $27.90 on the New York Stock Exchange, where they've traded between $21.40 and $34.65 over the past year.
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