DBRS Confirms Superior Plus LP at BBB (low) with a Stable Trend

DBRS has today confirmed the Senior Secured Notes rating of Superior Plus LP (Superior or the Partnership) at BBB (low) with a Stable trend, following the announcement of the Partnership’s proposed acquisition of Specialty Products & Insulation Co. (SPI) for the total aggregate price of US$135 million ($145 million). The transaction is subject to regulatory and other approvals and is expected to close in September 2009.

The confirmation of the Senior Secured Notes rating is based on DBRS’s expectation that the acquisition will be accretive to cash flow (the Partnership forecasts four to six cents per share in 2010); add geographic and market diversification to Winroc Corporation (Winroc), its construction products distribution business; and result in minimal impact on its key credit metrics.

The transaction is expected to be financed with a combination of equity and debt as Superior has the option to pay US$30 million of the purchase price to existing equity holders in either common shares or cash, with the remaining US$105 million to be funded from its $570 million credit facility (which has more than $280 million currently available). The transaction price equates to approximately 5.7 times annualized EBITDA for the first half of 2009, which is reasonable. DBRS expects the impact of the proposed acquisition on Superior’s business risk profile to be modestly positive by providing diversification to Winroc’s current business mix.

SPI is a leading national distributor of insulation and architectural products in the United States, primarily focused on the commercial and industrial sector, with a diverse customer base. With a network in 28 states and a strong presence in the U.S. eastern seaboard, SPI will provide Superior’s Winroc division with additional geographic diversification (increasing its presence from four states to 32), a complementary business and growth opportunities.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is General Rating Methodology for Non-Financial Companies, which can be found on our website under Methodologies.

This is a Corporate rating.