Research: Rating Action: Moody’s Downgrades Cornerstone CFR from B2 to B2, Assigns B2 to New Senior Secured Debt; stable outlook

About $4.2 billion in rated debt affected

New York, July 12, 2022 — Moody’s Investors Service (Moody’s) has downgraded the Corporate Family Rating (CFR) of Cornerstone Building Brands, Inc. (Cornerstone) to B2 from B1 and the Probability of Default (PDR) rating ) to B2-PD from B1-PD. Moody’s also downgraded the rating of Cornerstone’s existing senior secured credit facility to B2 from B1 and the rating of the company’s senior unsecured notes to Caa1 from B3. At the same time, Moody’s has assigned a B2 rating to Cornerstone’s new senior secured debt due 2028. The outlook is stable. Finally, Moody’s withdrew the company’s SGL-1 speculative liquidity rating.

The ratings downgrades reflect Cornerstone’s increased debt leverage following the company’s privatization transaction announced on March 7, 2022. Pro forma for the leveraged buyout transaction and proposed financing, Moody’s expects the debt to total EBITDA ratio to be 5.7x at the end of 2022 (including Moody’s adjustments) compared to 4.4x the total debt to EBITDA ratio at the end of 2021. The proceeds of the proposed new senior secured debt of $1,010 million, the issuance of $464 million of PIK notes to the holding company, the $195 million raised in preferred shares and available cash will be used to finance the transaction . The governance risk we consider in rating Cornerstone is its private company status by Clayton Dubilier and Rice (CD&R), a private equity firm with a history of leveraged acquisitions and dividend distributions.

The B2 rating assigned to the new senior secured debt, the liquidity facility and the term loans, which comply with B2 CFR, results from their senior position on the senior unsecured notes and the PIK notes of $464 million, as well as on the pledge guaranteeing the guaranteed debt.

“While we expect Cornerstone’s management team to remain focused on execution and deleveraging from free cash flow, we believe increased leverage will limit flexibility. of the company at a time of heightened operational and financial risks,” said Emile El Nems, Vice President. – Senior Credit Officer at Moody’s.


..Issuer: Cornerstone Building Brands, Inc.

…. Business family ranking, downgraded from B1 to B2

…. Default scoring probability, downgraded to B2-PD from B1-PD

….Senior secured bank credit facility, downgraded from B1 (LGD3) to B2 (LGD3)

….Senior regular unsecured bond/debenture, downgraded to Caa1 (LGD6) from B3 (LGD5)


..Issuer: Cornerstone Building Brands, Inc.

….Senior secured bank credit facility, assigned B2 (LGD3)

….Senior secured bond/debenture attributed B2 (LGD3)


..Issuer: Cornerstone Building Brands, Inc.

…. Speculative liquidity rating, withdrawn, previously rated SGL-1

Outlook Actions:

..Issuer: Cornerstone Building Brands, Inc.

…. Outlook, changed to stable from rating under review


Cornerstone’s B2 CFR reflects the company’s high leverage and exposure to cyclical end markets. At the same time, the rating takes into account (i) the company’s leadership position as the largest integrated manufacturer of exterior building products in North America for the commercial, residential and repair construction industries and renovation, (ii) improved profitability and (iii) predictability of free cash flow generation. The rating is also supported by the company’s good liquidity.

Moody’s expects Cornerstone to have good liquidity over the next 12 to 18 months. This is backed by (i) $303 million in cash, (ii) $850 million in availability under the company’s $850 million asset-based loan (ABL) revolver expiring in July 2027, (iii) $95 million of availability under the Company’s $95 million ABL FILO credit facility expiring in July 2027, (iv) full availability under the company’s $115 million revolving credit facility of the company expiring in April 2026, (v) and Moody’s expectations for strong free cash flow generation. The ABL facilities ($850 million ABL facility and $95 million FILO facility) have a spring-loaded fixed charge commitment ratio of 1:1 that is triggered when availability under the ABLs, in aggregate, is less than 10% of total commitments or borrowing base, as the case may be. is lower. Similarly, the company’s liquidity facility has an elastic net leverage ratio of 7.75x that triggers when utilization exceeds 35% of the facility. There are no financial covenants under the term loan facility.

The stable outlook reflects Moody’s expectation that Cornerstone will steadily grow revenue organically, improve profitability and generate significant free cash flow that can be used to deleverage its balance sheet.

The proposed $1,010 million senior secured debt is expected to contain commitment flexibility similar to the existing $2,574 million senior secured term loan facility, including the ability to incur additional indebtedness. In addition, designations of unrestricted subsidiaries and the transfer of assets to unrestricted subsidiaries are permitted.


Ratings could be upgraded if: the total debt to EBITDA ratio approaches 4.75x, the adjusted EBITA to interest expense ratio is above 3.5x, the company improves its free cash flow and good liquidity, and the company demonstrates a Commitment to modest leverage.

Ratings could be downgraded if: the total debt/EBITDA ratio is above 5.75x, the adjusted EBITA/interest expense ratio is below 2.5x, and the operating performance and liquidity of the business deteriorate.

The main methodology used in the ratings was Manufacturing published in September 2021 and available at Otherwise, please see the Scoring Methodologies page on for a copy of this methodology.

Based in Cary, North Carolina, Cornerstone Building Brands, Inc. is the largest manufacturer of exterior building products for low-rise residential and non-residential buildings in North America. Following privatization, Cornerstone will become a private company of Clayton, Dubilier and Rice. As of May 28, 2022, Cornerstone’s trailing twelve months revenue was $6.0 billion.


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Emile El Nems
VP – Senior Credit Officer
Corporate Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Gretchen French
Associate General Manager
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

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Moody’s Investors Service, Inc.
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