Moody’s affirms Doman’s B1 rating, changes outlook to stable

Investing.com -- Moody’s Ratings has affirmed Doman Building Materials Group Ltd.’s B1 corporate family rating while changing the outlook to stable from negative following the company’s proposed CAD175 million add-on to its senior unsecured notes.

The rating agency also assigned a B2 rating to the proposed add-on to the senior unsecured notes due 2029 and upgraded the company’s speculative grade liquidity rating to SGL-3 from SGL-4.

According to Moody’s, Doman plans to use the proceeds from the proposed add-on along with approximately CAD100 million drawn from its ABL facility to redeem CAD272 million in senior unsecured notes due May 2026.

The transaction reduces Doman’s refinancing risk and improves its debt maturity profile, though Moody’s expects ABL facility utilization to remain elevated due to the additional borrowing. The rating agency noted that liquidity will be "notably constrained" in the first half of 2026 because of seasonal working capital needs.

The outlook change reflects Moody’s view that Doman is addressing its refinancing risk through the proposed transaction. The agency expects the company’s strong operational performance and free cash flow generation to support deleveraging efforts.

Doman’s B1 rating benefits from its strong positions in Canadian building materials distribution and North American pressure treated lumber markets, good geographical diversification, and positive repair and renovation market fundamentals. Moody’s expects financial leverage to decline but remain around 4x over the next 12-18 months.

The rating is constrained by Doman’s concentration in the North American renovation and remodel market, exposure to wood products price volatility, expected weaker demand as housing starts decline in the US and Canada, potential integration challenges from acquisitions, and a track record of reduced liquidity when funding large acquisitions.

Moody’s considers Doman’s liquidity to be adequate, with approximately CAD350 million of liquidity sources and no uses, pro forma for the 2026 notes repayment. As of September 2025, these sources include CAD15 million in cash, CAD292 million available under its CAD580 million ABL revolving credit facility, and expected positive free cash flow of about CAD50 million over the next four quarters.

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