Gold is 2025’s best performer. UBS sees more upside
Investing.com -- Moody’s Ratings downgraded Doman Building Materials Group Ltd.’s corporate family rating to B1 from Ba3, while maintaining a negative outlook on the company.
The rating agency also downgraded Doman’s probability of default rating to B1-PD from Ba3-PD and lowered its senior unsecured notes ratings to B2 from B1. The company’s SGL-4 speculative grade liquidity rating remains unchanged.
According to Moody’s, the downgrade reflects concerns over Doman’s refinancing risk, as its CAD272 million outstanding senior unsecured notes will mature in May 2026, now within the next 12 months. The rating agency noted that the proximity of this maturity without a liquidity backstop increases the company’s exposure to near-term liquidity risk.
Despite these concerns, Moody’s expects Doman’s strong operational performance will support its refinancing efforts. The agency identified governance considerations as a key driver of the rating action, pointing to the company’s tolerance for financial strategies that increase refinancing risk.
Doman’s B1 rating benefits from several factors, including strong positions in Canadian building materials distribution and North American pressure treated lumber markets, good geographical diversification with some vertical integration, and positive repair and renovation market fundamentals. Moody’s expects the company’s financial leverage will decline but remain around 4x over the next 12-18 months.
The rating is constrained by weak liquidity due to the upcoming notes maturity and seasonally high revolver utilization at the end of Q1 2025, though utilization is expected to decline through 2025. Other constraints include concentration in the North American renovation and remodel market, exposure to sudden drops in wood products prices, expected weaker demand as housing starts decline in both the US and Canada, potential integration challenges from acquisitions, and low operating margins.
Moody’s assessment shows Doman has weak liquidity with approximately CAD165 million of liquidity sources compared to uses of CAD272 million. These sources include CAD18 million in cash as of March 2025, about CAD92 million available under its CAD580 million revolving credit facility maturing in April 2028, and expected positive free cash flow of about CAD55 million through mid-2026.
The B2 ratings on the company’s CAD325 million senior unsecured notes maturing in 2026 (CAD272 million outstanding) and CAD365 million senior unsecured notes due 2029 are one notch below the B1 corporate family rating, reflecting their subordinate position behind the secured CAD580 million asset-based revolving credit facility expiring in 2028.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.