CSR Credit Rating Downgraded After Deal

Ratings agency Standard & Poor's has placed CSR Ltd on CreditWatch negative after the building materials group flagged the $690 million acquisition of glass maker Pilkington Australasia.

Standard & Poor's said CSR's plan to fund the acquisition though debt would weaken its financial profile and placed CSR's BBB-plus rating on CreditWatch with negative implications.

"Whilst this acquisition complements CSR's building products activities, the initial debt funding of these glass operations will weaken the company's financial profile," Standard & Poor's said.

CSR said its $690 million transaction would have an estimated, underwritten $180 million equity injection funded by the reintroduction of a dividend reinvestment plan (DRP).

"Standard & Poor's will seek to understand how quickly this acquisition debt will be amortised in light of the future DRP injection and the amount of future free cash flow that will be applied to debt reduction," the ratings agency said.

"The future capital needs and execution challenges of the glass operations, in combination with CSR's other capital growth needs, will also be considered.

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