Ply Gem Industries' first and second lien broke into the secondary market last week in the midst of the weakening housing sector. A buyside trader said his firm had concerns about the company's exposure to the residential market, but said the weak environment for housing credits did not appear to impair its performance in the secondary. Ply Gem's $187 million first lien broke in the high 100 range, while its $105 million second lien broke at 101 1/2-102 1/4 before settling to trade in the mid-101s.
UBS, Deutsche Bank and JPMorgan lead the credit, which finances the company's $305 million takeover of Alcoa Home Exteriors. The first lien is priced at LIBOR plus 3%, while the second lien ended up at LIBOR plus 5 3/4%. It was originally priced at LIBOR plus 6 3/4% (CIN, 9/29). "Our issue with this credit is its exposure to the residential new construction market. Clearly it is a risk. You may see volatility," said the buysider. But he added the company's B2 rating and LIBOR plus 3% coupon on the first lien makes it an attractive investment, despite the poor market conditions for housing sector credits.
The first lien was originally $175 million and the second lien $117 million. Shawn Poe, v.p. and cfo, said proceeds from the second lien were shifted to the first lien because of the second lien's higher margin. He declined to comment on the trading of the loans. He also declined to comment on the effect of the housing downturn on the credit, but said the Alcoa acquisition improves the balance of the company's business between the new construction sector and the repair and remodeling industry.
In October, Moody's Investors Service downgraded Ply Gem's corporate family rating to B2 from B1 to reflect the weakened outlook for the new home construction business and its high leverage. Ply Gem, which makes vinyl siding, windows and doors, relies on the new construction market for 58% of total revenues post acquisition, according to Moody's. The company's acquisition of Alcoa, which it completed last week, positions it as the largest maker of vinyl siding in the U.S., according to a Moody's release.