New York, June 13, 2012 -- Moody's Investors Service downgraded Interline Brands, Inc.'s ("Interline") corporate family and probability of default ratings to B2 from B1. In a related rating action, Moody's confirmed the B2 rating on the company's existing senior subordinated notes and assigned a Caa1 rating to the proposed senior unsecured notes. In addition, we assigned a speculative grade liquidity assessment of SGL-3. The rating outlook is stable.

The following ratings were affected by these actions:

Corporate Family Rating downgraded to B2 from B1

Probability of Default Rating downgraded to B2 from B1

$300 million Senior Subordinated Notes due 2018 confirmed at B2 (LGD3, 46%) (previously LGD4, 68%)

$375 million Senior Unsecured Notes due 2018 rated Caa1 (LGD5, 84%)

Speculative Grade Liquidity assessment of SGL-3 assigned

RATINGS RATIONALE

The downgrade reflects the increase in pro forma adjusted debt leverage to approximately 6.5x debt-to-EBITDA from 3.5x at March 30, 2012 following the partially debt-financed purchase of the firm by Goldman Sachs Capital Partners and P2 Capital Partners. The action also takes into consideration our belief that Interline has not met our expectations for organic revenue growth or operating margin expansion over the past 12 months.

The B2 corporate family rating reflects our expectations that Interline's adjusted debt-to-EBITDA will remain elevated over the next 12 to 18 months. It also considers our expectations that interest coverage, measured as adjusted (EBITDA-Capex) to adjusted interest expense, could weaken to close to 1.5x by the end of fiscal 2013 from 2.9x at March 30, 2012 (ratios incorporate Moody's standard accounting adjustments). However, also factored into the rating are Interline's stable mid- to high-single digit adjusted EBITA margins and its ability to consistently generate cash through the recession. Over 50% of total revenues are tied to janitorial/sanitation and plumbing products that benefit from relatively non-cyclical demand, particularly from large multi-family housing and institutional facilities, adding further support to the rating. The rating also takes into account Interline's diverse customer base, its broad national distribution network and its success in improving its cost structure during the downturn through facility consolidations.

The SGL-3 speculative grade liquidity assessment reflects Interline's adequate liquidity, limited primarily by its weak pro forma cash position following the proposed transaction. The company's liquidity profile is supported by a large asset-based revolver with sufficient remaining availability to cover potential shortfalls. The assessment also considers the lack of debt maturities until the revolver expires in 2017, which is a credit positive. It acknowledges that the company generates sufficient cash flow to cover annual working capital requirements and capital expenditures. However, Interline expects to apply free cash flow to debt reduction over the next two to three years, which will limit its ability to build short-term liquidity. Finally, alternate liquidity options are constrained since the company's assets are encumbered to secure its bank borrowings.

The stable outlook reflects our view that stable demand from Interline's key end markets will enable it to continue generating healthy free cash flow until a sustainable economic recovery takes hold. This should allow the company to gradually reduce balance sheet debt over the next 12 to 18 months.

The corporate family and probability of default ratings are being reassigned to Interline Brands, Inc. (a Delaware Corp), the holding company issuing the proposed senior unsecured notes, from the operating company, Interline Brands, Inc. (a New Jersey Corp). The reason for this change is that the holding company is now the highest-ranked issuer of Moody's-rated debt in Interline's corporate structure.

The company may experience positive ratings movement if it is able to achieve and maintain adjusted (EBITDA-Capex) to adjusted interest expense above 2.0x and adjusted debt-to-EBITDA sustained below 3.8x (all ratios incorporate Moody's standard accounting adjustments). In addition, an upgrade could result from demonstrating the ability to extract greater value from its acquisitions through improved organic sales growth rates.

The ratings or outlook may come under pressure if the company's liquidity profile deteriorates or if operating performance weakens such that EBITA margin remains in the mid-single digits. Also, the rating or outlook could be revised downward if Interline pursues debt-financed acquisitions of lower margin businesses. In addition, adjusted debt-to-EBITDA sustained above 5.0x or adjusted (EBITDA-Capex) to adjusted interest expense below 1.5x could result in ratings pressures.

The Caa1 rating assigned to the $375 million senior unsecured notes due 2018 is two notches below the corporate family rating. This is because the notes are being issued by the holding company and are therefore structurally subordinated to the existing senior subordinated notes issued by the operating company. As a result, the rating reflects the notes position as the (structurally) junior-most debt in the capital structure.

The B2 rating on the existing $300 million senior subordinated notes due 2018 is in line with the corporate family rating. This is because the notes, which were previously rated one notch below the corporate family rating, now benefit from the structural subordination of the senior unsecured notes.

The principal methodology used in rating Interline Brands, Inc. was the Global Distribution & Supply Chain Services Industry Methodology published in November 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Interline Brands, Inc., headquartered in Jacksonville, FL, is a national distributor and direct marketer of maintenance, repair and operations ("MRO") products. Revenues for the 12 months ended March 30, 2012, totaled approximately $1.27 billion.

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Peter Doyle Analyst Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Brian Oak MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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