MOODY'S ASSIGNS RATING OF "ba3" TO CAPITAL SECURITIES OF ARVIN CAPITAL I
New York, 01-15-97 -- Moody's Investors Service assigned a rating of "ba3" to $100 million of Capital Securities being issued by Arvin Capital I, a trust owned by Arvin Industries, Inc. (Arvin). At the same time, Moody's assigned a rating of Ba3 to the Junior Subordinated Deferrable Interest Debentures (junior subordinated debentures) being issued by Arvin to Arvin Capital Trust I, the terms of which mirror the terms of the Capital Securities. Distribution payments on and redemption of the Capital Securities will be funded solely by debt service payments made by Arvin on the junior subordinated debentures. Although the junior subordinated debentures will be held by Arvin Capital Trust I, Moody's has elected to assign a rating since Arvin has the right at any time to dissolve the trust and distribute the junior subordinated debentures to holders of the Capital Securities. The "ba3" rating assigned to the Capital Securities is the same as the rating on Arvin's shelf registration for preferred securities. However, Moody's noted that holders of the Capital Securities could have a priority claim in bankruptcy over the holders of any future preferred securities issued by Arvin since the Trustee can exercise its rights as a holder of the junior subordinated debentures on behalf of the holders of the Capital Securities.
Moody's said that the ratings are supported by Arvin's dominant North American market position in original equipment exhaust systems and aftermarket shocks and struts, and its ongoing efforts to strengthen its global presence. Arvin is also a key supplier of ride control products for one of Ford's global platforms under the Ford 2000 program. Earnings and cash flow are benefiting from restructuring efforts, which have reduced costs, improved productivity and divested non-core operations, as well as from additional volumes. Nonetheless, earnings pressures will continue as original equipment manufacturers reduce the number of suppliers, seek price concessions and shift back certain development costs to slow the rise in auto price tags. These factors, together with heavy capital spending primarily for expansion of international joint ventures and high dividend payout, will reduce cash available for debt repayment. Consequently, meaningingful improvment in financial leverage and debt-protection measurements is not expected in the near term.
Arvin Industries, Inc., headquartered in Columbus, IN, is a global manufacturer of automotive components with 50 manufacturing facilities and eight technical centers located in 16 countries.
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