Recipient email addresses will not be used in mailing lists or redistributed.
Use semicolon to separate each address, limit to 20 addresses.
characters you see
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
Don't want to see this again?
Accept our to continue to Moodys.com:
AND SCROLL DOWN!
By clicking “I AGREE” [at the end of this document],
you indicate that you understand and intend these terms and conditions to be
the legal equivalent of a signed, written contract and equally binding, and
that you accept such terms and conditions as a condition of viewing any and all
Moody’s information that becomes accessible to you [after clicking “I AGREE”] (the
“Information”). References herein to “Moody’s” include Moody’s
Corporation, Inc. and each of its subsidiaries and affiliates.
Terms of One-Time Website Use
you have entered into an express written contract with Moody’s to the contrary,
you agree that you have no right to use the Information in a commercial or
public setting and no right to copy it, save it, print it, sell it, or publish
or distribute any portion of it in any form.
acknowledge and agree that Moody’s credit ratings: (i) are current opinions of
the future relative creditworthiness of securities and address no other risk; and
(ii) are not statements of current
or historical fact or recommendations to purchase, hold or sell particular
securities. Moody’s credit ratings and
publications are not intended for retail investors, and it would be reckless
and inappropriate for retail investors to use Moody’s credit ratings and
publications when making an investment decision. No
warranty, express or implied, as the accuracy, timeliness, completeness,
merchantability or fitness for any particular purpose of any Moody’s credit
rating is given or made by Moody’s in any form whatsoever.
3. To the extent permitted by law, Moody’s and its directors,
officers, employees, representatives, licensors and suppliers disclaim
liability for: (i) any indirect, special, consequential, or incidental losses
or damages whatsoever arising from or in connection with use of the
Information; and (ii) any direct or compensatory damages caused to any person
or entity, including but not limited to by any negligence (but excluding fraud
or any other type of liability that by law cannot be excluded) on the part of
Moody’s or any of its directors, officers, employees, agents, representatives,
licensors or suppliers, arising from or in connection with use of the
4. You agree to read [and
be bound by] the more detailed disclosures regarding Moody’s ratings and the
limitations of Moody’s liability included in the Information.
5. You agree that any disputes relating to this agreement or your use of
the Information, whether sounding in contract, tort, statute or otherwise,
shall be governed by the laws of the State of New York and shall be subject to
the exclusive jurisdiction of the courts of the State of New York located in
the City and County of New York, Borough of Manhattan.
20 Aug 1998
MOODY'S CONFIRMS B3 RATING ON AMSCAN HOLDINGS, INC.'S SR SUB NOTES AND B1 RATING ON ITS SECURED CREDIT FACILITY; ASSIGNS B1 RATING TO ITS SUPPLMENTAL TERM LOAN
New York, 08-20-98 -- Moody's Investors Service confirmed its B3 rating on Amscan Holdings, Inc.'s (Amscan) $110 million of 9 7/8% senior subordinated notes, due 2007, and the B1 rating on its $167 million secured credit facility, consisting of a $50 million revolving credit and $117 million term loan, the latter maturing in 2004. Moody's also assigned a B1 rating to its proposed $40 million supplemental term loan facility. The outlook remains stable. Amscan's senior implied rating is B1.
The confirmations, as well as the new rating assignment, are in response to the recent announcement that Amscan will acquire, largely with debt, the stock of Anagram International, Inc. (Anagram) for $91 million. The purchase price, which includes the repayment of $16 million of Anagram debt, as well as transaction costs, is relatively high at approximately 15 times Anagram's LTM EBITA of $6 million (10 times EBITDA). Anagram, with LTM sales of nearly $66 million, is a privately-held manufacturer of metallic balloons. Its products are primarily sold through distributors to grocery stores, as well as floral, card and gift shops.
Amscan designs, manufactures and distributes decorative party goods largely through the party superstores. Its products primarily include plastic and paper tableware, novelties, balloons and gift wrap.
The ratings reflect Amscan's weak capital structure, which includes substantial debt and negative book equity, the latter due to recapitalization accounting. The ratings also reflect the potential for ongoing margin pressure due to intense competition in the decorative party goods industry, as well as the company's significant exposure to party superstores, which have gained significant market share and buying power over the past several years.
However, the ratings also reflect the fact that the incremental cash flow generated by Anagram is sufficient to cover the effects of the acquisition debt without causing a material deterioration in credit fundamentals. The ratings further reflect Amscan's broad, albeit highly discretionary, product offerings, which include 15,000 SKU's, and its diversified customer base, both of which will be enhanced as a result of the proposed acquisition. The ratings also consider the potential for cost synergies, as well as the good prospects for continued growth of the $3.5 billion US decorative party goods industry.
In order to finance the $91 million acquisition price, Amscan will use $15 million of existing cash on-hand and will borrow approximately $24 million under its revolving credit facility, which is currently unused. Additionally, a $40 million supplemental term loan will be provided by its existing bank group. The balance of the purchase price will be represented by Anagram roll-over equity.
Pro forma for the acquisition, Amscan's debt remains substantial at $301 million, compared to negative book equity of $80 million. Prior to the acquisition, total debt was $237 million. Based on pro forma adjusted EBITA of $39 million ($49 million EBITDA) for the LTM ended June 30, 1998, cash flow leverage is high at nearly 7.7 times (6.1 times EBITDA) and interest coverage is thin at 1.4 times (1.8 times EBITDA). Interest coverage as measured by EBITDA minus CAPEX-to-interest expense is 1.4 times. Despite the additional debt incurred to finance the proposed acquisition, the cash flow generated by Anagram, as well as $1 - 2 million of annual cost savings which may be realized from revenue and cost synergies, results in relatively unchanged pro forma debt service coverage ratios when compared to Amscan's LTM ratios on a stand-alone basis. However, downward pressure on the ratings could be applied if additional debt is incurred to finance future acquisitions, or if there is any erosion in the company's debt service coverage ratios, especially as a result of margin compression.
Pro forma adjusted operating income was $35 million for the LTM ended June 30, 1998, which results in a healthy operating margin of nearly 13%. Although, Anagram's historical gross margins have been substantially higher than Amscan's, its SG&A expenses have also been notably higher.
Amscan's pro forma balance sheet is weakened by $56 million of goodwill, resulting primarily from the proposed acquisition. Intangibles account for nearly 25% of total assets. However, its EBITA return on assets is in excess of 15%, which appears capable of supporting the significant level of intangibles.
At nearly 122 days, Amscan's inventory is substantial, but improving. However, this inventory partially reflects seasonality of sales, which are highest in the third quarter, as well as the company's high number of SKU's.
Though pro forma retained cash for the LTM is only $10 million, or 3% of total debt, the company will have $26 million of unused availability under its revolving credit facility, which should provided added liquidity. Management's objective is to pay-down the revolving credit over the next two years. In addition, term loan amortization over the next few years is relatively modest. Management has estimated that capital expenditures will be in the $12 - 14 million range during the period 1999 - 2002. Pro forma CAPEX for the LTM was approximately $11 million.
Beyond the nearly 45% concentration of Amscan's revenues to party superstores, the balance of revenues are to a more fragmented base of independent card and party retailers, mass merchandisers and other distributors. Though it has a relatively diverse customer base, one customer accounted for nearly 19% of its sales in fiscal 1997. Following the acquisition of Anagram, its customer base should become more diversified. In addition, the combined company should benefit from Amscan's strong presence in party superstores and Anagram's well-established presence in independent grocers and gift shops.
The US decorative party goods industry has experienced steady growth over the past several years, largely due to increased consumer spending, the emergence of the party superstores and increases in the number of party events. Though competition is highly fragmented and price intensive, Amscan's vertical integration has historically provided substantial cost benefits and has provided for relatively healthy profit margins. These profit margins may be enhanced as a result of various cost synergies, including the consolidation of distribution facilities, and lower manufacturing and marketing expenses as a result of economies of scale. However, the impact of such cost benefits on Amscan's profit margins may be reduced slightly by Anagram's continued use of distributors.
Since 1990, the party superstores have been growing rapidly by providing consumers with a one-stop source for all of their party needs. Currently, these superstores account for nearly 10% of total industry sales, and they could double their market penetration over the next several years. As industry sales continue to shift to these superstores, pricing pressure is likely to remain strong. In addition, the purchasing power of the party superstores could make it difficult for Amscan to fully pass-through any future raw material price increases, especially increases in the price of paper.
Headquartered in Elmsford, New York, Amscan Holdings, Inc. is a manufacturer of party goods, including table wares, accessories and novelties. Its pro forma sales for the LTM ended June 30, 1998, were $277 million.
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY'S CREDIT RATINGS,
ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.
MOODY'S CREDIT RATINGS,
ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.
To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.
To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.
Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com
under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.