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04 Sep 2001
MOODYS CONFIRMS DEBT RATINGS OF GOODRICH CORPORATION; REVIEWS RATINGS OF CERTAIN DEBT OBLIGATIONS OF COLTEC INDUSTRIES FOR POSSIBLE DOWNGRADE
Approximately $1.5 Billion of Debt Securities Affected.
New York, September 04, 2001 -- Moody's Investors Service confirmed the debt ratings of Goodrich Corporation
(Goodrich) following the company's announcement that it intends to focus
on its Aerospace business by spinning off its Engineered Industrial Products
(EIP) business, including its Coltec Industries (Coltec) subsidiary,
to shareholders in a tax-free transaction, expected to be
completed in early 2002. In a related action, Moody's placed
under review for possible downgrade the ratings for Coltec's $300
million 7.5% senior secured notes due 2008 and for certain
Industrial Revenue Bonds, which remain guaranteed obligations of
Coltec. Coltec's convertible preferred securities (term income
deferrable equity securities [TIDES]) were confirmed due to the guarantee,
on a subordinated basis, by Goodrich. The confirmation of
Goodrich's ratings reflects Moody's expectation that the company's diverse
mix of customers, products, services and OEM/aftermarket business
in the aerospace industry will provide a strong platform for future growth
and consistent cash flow generation. The confirmation also recognizes
that Goodrich will be less diverse, more leveraged on an adjusted
basis and still will be acquisitive as it seeks to expand its aerospace
operations. Nevertheless, the stable rating outlook for Goodrich
anticipates the company's maintenance of strong debt protection measurements
and a prudent approach to financing future acquisitions.
Moody's noted that in connection with the spin-off, a new
public company (New Entity) will be formed. The ratings for certain
IRBs, which are currently guaranteed by Coltec, will become
guaranteed obligations of the newly created company. In addition,
should Goodrich's exchange offer not be completely successful, stub
debt remaining at the Coltec level will become obligations of the New
Entity. The review will focus on the business strategy of the new
company and its competitive position in the consolidating industrial products
arena. The review will also consider the company's growth initiatives
in the current business environment, and the flexibility provided
by its initial post-spin capital structure to pursue acquisitions.
The review will also assess the revenue, earnings and cash flow
generation associated with the EIP business, the potential risks
and cash usage associated with ongoing asbestos litigation, and
the adequacy of insurance coverage for asbestos payments.
Confirmed ratings are:
Goodrich Corporation -- its Baa1 rating on senior unsecured
debt; the Baa1 rating on senior unsecured bank credit facilities;
the Baa2 rating on trust preferred stock; and the ratings on its
shelf registration: the (P)Baa1 for senior securities and the (P)Baa3
for preferred stock.
Rohr, Inc. -- the Baa2 rating on its senior
Coltec Industries Inc. -- the Baa2 on its trust preferred
stock guaranteed, on a subordinated basis, by Goodrich.
Ratings under review are:
Coltec Industries Inc. -- the Baa2 rating on senior,
secured debt; and the Baa2 rating for the following IRB's:
Beaver (County of) PA, Industrial Development Authority, $12
million Revenue Bonds due June 1. 2008; Allegheny County Industrial
Development Authority, PA, $1 million Revenue Bonds
due June 1, 2008; Onondaga County Industrial Development Agency,
NY, $2.6 million Revenue Bonds due October 1,
2010; Onondaga County Industrial Development Agency due June 1,
2008; and Huntsville City Industrial Development Board, AL,
$.6 million Revenue Bonds due October 10, 2010
Goodrich announced that it would spin of its Engineered Industrial Products
business that, including the recently completed Glacier Bearings
transaction, would have revenues of over $800 million.
Goodrich will offer to exchange for similar securities, Coltec's
existing public debt and trust preferred securities, totaling $450
million. If the exchange is successful, the New Entity will
have approximately $190 million of debt at the time of the spin-off.
The ratings for the new bonds issued by Goodrich during the exchange will
have the same rating as Goodrich, while any remaining stub debt
will carry the new rating for the New Entity once the review for downgrade
is resolved. Coltec's contingent liabilities associated with IRBs
related to sold properties will become obligations of the New Entity.
In addition, substantially all of EIP's assets and liabilities,
including related asbestos liabilities and associated insurance,
would become the responsibility of the New Entity. Moody's will
continue to monitor any new developments regarding asbestos liabilities
of the New Entity, as well as any potential for future claims against
Moody's expects that Goodrich will continue to be acquisitive as the aerospace
industry continues to consolidate. While most of Goodrich's acquisitions
have been "bolt-on" and debt-financed, the company
would do a larger transaction, if it could be financed on a conservative
basis. Any deviation from this conservative financial philosophy
could have negative ratings implications. On a proforma basis,
Moody's notes that the recently closed Glacier Bearings acquisition has
driven adjusted debt to capital to approximately 54%, while
interest coverage and retained cash flow to adjusted debt are 5.8x
and 14%, respectively.
Goodrich Corporation, headquartered in Charlotte, North Carolina,
is a diversified company serving primarily the aerospace and industrial
Michael J. Mulvaney
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
George A. Meyers
VP - Senior Credit Officer
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
No Related Data.
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