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27 Sep 2001
MOODY'S CONFIRMS THE DEBT RATINGS FOR GOODRICH CORPORATION (SR AT Baa1), CHANGES RATING OUTLOOK TO NEGATIVE
Approximately $1.5 Billion of Debt Securities Affected.
New York, September 27, 2001 -- Moody's Investors Service confirmed the debt ratings of Goodrich Corporation
(Goodrich) but changed the outlook to negative. Goodrich Corporation
recently announced 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. The company will now focus on
aerostructures, aviation services, landing systems,
engine and safety systems and electronic systems for commercial,
military, regional, business and general aviation markets.
Moody's notes that Goodrich will be less diverse as a result of the transaction,
as well as more leveraged on an adjusted basis.
The rating agency is concerned that the company's OEM related aircraft
business will be materially impacted by the declines of civil aircraft
deliveries. Its aftermarket related business is also expected to
be affected by the slowing airline traffic, worldwide, albeit
to a lesser degree than the OEM related business. However,
Moody's recognizes the company's diverse mix of customers, products,
services and OEM/aftermarket business in the aerospace industry,
which should provide a strong platform for future growth and consistent
cash flow generation over the long-term.
Ratings confirmed with negative outlook 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
-Coltec Industries Inc. -- the Baa2 on its
trust preferred stock, guaranteed on a subordinated basis by Goodrich.
As part of its confirmation of the Goodrich ratings on September 4,
Moody's left under review for possible downgrade the ratings for Coltec's
$300 million 7.5% senior secured notes due 2008 and
the ratings for certain Industrial Revenue Bonds, which remain guaranteed
obligations of Coltec. These obligations are expected to remain
obligations of Coltec following the spin off. 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.
Ratings that remain under review for possible downgrade:
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
Moody's rating action for Goodrich occurs along with the initiation
of rating reviews and outlook changes for a number of companies in the
civil aerospace sector. The rating actions consider the potential
for deterioration of the business outlook for these companies as a result
of implications of the unprecedented terrorist attacks on the United States.
These events have exacerbated the already-weak prospects of the
global airline industry, and its respective credit quality,
and are resulting in decisions by most carriers to reduce their capacity
by about 20%. These developments will result in weakened
demand for new commercial and regional aircraft and will put downward
pressure on aircraft values over the intermediate term. Moody's
also noted that the declines may also result in the grounding of many
aircraft as airlines reduce the number of scheduled flights and/or routes,
placing pressure on the aircraft maintenance and replacement parts businesses,
a lucrative part of the business for many aerospace companies.
In addition, Moody's noted that the financially weak airlines
-- even with the government sponsored financial assistance
-- may have difficulty honoring their commitments for future
aircraft deliveries which could place pressure on the aircraft and aircraft
engine manufacturers to provide financing.
Deteriorating global economic conditions are also expected to impact the
demand for business jets as corporations and other aircraft-buyers
attempt to cut capital expenditures and costs through delaying or canceling
orders for new aircraft in the near-to-intermediate term.
Moody's noted that the demand for business jets had started to soften
even before the September 11 terrorist attack, especially at the
low end of the sector. However, the rating agency noted that
potential exists for a rebound in business jet demand over the intermediate
term as economic conditions stabilize, and corporations reassess
travel practices in light of the risk of terrorism and the complexities
of airline travel.
Moody's also noted that despite recent events, the rating
actions for the civil aircraft sector recognize the benefits of diversification
for some industry participants and the more favorable long-term
prospects for the industry as a whole, as airline traffic growth
is expected to rebound in both the commercial and regional markets over
the intermediate term. In addition, the recent approval by
the U.S. Congress of the $15 billion airline/aerospace
relief package should provide somewhat of an offset to the recent negative
developments in the industry.
Goodrich Corporation, headquartered in Charlotte, North Carolina,
is a leading aerospace company serving commercial, military,
regional, business and general aviation markets.
Michael J. Mulvaney
Moody's Investors Service
JOURNALISTS: (215) 967-6233
SUBSCRIBERS: (215) 967-6233
Senior Vice President
Moody's Investors Service
JOURNALISTS: (215) 967-6233
SUBSCRIBERS: (215) 967-6233
No Related Data.
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