MOODY'S RAISES RATINGS OF ARVIN INDUSTRIES (SENIOR TO Baa3)
New York, 02-17-98 -- Moody's Investors Service raised the senior debt rating of Arvin Industries, Inc. (Arvin) to Baa3 from Ba1 and its subordinated debt rating to Ba2 from Ba3, while assigning a Baa3 rating to Arvin's $100 million bank credit facility. In addition, Moody's raised the preferred stock rating to "ba2" from "ba3" for Arvin Capital I, which is supported by Arvin Industries. The rating actions are based on Arvin' s leading market positions as a producer of exhaust systems and ride control products on a global basis for the original equipment and replacement markets. The rating actions also recognize the overall stability of Arvin's operating performance through the cycles, which may cushion the impact of future downturns. Moreover, earnings and cash flow will continue to benefit from the company's ongoing focus on product quality and cost reduction efforts, providing support for the moderate levels of debt in its capital structure.
The ratings raised are:
Arvin Industries, Inc. - senior notes and debentures to Baa3 from Ba1; convertible subordinated debentures to Ba2 from Ba3 and junior subordinated deferred interest debentures, which are the obligations between Arvin Industries and Arvin Capital I, to Ba2 from Ba3.
Arvin Capital I - Cumulative Trust Originated Preferred Securities to "ba2" from "ba3".
Arvin Overseas Finance B.V. - medium term note program, which is guaranteed by Arvin Industries, to Baa3 from Ba1.
Arvin International (UK) plc - Euronotes, which are guaranteed by Arvin Industries, to Baa3 from Ba1.
The ratings assigned are:
Arvin Industries, Inc. - Baa3 to the $100 million unsecured Multicurrency Credit Agreement.
Moody's said that following the disposal of its technology operations and several underperforming businesses, Arvin remains focused on its core automotive operations. The company is the dominant player in exhaust systems for original equipment manufacturers and a leading player in ride control products for both the original equipment and replacement markets. Through the purchase of its remaining interests in TESH, Arvin further strenghtened its market position in Europe. The company has also improved its position with Japanese transplants in the US and Europe due to its joint ventures with Sango and Kayaba.
While the auto supplier industry is very competitive and continues to face significant pricing pressures, the steps taken by Arvin to restructure operations, to improve product quality and to reduce costs will enhance its competitive position. Moreover, Arvin has demonstrated its ability to remain profitable, albeit at lower levels, through industry downturns. Arvin's earnings and cash flow are benefiting from sustained vehicle sales in North America and Europe, increasing content per vehicle and improved productivity. Nonetheless, significant reductions in the company's debt levels are not anticipated as cash is invested in strengthening Arvin's global competitive position. While acquisitions are a possibility, Moody's anticipates that Arvin will continue to manage its balance sheet to preserve flexibility to weather future downturns.
Moody's said that Arvin Industries, Inc. and Arvin Finance Ireland, with the guarantee of Arvin Industries, are both borrowers under a $100 million Multicurrency Credit Agreement that is co-agented by Bank of America and First Chicago NBD. The facility is unsecured and matures on August 27, 2002. The bank facility rating considers that outstandings under the bank credit facility rank pari passu with other senior debt within the company's capital structure. The lenders enjoy the benefit of certain financial covenants contained in the bank credit agreement, including a maximum leverage test and a minimum interest coverage test. In addition, there are limits on mergers and the sale of assets, on sale leaseback transactions and on subsidiary borrowings.
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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