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23 Dec 2009
Approximately $343 million of debt securities affected
New York, December 23, 2009 -- Moody's Investors Service affirmed the ratings of Blount, Inc.
("Blount" or "the company"), including Blount's corporate
family and probability of default ratings at Ba3, the ratings on
the existing term loan at Ba1, and the rating on the subordinated
notes at B2. At the same time, Moody's assigned Ba1
ratings to the company's amended and extended term loan and revolving
credit facility. Blount, Inc. is a wholly-owned
subsidiary of Blount International Inc. The rating outlook is stable.
The rating affirmations consider the company's solid market position
in its Outdoor Products segment; the high proportion of this segment's
sales going towards replacement markets, a factor which provides
some smoothing of the cyclicality inherent in the business; its heavy
and diversified mix of international sales (approximately 66% for
the nine months ending September 30, 2009); the turnaround
in its performance that began in the third quarter ended September 30,
2009; and reasonably consistent cash flow generation, which
has permitted the company to de-lever considerably over the past
At the same time, the ratings acknowledge the persistence in much
of the world of the current global economic slowdown, which has
had a significant effect on the demand for the company's products;
the company's relatively small size and the limited diversity of
its end markets, which essentially target consumers in one industry
-- outdoor equipment; and its exposure to volatile
steel and energy prices.
The stable outlook reflects the liquidity breathing room that the company
gave itself by successfully instituting the amend-and-extend
for its bank credit facilities, which now will largely expire in
February 2012 as opposed to August 2010. However, Moody's
notes that the company now has all of its debt coming due in 2012,
including its $175 million of senior sub notes. The stable
outlook also incorporates the company's comfortable credit ratios for
its rating category, which partially mitigate the risk posed by
The rating could be negatively impacted in the event that the company's
adjusted debt-to-EBITDA ratio exceeded 4.0x due to
either diminished operating performance or increased debt. Factors
that could negatively impact operating performance include higher product
costs; prolonged weakness in the North American and international
end markets; and/or the loss of any portion of business with its
largest customers. Debt-financed acquisitions or share repurchases
could increase debt.
Factors that could have favorable rating implications include sustained
revenue growth, improvement in operating margins and free cash flow
generation resulting in further debt reduction such that both free cash
flow as a percentage of debt increases to over 15% and debt-to-EBITDA
declines to less than 3.5x on a sustainable basis.
The following ratings/assessments were affected:
Corporate family rating, affirmed at Ba3;
Probability of default rating, affirmed at Ba3;
$60 million senior secured revolving credit facility, due
2012, assigned a Ba1 (LGD2, 19%);
$103.5 million senior secured term loan, due 2012,
assigned a Ba1 (LGD2, 19%);
$3.9 million senior secured term loan, due 2010,
affirmed at Ba1 (Loss Given Default rate changed to LGD2, 19%
from LGD2, 22%); and
$175 million of 8 7/8% senior subordinated notes,
due 2012, affirmed at B2 (Loss Given Default rate changed to LGD5,
82% from LGD5, 84%).
The up-notching (to Ba1) of the rating assigned to the revolving
credit facility and term loan reflects the seniority of these debt instruments
as well as the benefits of the collateral package, which consists
of (i) a first priority interest in substantially all of the assets of
Blount and its domestic subsidiaries (ii) a pledge of Blount's capital
stock (held by its parent, Blount International Inc.),
as well as 100% and 65%, respectively, of the
stock held at the company's domestic and foreign subsidiaries; and
(iii) upstream guarantees from domestic subsidiaries and downstream guarantees
from its parent company, and (iv) the loss absorption provided by
Blount's junior capital. The B2 rating on the senior subordinated
notes reflects their junior status in the company's priority of claims
waterfall, and they are guaranteed both by Blount International
Inc. and by the domestic subsidiaries.
Moody's last rating action for Blount, Inc. occurred March
24, 2006, at which time Moody's affirmed the company's
Ba3 corporate family rating and assigned ratings to the company's senior
secured credit facilities. The principal methodology used in rating
Blount, Inc. was Moody's Global Heavy Manufacturing Industry
rating methodology, published in November 2009, and available
on www.moodys.com in the Rating Methodologies sub-directory
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found in the Rating Methodologies sub-directory on Moody's
Blount International, Inc., headquartered in Portland,
Oregon, is a manufacturer of outdoor products and gear-related
products. Revenues and net income for the trailing twelve month
period ended September 30, 2009, were $495 million
and $23 million respectively.
Joseph A. Snider
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
Moody's assigns Ba1 rating to Blount's extended sr. credit facilities
Senior Vice President
Corporate Finance Group
Moody's Investors Service
No Related Data.
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