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Rating Action:

Moody's assigns Ba1 rating to Blount's extended sr. credit facilities

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 six years.

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 lower backlogs.

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 website.

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.

New York
Joseph A. Snider
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Steven Oman
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns Ba1 rating to Blount's extended sr. credit facilities
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