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Announcement:

Moody's revises Brunswick's outlook to positive; all ratings affirmed

Global Credit Research - 22 Dec 2010

New York, December 22, 2010 -- Moody's Investors Service changed Brunswick Corporation's ("Brunswick") rating outlook to positive from stable due to our expectation that its credit profile and earnings will continue to improve over the near to mid-term despite continued softness in the overall marine industry. At the same time, all ratings were affirmed including the B2 CFR and PDR, Ba3 secured notes, Caa1 unsecured notes and SGL 1 liquidity rating.

"We believe Brunswick's continuing strong liquidity profile, vastly improved cost structure, enhanced health of its dealership network and strong product portfolio should enable it to capitalize on nascent signs of possible marine industry improvement," said Kevin Cassidy, Senior Credit Officer at Moody's Investors Service. Brunswick's strategy of ensuring the viability of its dealer network by decreasing 2009 production paid dividends in 2010 as the company had to significantly increase its manufacturing to restock its dealer's inventory levels. On top of this, over the past couple of years, Brunswick has materially improved its operating efficiency through numerous restructuring activities, eliminating seven boat brands and closing 17 boatbuilding facilities since 2006. The combined effect of these actions has been to increase operating profit by about $350 million in the first nine months of 2010 (excluding restructuring), on a revenue increase of $560 million. Despite the improvements so far in 2010, we expect Brunswick to lose money in the fourth quarter because of typical seasonal fluctuations and additional planned downtime in some fiberglass boat plants beyond its normal holiday shutdown. We believe Brunswick is expanding its downtime in an effort to manage its production of fiberglass boats and dealer inventory ahead of the selling season. The fourth quarter loss is not expected to be as high as the $120 million Q4 2009 loss, but more than the $40 million Q4 2008 loss.

The positive outlook reflects Moody's expectation that overall marine retail demand will continue to show modest improvements in the near to mid-term and that operating margins and credit metrics will meaningfully improve next year mainly because of increased cost efficiencies and some volume improvement. Our expectation of a slight improvement in discretionary consumer spending, especially for higher end consumers, and modest GDP growth between 2.5% and 3.5% is also reflected in the positive outlook as is our belief that Brunswick will maintain a strong liquidity profile.

In order for an upgrade to be considered in the near term, marine industry units need to stay at around 135,000, demand for fiberglass boats needs to show signs of improvement and worldwide financial markets need to continue to stabilize. If industry units fell below this amount, the rating could still be upgraded over the longer term assuming Brunswick's cost rationalization efforts reap the benefits we expect and Brunswick maintains its strong liquidity profile. Because of the severe volatility over the last few years, Brunswick's credit metrics need to be stronger than other similarly rated consumer durable companies. Credit metrics necessary for an upgrade to be considered would be financial leverage approaching 4x, strong mid single digit operating margins, interest coverage approaching 2x and retained cash flow/net debt in the mid to high single digits.

While not considered likely in the near term, if the company's liquidity profile were to materially decrease or if the sovereign debt crises were to rapidly expand and put pressure on worldwide financial markets, the long term rating and liquidity rating could be downgraded. Significant erosion in the operating performance of the company's dealership network or the floorplan lending facility could also trigger a downgrade. The outlook could be stabilized or possibly changed to negative if marine retail demand in 2011 meaningfully declines without signs of a recovery.

RATING RATIONALE

Brunswick's B2 corporate family rating reflects the severe and sudden volatility in demand for marine related products over the last few years. The ensuing dramatic revenue and earnings decline is incorporated into the rating, but so is our expectation of operating improvements in the near to mid-term as the company continues to adjust its business profile to address the weak marine industry. Credit metrics are expected to improve from their current levels with financial leverage potentially approaching 4x by the end of 2011 and EBITA margins increasing to the mid to high single digits. A critical component of the B2 corporate family rating is Brunswick's strong liquidity profile. Other factors supporting the rating are the improved health of its dealership network, having a management team experienced in the marine industry and having a joint venture agreement with General Electric Capital Corporation for its floorplan financing.

The following ratings were affirmed/assessments revised:

Corporate family rating at B2;

Probability of default rating at B2;

$575 million senior unsecured notes due 2013-2027 ($442 million outstanding) at Caa1 (LGD 5, 88% from 89%);

$350 million senior secured notes due 2016 at Ba3 ($340 million carrying value) (LGD 2, 29% from LGD 2, 23%);

Speculative grade liquidity rating at SGL 1

Moody's subscribers can find further details in the Brunswick Credit Opinion published on Moodys.com.

The last rating action was on May 24, 2010, where Moody's affirmed all ratings and revised the outlook to stable from negative.

The principal methodologies used in this rating were the Global Consumer Durables published in October 2010, and the Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009.

Brunswick is headquartered in Lake Forest, Illinois. The company manufactures marine engines, pleasure boats, bowling capital equipment and fitness equipment, and operates retail bowling centers. Sales for the twelve months ended September 2010 approximated $3.3 billion.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

New York
Kevin Cassidy
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
John Diaz
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's revises Brunswick's outlook to positive; all ratings affirmed
No Related Data.
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