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Rating Action:

Moody's upgrades Columbus McKinnon's CFR to Ba3 from B1; outlook stable

16 Nov 2018

Approximately $450 million of rated debt affected

New York, November 16, 2018 -- Moody's Investors Service ("Moody's") upgraded the Corporate Family Rating ("CFR") and Probability of Default Ratings of Columbus McKinnon Corporation ("Columbus McKinnon") to Ba3 and Ba3-PD from B1 and B1-PD, respectively. The CFR upgrade is based on the company's meaningful debt reduction and continued focus on improving operating performance supported by progress it has made as part of the company's Blueprint 2021 strategy. This initiative has translated to improved EBITDA margins that are expected to be sustained. Concurrently, Moody's upgraded the ratings on the company's senior secured revolving credit facility and first-lien term loan by one notch to Ba2 from Ba3. The company's speculative grade liquidity rating ("SGL") was upgraded to SGL-1 from SGL-2, reflecting Moody's expectation that the company will maintain very good liquidity supported by healthy free cash flow generation over the next 12-18 months. The ratings outlook is stable.

Moody's took the following rating actions on Columbus McKinnon Corporation:

Ratings Upgraded:

Corporate Family Rating, to Ba3 from B1

Probability of Default Rating, to Ba3-PD from B1-PD

Senior secured first-lien revolving credit facility due 2022, to Ba2 (LGD3) from Ba3 (LGD3)

Senior secured first-lien term loan due 2024, to Ba2 (LGD3) from Ba3 (LGD3)

Speculative Grade Liquidity Rating, to SGL-1 from SGL-2

Outlook Action:

Outlook, Stable

RATINGS RATIONALE

Columbus McKinnon is reducing leverage through a combination of proactive debt reduction, including over $90 million of funded debt since 2017, and positive operating results that Moody's anticipates will continue. Operating performance is expected to benefit from increased operating efficiencies and product simplification process that have been contributing to margin enhancement despite raw material and tariff-related headwinds. The financial leverage profile as measured by debt/EBITDA (including Moody's standard pension and lease adjustments) is expected to improve to below 3.5x over the next 12-to-18 months. Last twelve months ended September 30, 2018 debt/EBITDA totaled 3.8x, a meaningful improvement from approximately 5.7x when the company completed its largely-debt financed acquisition of STAHL CraneSystems in January 2017.

Columbus McKinnon's Ba3 CFR is supported by a favorable market position and strong brands in the material handling products and systems market. The company has a diverse product portfolio ranging from hoists and actuators to rigging tools and digital power control systems serving a wide range of commercial and industrial end-markets. Favorable end-market fundamentals in the majority of the company's key end-markets supports the expectation of continued revenue growth as the company benefits from greater volume and improved pricing as well as manufacturing efficiencies, the realization of acquisition synergies and cost savings. The ratings also recognize the company's historically conservative balance sheet management. At the same time, Moody's also considers the company's relatively small size compared to some of its peers within the industry and the highly cyclical nature of its earnings.

The SGL-1 rating reflects our expectation that the company will maintain very good liquidity over the next twelve to eighteen months supported by healthy free cash flow generation, revolver availability and financial ratio covenant headroom. The ratings anticipate that the company will generate over $50 million of free cash flow over the next twelve to eighteen months. We also expect the $100 million revolving credit facility due 2022 to remain largely undrawn.

The stable outlook reflects the expectation that adjusted debt to EBITDA will improve to and be maintained below 3.5x times over the next twelve to eighteen months, driven by debt repayment as well as higher revenue and increased profitability derived from implemented cost saving actions and acquisition synergies.

The ratings could be upgraded if the company were to grow revenues above the mid-single digit level, debt-to-EBITDA were to improve to below 2.5x on a sustained basis, EBITA-to-interest were to improve to the 5.0x range, and free cash flow-to-debt were to exceed 15%.

The ratings could be downgraded if financial leverage increases towards 4.0x and/or EBITA-to-interest coverage weakens to below 3.0x and is sustained at those levels, the company's financial policy becomes more aggressive through debt-financed share repurchases or dividends as well as significant erosion in its liquidity profile.

Columbus McKinnon Corporation ("CMCO"), located in Getzville, NY, is a global leading worldwide designer, manufacturer and marketer of material handling products, systems and services, which efficiently and ergonomically move, lift, position or secure material. Key products include hoists, chains, actuators and rigging tools and drives and controls. Net sales for the last twelve months ended September 30, 2018 totaled $865 million.

The principal methodology used in these ratings was Global Manufacturing Companies published in June 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jadijhe (Gigi) Adamo
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Robert Jankowitz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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