Collins & Aikman Floorcoverings’ weakening revenues and margins has led Standard & Poor’s to downgrade the company’s ratings. Its operating margin dropped to 12.9% from 22.7% the prior year. Much of this is due to weak demand in the corporate sector, where the company had about 35% concentration in 2003, explained Susan Ding, an analyst with S&P. Leverage increased from 3.2 times to 5.5 times. S&P lowered the corporate credit rating and bank loan rating to B+ from BB- and the subordinated debt rating to B- from B. “With the corporate credit rating most of the issues were lowered in tandem,” Ding explained. The downgrade should not have a big impact on bank loan investors. “There is a little additional risk. There is still a secured group and they would still fare better than the unsecured creditors,” she added. The credit comprises a $50 million revolver, $60 million “A” loan and $146 million “B” loan.
The company has the number one market position in the fast-growing area of six-foot roll carpet segment and is the leading manufacturer of vinyl-backed commercial floor covering. S&P assigned a 4 recovery rating to the $256 million credit facility, indicating a 25-50% recovery of principal in the event of default. S&P believes a default would occur if all of the company’s divisions simultaneously experienced drawbacks or if a major new player took over market share. Darrell McCay, cfo, declined comment.
• Imagistics International has been using free cash flow for debt reduction, share repurchases and acquisitions. Moody’s Investors Service has upgraded the company’s ratings as a result of its low leverage, strong operating performance and improved coverage statistics. Total debt was $73 million as of June 31 and leverage was less than one time at Dec. 31. Imagistics’ $95 million revolver due 2006 and $53 million term loan due 2007 were both upgraded from Ba2 to Ba1.
Trumbull, Conn.-based Imagistics sells, services and markets business document imaging and management solutions. The company is experiencing strong revenue growth in its copiers/multifunctional (MFP) products but weakening revenues in facsimile products. Moody’s expects the growth in the copiers/MFP business to offset the expected decline in the fax business.