Blount's capital structure has been strengthened by the company's improved operating performance, extended debt maturities and parent company Blount International's $125 million common stock offering.
Blount's recent refinancing termed out debt maturities and significantly lowered cash interest payments with better coupons. The follow-on offering affirmed the fact that Blount has better access to capital, noted Linli Chee, a Standard & Poor's analyst. "All of those combined with the fact that operating performance has improved, leverage goes down with the refinancing, speaks to a better credit profile," Chee added. "Right now you're talking about a company that is at the beginning of an upturn in the economy."
S&P assigned a B+ rating to Blount's $125 million first-lien revolver and $240 million first-lien "B" loan. The $50 million second-lien term loan was rated B- and the $5.2 million Canadian "B" loan was rated BB. GE Capital led the refinancing.
Blount is divided into three operating segments: outdoor products, lawnmowers, and industrial and power equipment. The company is stepping up its acquisition growth strategy due to the upturn in the economy. It had been limited in the past because it was operating as a highly levered company that was dependent on internal growth. The company has a decent business position but is still below average relative to other companies in the capital goods industry, Chee noted. Even though the economy is turning around it's still a very cyclical industry, she added.
S&P assigned a 3 recovery rating to the revolver and U.S. "B" loan, indicating a 50-80% recovery of principal in the event of default, and a 5 recovery rating to the second-lien term loan, indicating a 0-25% recovery of principal. S&P also assigned a recovery rating of 1 to the Canadian "B" loan, indicating a 100% recovery of principal. Lehman Brothers Merchant Banking Partners owns about 61% percent of Blount International. Calvin Jenness, cfo of Blount International, did not return calls.