AMSTED Holds Niche Positions

AMSTED Industries has leading niche positions in certain vehicular, construction and industrial markets. It is also the market leader in the undercarriage of freight cars in North America, says Standard & Poor's. S&P rated the $525 million credit for the diversified manufacturer of industrial components--primarily to the railroad, vehicular, and the construction and building markets--at BB-. AMSTED's leading market positions are "a reflection of the longstanding customer relationships [that AMSTED has] with multi-year agreements," added Linli Chee, an S&P analyst, explaining that AMSTED has long-term contracts with customers that receive a broad product base, technical expertise and ample manufacturing capacity from the company. AMSTED holds the number one or two positions for most of its products, she noted.

Separate from expected demand improvements in the rail and vehicular markets, AMSTED is seeking to enhance revenues through selective price increases and increased content per unit sold, S&P also notes. "They are still subject to improvements in their marketplace," Chee stated. She said AMSTED has not performed as well as before in the railroad and cyclical vehicular segments, but the segments have recently shown improvement. "It looks like [AMSTED has] hit the bottom and demand should slowly increase over time" on the railroad side, with demand increasing a little bit more slowly on the vehicular side, Chee explained. The construction industry segment's steady volume is also expected to partially balance the cyclical nature of the company's other markets, S&P states.

The credit includes a $125 million, five-year revolver and a $400 million, seven-year "B" loan. S&P also rated AMSTED's $275 million in senior unsecured notes at B. Proceeds from both transactions will go toward repaying the Chicago-based company's existing debt and for working capital and general corporate purposes. "Given AMSTED's success in managing costs amid difficult end-market conditions, the company should be able to maintain profitability and cash flow protection measures that are in line with the rating," S&P says. Matthew Hower, treasurer of AMSTED, did not return calls.