Moody's Investors Service upgraded Flowserve's bank debt due to stronger operating and financial performance and the company's proficiency in integrating acquisitions as Flowserve incorporates the recently acquired Invensys' flow control division (IFC). Flowserve's $300 million revolver and $238.4 million term "A" loan have been upgraded from B1 to Ba3 and the same rating was assigned to the company's new $95.3 million term loan "A" add-on and $700 million term loan "C".
Moody's expects that Flowserve will face substantial challenges while integrating IFC but looks for the company to realize cost savings and improve its cash flow. The combined company will benefit from its more competitive position in the global flow control market, its increased geographical diversification, and economies of scale. The company is currently leveraged with debt to EBITDA of 3.7 times recorded by the end of 2001, but is expected to repay $522.7 million of debt with the new facilities and funds from a common stock offering. Additional repayment is expected to come from post-integration free cash flow. Calls to Renee Hornbaker, v.p. and cfo for Flowserve, were not returned by press time.
* Moody's has downgraded SMTC's $100 million revolver and $40 million term loan "A" with the possibility that strict covenants in the company's recent credit amendment may interfere with the company's attempts to reach its 2002 fiscal year forecasts. The company's EBITDA requirements and operating performance are strained by SMTC's weak communications and networking end markets. The company is also hindered by its liquidity with monthly and daily revolver balances required. "Overall [SMTC] appear[s] to be turning the corner although they will remain under pressure from stringent requirements imposed by the lending group," said Howard Sitzer, Moody's analyst.
The company's seasoned financial management holds up SMTC's ratings. The lending group also remains closely involved with the company as it looks to protect its collateral. The company has been focusing its activity on its key customers and ratings are likely to remain stable if operating performance continues to improve. Frank Burke, SMTC cfo and treasurer, said that Moody's conducted a pretty thorough analysis and noted that the outlook was changed from negative to stable.
* Standard & Poor's has downgraded General Chemical Industrial Products from BB- to B+ after the company's profitability and cash flow have been hurt by issues relating to its primary soda ash and calcium chloride businesses. The company's soda ash business has been diluted by overcapacity and shrinking demand. Its calcium chloride business has faced weaker pricing, and high 2001 energy costs have taken their toll. Falling operating margins and high leverage have impaired credit protection measures and financial flexibility. While no relief is expected in the near-term, the rating reflects the expectation that the company will benefit from gradually recovering business conditions. "We continue to move forward with the plan that we put forth in the fourth quarter," said David Graziosi, v.p. and cfo for the company, commenting on the downgrade noting the company has no ratings triggers in its debt.