Moody's Investors Service assigned a B3 rating to Tokheim Corporation's reorganized debt obligations, following the company's emergence from Chapter 11 bankruptcy on Oct. 20, 2000. The rating affects $47,765 million new guaranteed senior secured revolving credit facility with a final maturity of September 2005. The company is based in Fort Wayne, Ind., and manufacturers gas pumps.
According to Lisa Matalon, v.p. and senior analyst at Moody's, Tokheim must continue to make dramatic improvement over the next year in both its operations and working capital management in order to instill confidence that the company can remain viable with its new capital structure. Despite the fact that Tokheim has done an impressive job of realizing cost saving synergies from its acquisition of RPS Division of Schlumberger and has been implementing various cost-savings initiatives, Tokheim's revenue base continues to suffer from a variety of negative external factors that are showing limited signs of near-term improvement. "Basically when the company made its last big acquisition was when everything went crazy with mergers among the major oil companies. Management was assuming sales would continue at that rate. Major oil companies [MOC] started to merge, and it really slowed down MOCs capital spending. That market's beginning to stabilize," she said. "[The] new capital structure is quite tight; it doesn't have a lot of room for error. They need everything to go right. They need cash to finance the working capital. They can't rely on having much financial flexibility to raise additional funds."
Tokheim's revenue base continues to suffer from a variety of negative external factors that are showing limited signs of near-term improvement, according to the ratings report. While management sees indications that orders from the major oil companies are beginning to rebound in the wake of significant consolidation and merger activity during 1999 and 2000, several of Tokheim's other key markets are now being unusually stressed. "They did a huge acquisition, which was something they did for competitive reasons. Given the fact that it was a debt-financed acquisition, the company couldn't afford to have volume decline the way it did," she explained.
Positives for the rating are Tokheim's programs to integrate acquisitions and streamline its organization to produce increased efficiencies and operating costs.