NEW YORK, Feb 17 - Standard & Poor's today raised its corporate credit rating on Thiokol Corp to BBB from BBB-minus and its preliminary rating on the company's senior/subordinated Rule 415 shelf debt securities to BBB/BBB-minus from BBB-minus/BB-plus.
At the same time, Standard & Poor's assigned its BBB rating to Thiokol's $150 million senior notes due 2008 (a drawdown under the shelf) and $150 million revolving credit agreement, expiring in May 2001. Proceeds of the notes will be used to refinance bank borrowings. Standard & Poor's also raised its corporate credit rating on Howmet Corp (62% owned by Thiokol) to BBB from BB-minus and assigned its BBB rating to the company's $300 million senior revolving credit facility, expiring in December 2002.
The outlook is stable for the two entities.
The upgrade on Thiokol reflects consolidation of Howmet's strong earnings following the increase in ownership to a controlling interest, improved performance at Thiokol's propulsion and fastening systems, and material debt reductions at both companies.
Furthermore, uncertainty regarding the price to be paid by Thiokol for the Carlyle Group's remaining 23% stake in Howmet has been resolved, as Howmet's initial public offering in December 1997 established its market value.
Thiokol has an option (starting in December 1999 and intention to acquire that remaining stake.
The upgrade on Howmet is based on a much improved financial profile, stemming from higher than anticipated sales, earnings, and cash flow generation.
The latter coupled with the sale of the engine component refurbishment business, enabled the firm to reduce debt significantly.
Favorable conditions in the commercial aircraft business and continued efforts to improve efficiencies should be the primary drivers for another solid performance in both firms.
OUTLOOK: STABLE (Thiokol)
Although the consolidation of Howmet and the exercise of the option to increase ownership in that firm would increase significantly Thiokol's debt levels, the overall credit profile is expected to be appropriate for the rating.
OUTLOOK: STABLE (Howmet)
The company's leading market positions and good overall business fundamentals should mitigate cyclical factors and competitive pressures, this maintaining a financial profile consistent with the ratings. |
