Wednesday January 28, 11:10 am Eastern Time
S&P assigns Mastec Inc ratings
(Press release provided by Standard & Poor's).
NEW YORK, Jan 28 - Standard & Poor's today assigned its double-'B'-plus corporate credit
rating to MasTec Inc. and its double-'B'-minus rating to the firm's $150 million senior
subordinated notes due 2008 issued under Rule 144A.
At the same time, Standard & Poor's assigned its double-'B'-plus rating to the firm's $125 million
bank revolving credit agreement maturing in 2000.
The outlook is stable.
The ratings reflect a solid position in large but highly fragmented and competitive markets with
good growth prospects and a moderate financial profile.
The Miami, Fla.-based firm is a leading independent contractor specializing in the installation,
and
maintenance of infrastructure for the telecommunications industry.
Acquisitions and joint venture investments have supported dramatic growth over the past two
years.
The company is expected to benefit from the trend for telephone service providers to cut costs
by
outsourcing construction work in order to remain profitable in an increasingly rate competitive
pricing environment.
Further, there is substantial and continuing need to replace existing copper wired networks with
more efficient optic fiber cable. Geographic diversity is good with about 40% of pro forma 1997
revenues derived from sources outside the United States.
Still, customer concentration is an issue with the two largest clients accounting for almost 40% of
1997 sales. In addition, significant market growth potential could attract better capitalized
competitors and result in margin erosion.
The strategic plan relies on internal growth supplemented by acquisitions or joint venture
investments that will extend the product line or broaden geographic diversity.
Given a favorable business outlook, internal cash generation will be sufficient to fund operating
requirements and niche acquisitions and investments. Leverage is expected to average a
moderate
50%.
Anticipated growth should enable the firm to generate satisfactory operating margins averaging
between 10% and 15%. Improving geographic diversity should support fairly stable cash flows,
with funds from operations to total debt averaging between 40% and 50%.
However, significant additional competition could depress this parameter.
Although the bank facilities derive some strength from a pledge of stock of operating
subsidiaries,
based on Standard & Poor's simulated default scenario, it is not clear that a distressed enterprise
value will be sufficient to cover full usage of the facility.
OUTLOOK: STABLE
Despite the potential for new market entrants, substantial growth prospects combined with
maintenance of a moderate financial policy should preserve credit quality. |
