American Eco's Corporate Credit, 100 Million Senior Notes Rated BB- By Standard & Poor's
NEW YORK, May 12 /PRNewswire/ -- Standard & Poor's today assigned its double-'B'-minus rating to American Eco Corp.'s $100 million senior notes due 2008, filed under Rule 144A with registration rights.
Additionally, Standard & Poor's assigned its double-'B'-minus corporate credit rating to the company. The outlook is positive.
Proceeds will be used to repay all outstanding debt. The remaining portion of proceeds will be used for acquisitions and general corporate purposes.
The ratings reflect American Eco's relatively modest size, with revenues of $250 million and its limited financial flexibility, with equity of $111 million. These ratings factors are offset to some extent by the company's respectable position in a very large and fragmented industry.
American Eco has grown rapidly over the past three years through acquisitions and has become a leading, single-source provider of industrial support and specialty fabrication services to three industry groups: energy, pulp and paper, and power generation. Thus far, American Eco has successfully integrated acquired companies, although this remains a risk factor. In an economic downturn customers may defer some maintenance activities. However customer, end-market and geographic diversification, and the service nature of American Eco's business should moderate cyclical exposure. Above-average growth prospects are driven by the trend toward greater outsourcing that will allow customers to focus on core competencies while reducing costs.
American Eco is expected to pursue aggressive growth objectives, but acquisition premiums should be modest and financing should be accomplished in a manner that does not weaken the financial profile. The balance sheet is leveraged somewhat aggressively with total debt to capital of 47%. Excess cash balances, notes receivable receipts, internal cash flow, and some borrowings are expected to fund potential acquisitions. The company's leverage is expected to remain in the 40%-50% range, acceptable for the ratings. Cash flow protection is expected to be satisfactory with funds from operations to total debt averaging between 20%-25%.
OUTLOOK: POSITIVE
The ratings could be raised within three years if American Eco can continue to grow profitably while maintaining a supportive capital structure, Standard & Poor's said. -- CreditWire
SOURCE Standard & Poor's CreditWire |
