Standard & Poor's Rates Pacific Aerospace &
Electronics Corporate Credit B+
PR Newswire - July 14, 1998 12:56
NEW YORK, July 14 /PRNewswire/ -- Standard & Poor's today assigned its single-'B'-plus corporate credit rating to Pacific Aerospace & Electronics Inc. and its single-'B'-minus rating to the company's $75 million senior subordinated notes due 2005 under Rule 144A issue with registration rights. The outlook is stable.
Pacific Aerospace & Electronics Inc.'s ratings reflect defensible positions in niche markets, significant customer concentration in the cyclical aerospace industry, and modest financial staying power due to substantial debt. The company serves aerospace, defense, electronics, and transportation markets. Pro forma for a pending acquisition, revenues were $115 million in fiscal 1998, ended May 31. Near-term prospects for profitable growth are favorable, due to healthy aerospace demand. Also, management has made liberal use of equity to finance growth and acquisitions. Consequently, an important credit protection measure, earnings before interest, taxes, depreciation, and amortization to interest expense, is expected to remain above 2 times, appropriate for the ratings.
Wenatchee, Wash.-based Pacific Aerospace, post-acquisition, manufactures aircraft parts (in nacelles, bulkheads, ducts, and cockpits) and skin panels, truck parts, electronic connectors and assemblies, and relays and solenoids. Pro forma for the pending acquisition, 59% of fiscal 1998 sales were to the commercial aerospace and defense industries. The company's top five customers accounted for 28% of sales. While market and customer diversity is well below average, demand prospects are satisfactory over the intermediate term, particularly in commercial and military aerospace. Longer term, revenues and internal cash generation could be vulnerable to downturns in markets served.
Investments in working capital and fixed assets to support growth will keep internal cash generation low, affording only modest capacity for debt reduction. At May 31, 1998, pro forma for the acquisition and associated financing, debt to total capital was 60% on a modest $63 million equity base. An active acquisition program is expected to be financed with both debt and equity, supporting moderate financial flexibility.
OUTLOOK: STABLE
Favorable demand prospects over the next few years should reduce potential for adverse cash flow swings. Consequently, measures of cash flow available for debt service are anticipated to remain consistent with current credit quality, Standard & Poor's said. -- CreditWire
SOURCE Standard & Poor's CreditWire
/CONTACT: Martin Knoblowitz of Standard & Poor's CreditWire,
212-208-1614/
/Web site: ratings.standardpoor.com
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