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Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked -- Ignore unavailable to you. Want to Upgrade?

To: Tim Cruise who wrote (69602)	11/2/1999 1:14:00 PM
From: Tim Luke	Respond to of 90042

+ 22 million

To: Tim Cruise who wrote (69602)	11/2/1999 1:31:00 PM
From: Tim Luke	Read Replies (2) \| Respond to of 90042

Tuesday November 2, 12:50 pm Eastern Time Moody's rates Arrow Electronics comm paper (Press release provided by Moody's Investors Service) NEW YORK, Nov 2 - Moody's Investors Service assigned a first time Prime-2 short term rating to Arrow Electronics, Inc. (Arrow). for commercial paper. The rating reflects the company's strong to leading market position across a broad product, customer, and geographic range, its scale of operations which provides advantages relative to smaller electronic component distributors, and good balance sheet liquidity. These strengths are balanced by a somewhat leveraged balance sheet, persistent margin pressure caused by a combination of product and customer mix shifts, as well as the still present but abating excess supply conditions in the worldwide semiconductor market. The rating outlook is stable. Commercial paper largely will be used to support working capital needs. Fully committed and unused bank line coverage, including a $650 million and a $350 million revolving credit facility that mature in September 2001 and March 2000, respectively, will provide adequate alternate liquidity for commercial paper note holders, the rating agency said. Moody's said that the industrial and electronics industries' ongoing march to remove costs from the supply chain favors larger distributors, such as Arrow, who have the operational and financial wherewithal to invest in and manage leading edge information systems. Also critical is the ability to offer a broad product line from a wide supplier list and sell to a broad customer base over a wide geographic footprint. As a result of the more demanding requirements for success, in addition to customers' and suppliers' desire to deal with fewer distributors, Moody's expects that consolidation will continue in the electronic component and computer distribution sector on a global basis, and that Arrow will be among those consolidators. Nevertheless, the company's senior unsecured long term rating of A3 does not incorporate the impact of a material sized, debt financed acquisition by Arrow in the future. The rating agency said that it expects that profit pressures will ease slightly over the intermediate term due to signs of an improving balance in the unusually long lasting excess supply conditions that the semiconductor industry has experienced over the last few years. Arrow's operating margins have improved sequentially over each of the last two quarters, reaching 3.9% in the September period, driven by its electronic components distribution business. Nevertheless, margin and cash flow expansion will be challenging due to the mix shifts to computer products distribution (primarily workstations and servers) where operating profit returns are below those of electronic components. Additionally, an ongoing expansion of business with customers who formerly sourced components directly and with contract manufacturers who may be able to extract favorable terms, will, in Moody's view, serve to limit margin expansion. Arrow Electronics, Inc., headquartered in Melville, New York, is the world's largest distributor of electronic components and computer products to industrial and commercial customers.