Moody's Investors Service upgraded The Manitowoc Company's corporate family rating to Ba2 from Ba3 and its probability of default to Ba2 from Ba3 reflecting the company's continued strong operating performance and its recent announcement that it will redeem all of its senior subordinate notes.
The rating of Manitowoc's senior unsecured notes remain at Ba3, but its loss given default assessment is changed to LGD4 (66%) from LGD3 (49%). The rating outlook is stable.
The ratings upgrade reflects Manitowoc's continued strong operating performance resulting from the robust construction end markets, the main driver for Manitowoc's crane business. Through LTM March 2007, Manitowoc's key credit metrics (as adjusted per Moody's FM Methodology) were: EBITA margin -- 11.5%; EBIT/interest -- 6.5x; debt/EBITDA -- 1.6x; and, free cash flow/debt -- 22.5%.
Additionally, the ratings upgrade reflects Manitowoc's recent announcement that Manitowoc will redeem its 10.5% senior subordinate notes due 2012 effective Aug. 1, 2007. The company will redeem all of these notes for approximately $129 million, including interest payments and related cost. Moody's expectation is that Manitowoc's improving operating efficiencies and the prudent financial policies should enable the company to maintain a solid Ba2 credit profile under the key rating factors in Moody's Heavy Manufacturing Rating Methodology despite the ongoing cyclicality of the construction market. Peter Doyle, Moody's analyst, said, "Manitowoc's improving operating efficiencies and strong construction end markets have resulted in strong free cash flow. These factors have enabled Manitowoc to reduce its outstanding debt."
The stable outlook reflects Moody's expectation that Manitowoc's debt protection measures will continue to improve as a result of the robust demand in the construction end markets, and the prudent financial policies embraced by management. The key risks that Manitowoc will continue to face are the cyclicality and the severity of any downturn in the construction end markets.
Nevertheless, Manitowoc should be able to weather future cyclical downturns much better than in the past due to its diversification into other business segments, expanding product offerings, an improving balance sheet, and a commitment to maintain ample liquidity.
These ratings/assessments were affected by this action:
-- Corporate Family Rating upgraded to Ba2 from Ba3;
-- Probability-of-default rating upgraded to Ba2 from Ba3;
-- $150 million
senior unsecured notes due 2013 remain at
-- $114 million
senior subordinate notes due 2012 upgraded to
The Manitowoc Company, Inc., based in
Manitowoc, Wisconsin, is a diversified industrial manufacturer and
provider of support services in three principal business segments -
Cranes and Related Products, Food service Equipment, and Marine
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