Mark IV Industries Inc.'s Subordinated Notes Rated BB+ by S&P

20 October 1997
Mark IV Industries Inc.'s Subordinated Notes Rated BB+ by S&P

    NEW YORK, Oct. 20 -- Standard & Poor's today assigned its
double-'B'-plus rating to Mark IV Industries Inc.'s $275 million convertible
subordinated notes due 2004. Proceeds from the issue, being sold in accordance
with SEC Rule 144A with registration rights, are being used to reduce debt.
    The company's triple-'B'-minus corporate credit rating and outstanding
double-'B'-plus subordinated debt rating have been affirmed.
    The ratings outlook is stable.
    The ratings reflect Amherst, N.Y.-based Mark IV's solid business position
as a leading producer of power transmission, fluid power and transfer, and
filtration products for competitive and cyclical automotive and industrial
markets, and the firm's somewhat sub-par, but improving, cash flow protection.
    Following completion of the divestiture of non-core businesses, Mark IV
is undertaking an aggressive growth plan to nearly double sales over the next
four years. The plan calls for the firm to increase the breadth of product
offerings and to obtain a 50/50 sales split between foreign and domestic
sales.
    A strong after-market presence, geographic diversity, and focus on cost
reduction mitigate earnings and cash flow volatility, and should enable the
firm to fund most of its operating requirements internally. However, some
external funding will likely be necessary to fund potential acquisitions
needed to meet the firm's aggressive growth objectives. In addition, through
August 31, 1997 Mark IV repurchased about 2.7 million common shares for an
aggregate cost of $63.6 million, part of a 7.3 million share repurchase
authorization. Increases in debt leverage should be limited by the balanced
use of debt and equity. Debt to capital currently stands at about 53%, and is
expected to average close to 50% over time. Funds from operations to total
debt, currently running in the mid-20% range, is expected to gradually
strengthen to a satisfactory 30%-35%.
    OUTLOOK: STABLE
    Upside rating potential over the next two-to-three years is limited by
management's somewhat aggressive financial policy. A favorable near-term
operating outlook limits downside risk, Standard & Poor's said. -- CreditWire

SOURCE  Standard & Poor's CreditWire