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S&P Rates Walbro Corp's $100 Million Senior Unsecured Notes 'B+'; Affirms Ratings

2 December 1997

S&P Rates Walbro Corp's $100 Million Senior Unsecured Notes 'B+'; Affirms Ratings

    NEW YORK, Dec. 2 -- Standard & Poor's today assigned its
single-'B'-plus rating to Walbro Corp.'s proposed $100 million senior
unsecured notes due 2007, issued under rule 144A with registration rights. At
the same time, Walbro's double-'B'-minus corporate credit rating and
single-'B'-plus senior notes rating and Walbro Capital Trust's single-'B'
preferred stock rating were affirmed. The ratings outlook is stable. Proceeds
from the offering will be used to refinance bank debt.
    Walbro's ratings reflect its solid niche position in cyclical and
competitive industries and an aggressive financial profile.
    Walbro is a leading manufacturer of automotive fuel systems, including
fuel pumps, fuel modules, and plastic fuel tanks. It also produces carburetors
and ignitions for small engines used in chain saws, outboard marine engines,
lawn mowers, and two-wheeled vehicles. Walbro's operating performance during
the past two years has been below expectations as a result of new product
launch delays, excess capacity, a downturn in the two-wheeled vehicle market
in China, and start up expenses related to heavy investments to meet future
plastic fuel tank demand. Walbro will recognize a $20 million to $25 million
restructuring charge in the fourth quarter of 1997 to cover actions intended
to lower its cost structure and enhance core operations. Restructuring
actions, combined with continuing healthy automotive demand and the increasing
penetration of plastic fuel tanks, are expected to result in improved
operating performance, with operating margins strengthening to the 12%-13%
level. The company will remain aggressively leveraged in the near to
intermediate term, with total debt to capital expected to average in the 60%
to 70% range. Cash flow protection measures are expected to improve to levels
more in line with the ratings, with funds from operations to total debt
expected to average 10%-20%, and EBITDA interest coverage expected to average
2 times (x)-3x.

    OUTLOOK:  STABLE
    Ratings assume that recent restructuring actions and continued healthy
automotive demand will lead to meaningful improvements in operating
performance. Cyclical and competitive market conditions limit upside ratings
potential. -- CreditWire.

SOURCE  Standard & Poor's CreditWire