BFGoodrich Ratings Raised; BFGoodrich & Rohr Off S&P Watch
24 December 1997
BFGoodrich Ratings Raised; BFGoodrich & Rohr Off S&P Watch
NEW YORK, Dec. 24 -- Standard & Poor's today raised its
ratings on BFGoodrich Co.'s corporate credit and senior unsecured debt to
single-'A'-minus from triple-'B'-plus, and on BFGoodrich Capital's preferred
stock to triple-'B'-plus from triple-'B'. At the same time, Standard & Poor's
withdrew its ratings on Rohr Inc. due to the redemption of rated issues,
following the merger of the two companies. All ratings are removed from
CreditWatch, where they were placed with positive implications on Sept. 24,
1997 (see table below). The rating outlook is stable.
The upgrade is based on BFGoodrich's ongoing financial and operating
improvements, coupled with better business and earnings diversity as a result
of the recent merger with Rohr. That combination should enhance BFGoodrich's
competitive position with airframe and engine original equipment manufacturers
through a broader offering of products and services, greater systems
capabilities, and complementary technologies. Although the company will be
more dependent on the cyclical commercial aircraft market, long term business
fundamentals for that business are favorable, driven by global traffic growth,
the replacement needs of older airplanes, and strong airline profitability.
Intermediate term prospects are bolstered by the expectation of significantly
higher airplane deliveries. The overall financial profile of the combined
entity, characterized by a moderately leveraged capital structure, improving
operating performance, and fairly strong cash flow protection measures, will
not change in the short term as a result of the merger.
BFGoodrich's ratings are based on the firm's leading positions in several
aerospace and specialty chemicals areas, good financial condition, and
moderate financial policy. The aerospace segment (about 70% of total sales,
combined with Rohr), focusing on commercial activities, is well-diversified
among large engine nacelle (Rohr's business), landing, sensors, and safety
systems, and airframe maintenance and overhaul. More stable aftermarket
operations account for about 45% of segment sales. Following a prolonged and
deep downturn, aircraft orders recovered strongly in 1996-1997, and the
company will benefit from overall attractive industry conditions. The
specialty chemicals businesses enjoy good technology positions and have solid
growth potential. This segment is being aided by volume increases in most
markets, product substitution, globalization efforts, and selected
acquisitions.
Funds flow coverage of debt and debt to capital should average in the
45%-50% and 30%-40% ranges, respectively, which are appropriate levels for the
rating. The stock combination with Rohr preserved financial flexibility for
small to midsize acquisitions.
Outlook: Stable
Leading market positions and prudent financial management should maintain
credit quality, despite cyclical and competitive pressures, and potential
acquisitions to meet growth objectives, Standard & Poor's said.
Ratings Raised And Removed From Creditwatch
TO FROM
BFGoodrich Co.
Corporate credit rating A- BBB+
Senior unsecured debt A- BBB+
BFGoodrich Capital
Preferred stock BBB+ BBB
Ratings Withdrawn And Removed From Creditwatch
Rohr Inc.
Corporate credit rating NR BB-
Senior unsecured debt NR BB-
Subordinated debt NR B
SOURCE Standard & Poor's CreditWire