S&P Rates Diamond Triumph Auto Glass' CCR, Senior Notes B+
19 March 1998
S&P Rates Diamond Triumph Auto Glass' CCR, Senior Notes B+
NEW YORK, March 19 -- Standard & Poor's today assigned its
single-'B'-plus corporate credit and senior unsecured note ratings to Diamond
Triumph Auto Glass, Inc.
Standard & Poor's also assigned its double-'B'-minus rating to Diamond's
$35 million revolving credit facility.
The bank's security interest in substantially all of the company's assets
offers reasonable prospects for full recovery of principal. Diamond's cash
flows were severely discounted to simulate a default scenario and capitalized
by an EBITDA multiple reflective of its peer group. Under this simulated
downside case, collateral value is sufficient to fully cover the bank facility
if a payment default were to occur.
All ratings reflect Diamond's aggressive financial profile and expansion
strategy, offset to some extent by a decent niche position in the North
American automotive glass replacement and repair market. Diamond is one of the
three largest providers of such services. It has grown rapidly over the past
few years and has plans to expand beyond its current Northeast, Mid-Atlantic,
Midwest and Southeast markets, and establish a nationwide presence over the
near-to-intermediate term.
Diamond currently operates a network of 182 service centers, over 700
mobile installation vehicles and four distribution centers. Over the 1993 to
1997 period, the company increased the number of service centers it operates
from 60 to 174 and increased revenues from $36 million to $122 million. Growth
prospects for the company remain favorable. The industry is highly fragmented,
and Diamond is expected to benefit from industry consolidation over the next
few years. In addition, the company should continue to benefit from two other
industry trends: the increase in miles being driven and the use of larger and
more expensive glass in vehicles.
The ratings incorporate an expectation that growth will translate into
improved cash flow and earnings protection measures over the near-to-
intermediate term. The rated debt issue is being issued in conjunction with a
recapitalization of the company. Following the recapitalization, the company
will be highly leveraged, with pro forma debt/EBITDA (adjusted for operating
leases) close to 6.5 times. This ratio is expected to steadily decline over
the next few years. Funds from operations/debt is expected to steadily improve
over time. It is currently estimated to be about 10% and is expected to
improve to the mid-teen percent range over the next few years.
OUTLOOK: STABLE
Downside risk is limited by the company's favorable growth prospects and
low fixed asset intensity. Upside risk is limited by high debt leverage and
aggressive growth plans, Standard & Poor's said. -- CreditWire
SOURCE Standard & Poor's CreditWire