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S&PWatch Rated Positive for Chief Auto Parts after Buy-Out Deal

13 May 1998

Chief Auto Parts Ratings on S&PWatch Positive Regarding Acquisition

    NEW YORK, May 12 -- Standard & Poor's today placed its
single-'B' senior unsecured debt rating and its single-'B'-plus corporate
credit rating on Chief Auto Parts Inc. on CreditWatch with positive
implications.
    The CreditWatch placement follows Chief Auto's announcement that it has
reached an agreement to be acquired by AutoZone for $280 million.  AutoZone
Inc. will acquire Chief Auto for $75 million in cash, before taking into
account $205 million of Chief Auto debt.
    Additionally, Standard & Poor's will withdraw its double-'B'-minus bank
loan rating on Chief Auto after the company is acquired by AutoZone. Standard
& Poor's expects that Chief Auto's bank facility will be refinanced.
    An initial review of AutoZone indicates that the combined company would
have a much stronger credit profile than Chief Auto.  AutoZone, with
$2.7 billion in sales for the fiscal year ended August 1997, is the leading
specialty retailer of automotive aftermarket parts and accessories. AutoZone's
lease-adjusted return on permanent capital in the 20% area is the highest in
the industry.  AutoZone's low, lease-adjusted debt to capital ratio of 24%
positions it favorably compared to more highly leveraged competitors.
AutoZone's market position, solid track record of profitability, and strong
balance sheet would likely reflect an investment-grade rating.  AutoZone's
acquisition of Chief Auto would add approximately 550 stores to AutoZone's
2,000 stores and give the company a presence in California, where AutoZone has
few stores.
    Standard & Poor's will review the operational and financial strategies of
the combined companies to determine the final credit rating, Standard & Poor's
said. -- CreditWire

SOURCE   Standard & Poor's CreditWire