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Arvin 'BBB' Senior Debt Affirmed by Fitch IBCA on Purolator Acquisition

8 February 1999

Arvin 'BBB' Senior Debt Affirmed by Fitch IBCA on Purolator Acquisition - Fitch IBCA -

    NEW YORK, Feb. 8 -- Arvin Industries, Inc.'s (Arvin)
outstanding senior debt and capital securities are affirmed at 'BBB' and
'BBB-', respectively, by Fitch IBCA.
    The affirmations follow an assessment of the operating and financial
impact of Arvin's agreement to acquire the Purolator Products automotive
filter business from Mark IV Industries, Inc. for a cash consideration of
$276 million, including $6 million of assumed debt.  Arvin will initially
finance the purchase with bank debt, followed by permanent funding.  Arvin
expects to close the transaction in the first quarter of 1999.
    Purolator, with sales of approximately $345 million and excellent brand
recognition, adds meaningfully to Arvin's $2.5 billion sales base and advances
Arvin's growth strategy by adding a 'third leg' to the company's
well-positioned ride control and exhaust product lies.  Arvin should be able
to integrate this new business quickly, as both companies have common original
equipment and replacement market customers, as well as common distribution
channels.  Additionally, Arvin can increase sales of Purolator's products
outside the U.S. in markets that Purolator had not yet extensively penetrated.
Although Purolator's manufacturing base is well organized, there are working
capital efficiencies, which Arvin can capture.
    Although initial debt financing will elevate Arvin's pro forma leverage
and suppress interest coverage, the resulting ratios are still within ranges
consistent with Fitch IBCA's current ratings.  Arvin has consistently
generated net free cash flow while improving creditor protection.  The company
exited 1998 with cash of $100 million, total debt of $319 million, earnings
before interest, taxes, depreciation, and amortization (EBITDA) interest
coverage of 6.85 times (x) and total debt and capital securities relative to
EBITDA at a reasonable 1.66x.  Assuming all debt financing for the purchase,
Fitch IBCA estimates pro forma interest coverage would remain above 5x, and
debt plus capital securities relative to EBITDA would be approximately 2.5x.
    Ongoing concerns center around the maturity of the U.S. auto cycle,
relentless customer pressure for technical and price performance, and supplier
base consolidation.  Therefore, Arvin must continue to fund healthy product
and capital spending to keep its competitive position and to serve growing
technical and service demands from its original equipment customers.
    Arvin, headquartered in Columbus, IN, is a leading global producer and
supplier of automotive exhaust systems and ride control products for both the
original equipment and replacement markets.