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S&P Revises Watch Implic on Breed Technologies to Dev

19 May 1999

S&P Revises Watch Implic on Breed Technologies to Dev

    NEW YORK, May 18 -- Standard & Poor's today lowered its
corporate credit and bank loan ratings on Breed Technologies Inc. to
single-'B'-minus from single-'B'-plus.
    In addition, Standard & Poor's lowered its subordinated debt rating on
Breed to triple-'C' from single-'B'-minus and its preferred stock rating on
BTI Capital Trust, which is guaranteed by Breed Technologies, to 'D' from
triple-'C'-plus.  Breed's corporate credit, bank loan, and subordinated debt
ratings remain on CreditWatch, where they were placed Nov. 24, 1998.  However,
the rating implications are revised to "developing" from negative.  Developing
means ratings may be raised, lowered, or affirmed.  The company's preferred
stock rating is removed from CreditWatch.  Total debt as of March 31, 1999 was
about $955 million.
    The downgrade reflects heightened concerns over Breed's weak operating
performance, strained liquidity position, and diminished financial
flexibility.  The preferred stock rating reflects the company's decision to
defer its quarterly dividend payment that was due May 15, 1999.
    Lakeland, Fla.-based Breed is a manufacturer of automotive occupant
restraint systems, including sensors, seat belts, steering wheels, and
airbags.
    Ongoing operating losses have contributed to reduced cash flow generation
and minimal financial flexibility. For the third quarter ended March 31, 1999,
Breed reported a loss of $37 million, excluding a $135 million asset
impairment charge related to the company's European seat belt operations.
Cash flow generation was minimal for the quarter, with earnings before
interest, taxes, and depreciation (EBITDA) of $11.6 million, and cash flow
from operations of negative $40 million.  Financial flexibility is severely
constrained: currently, Breed has only $11 million of borrowing availability
under its $125 million revolving credit facility, and expects to fully utilize
the facility during its fiscal fourth quarter to meet operating needs. Cash on
hand as of the end of the third was about $26 million.  The company has
obtained waivers of certain bank covenant violations that expire on June 29,
1999.
    Standard & Poor's will closely monitor the progress of various measures
Breed is taking to restore its liquidity position, including the pursuit of
certain strategic alternatives, such as a strategic alliance or investment in
the company.  Breed's board of directors will be meeting on May 25, 1999, to
evaluate various alternatives.  Ratings could be raised if discussions with
interested parties results in a significant improvement in Breed's liquidity
position.  However, failure to take sufficient steps to relieve the company's
near term financial pressures would likely result in a ratings downgrade, and
could lead to a default on the company's debt obligations. -- CreditWire