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Fitch Affirms Rtg For GenCorp With Stable Outlook

27 November 2000

Fitch Affirms Rtg For GenCorp With Stable Outlook

    NEW YORK--Nov. 27, 2000--Fitch affirms the `BB' rating to GenCorp's secured revolving line of credit with a Stable Outlook. This rating action follows the announcement of the merger agreement between GenCorp and Draftex.
    On Oct. 23, GenCorp announced an agreement to acquire The Laird Group's Draftex Division, a leading global automotive sealing supplier with annual sales of about $415 million. The Draftex acquisition will nearly double GenCorp's existing vehicle sealing sales and will position GenCorp as a leading global supplier of vehicle sealing systems to prominent platforms that include sport utility vehicles, light trucks and passenger cars. On a combined basis, Fitch expects annual revenues of $875 million and operating margins of 6.5% for the vehicle sealing division. Draftex, headquartered in Germany, will ease GenCorp's business risk profile in this segment through improved customer and geographical diversification.
    GenCorp expects to close the merger by year-end and projects merger synergies of $25 million per year, on average, during fiscal 2001 and 2002. GY is purchasing Draftex for approximately $190 million or four times (4x) expected 2001 EBITDA (earnings before interest, taxes, depreciation and amortization) and will fund the Draftex acquisition through new borrowings under its bank credit facility. GenCorp expects the transaction to be immediately accretive.
    At closing, GenCorp's credit metrics will reflect total debt to capitalization of approximately 65% and total debt to EBITDA of 2.4 times (x). During the next 2 years, Fitch expects these credit ratios to return to more comfortable levels as the acquisition synergies are realized and debt is reduced. As of Aug. 31, GenCorp had approximately $199 million of total debt outstanding.
    GenCorp, headquartered in Sacramento, California, is a leading manufacturer of aerospace and defense products, fine chemicals and automotive sealing systems. GY had sales of $1.07 billion during 1999 and sales by segment were as follows: 53% aerospace & defense; 43% vehicle sealing; 4% fine chemicals; and 1% real estate.