Moody's rates Dresser facility

Moody's Investors Service said it assigned a B1 rating to Dresser Inc.'s pending $125 million senior unsecured six-year non-amortizing term loan and assigned a Ba3 rating to the pending $235 million senior secured term loan C maturing 2009.

Moody's also confirmed at Ba3 the existing $100 million senior secured revolver and the existing $382 million senior secured term loan B as well as confirmed the B2 rating on $550 million of 9.375% senior subordinated notes due 2001.

Moody's said the ratings are restrained by high leverage and acquisition risk; the long absence of a clear view on recurring earnings and EBITDA due to very substantial 2003 one-time charges; soft demand growth from the North American industrial and oil and gas sectors and potential impact of secular changes in oil and gas sector spending patterns; a degree of execution risk in Dresser's ongoing rationalization; a high goodwill/intangible asset component and low tangible fixed asset component.

The ratings are supported by slowly firming 2003 trends; a 35% rise in the order backlog to $475 million; a 7% net debt reduction in 2003 and 16% since 2001; significant improvement in Dresser's working capital turnover; expected 2004 cost benefits from the restructuring effort and modestly higher spending by Dresser's customer base; the deep financial strength of much of Dresser's customer base; and fairly low capex needs.

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