S&P confirms Dunlop Standard, off watch

Standard & Poor's confirmed Dunlop Standard Aerospace plc's ratings including its $225 million 11.875% senior notes due 2009 at CCC+ and removed them from CreditWatch negative. the outlook is negative.

S&P said the confirmation reflects the group's satisfactory cash flow performance in the first half of 2003.

Furthermore, S&P said it does not expect the group's credit profile to deteriorate significantly from current levels in the near term.

Over the past 18 months, the group's financial performance has been adversely affected by the downturn in commercial aviation. In 2003, commercial airline traffic was further depressed by health concerns related to Severe Acute Respiratory Syndrome (SARS) and the war in Iraq.

In the first half of 2003, Dunlop's operating profit reduced by about 10%, but remains at satisfactory levels to maintain the group's credit profile.

Headroom on financial covenants is, however, extremely tight and compliance at the next testing date in December 2003 will be dependent on second-half profitability remaining stable, S&P noted.

The outlook on Dunlop is negative due to the group's exposure to the depressed commercial aerospace sector, the tight headroom on financial covenants, and the expectation that revenue and EBITDA growth will be pressured over the intermediate term, S&P added.

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