S&P rates new GenCorp convertibles B+

Standard & Poor's said it assigned its B+ rating to GenCorp Inc.'s proposed $100 million contingent convertible subordinated notes due 2024 and placed the ratings on CreditWatch with negative implications.

S&P's other ratings on GenCorp, including the BB corporate credit, the BB+ senior secured debt and B+ subordinated debt ratings, remain on CreditWatch with negative implications.

S&P said the CreditWatch review is based on expectations that problems at GenCorp's GDX Automotive unit and higher pension expense will likely result in deterioration of the company's financial profile in 2004 to a level subpar for the rating.

GDX is a leading provider of automotive vehicle sealing systems and accounts for around 65% of GenCorp's revenues. Lower volumes, unexpected costs associated with a new product launch, and pricing pressures resulted in an operating loss in the third quarter of fiscal 2003. GenCorp replaced management at the unit and instituted cost-saving initiatives, including closing a plant in France. The unit is expected to be profitable in the fourth quarter and in 2004, but at a very low level.

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