S&P lowers Kinetek ratings

Standard & Poor's said it lowered its ratings on Kinetek Inc. and its subsidiary Kinetek Industries Inc. including its corporate credit rating to B- from B.

S&P said the downgrade results from weaker-than-expected operating performance and higher leverage than expected.

At the same time S&P assigned its recovery rating of 1 to the company's senior secured credit facilities, which are rated B, one notch higher than the corporate credit rating. Also, it assigned its recovery rating of 2 to the company's senior secured notes, which are rated B-.

The outlook is negative.

The ratings on Kinetek are differentiated from its parent Jordan Industries (controlled by investor J.W. Jordan II) because of its separate financial structure, including separate public debt and bank agreements that place extremely tight restrictions on Kinetek's ability to incur additional debt, create liens, make restricted payments, engage in affiliate transactions or mergers and consolidations, and sell assets.

S&P said the ratings on Kinetek reflect its below-average business position, subpar financial performance, and limited financial flexibility. Kinetek is a leading manufacturer of specialty purpose electric motors for the consumer, commercial, and industrial markets. End-markets are cyclical but have some product-line and customer diversity, along with a competitive cost structure and modest capital intensity.

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