S&P rates SPX notes BB+

Standard & Poor's assigned a BB+ rating to SPX Corp.'s planned $200 million senior unsecured notes due 2011 and confirmed its existing ratings including its senior secured debt at BBB- and senior unsecured debt at BB+. The outlook is stable.

S&P said SPX's ratings reflect the firm's above-average business profile whose products generally enjoy leading or solid market positions in mature, cyclical markets, satisfactory financial profile, and moderate financial policy.

Following strong operating performance in 2002, as SPX benefited from large-scale acquisition synergies and cost-reduction initiatives, performance in the first quarter of 2003 weakened, with year-over-year net income from continuing operations (excluding a goodwill impairment charge in 2002) declining by 39%, S&P said. SPX was affected by a very weak power market, deterioration in markets served by electrical test and measurement equipment, and very challenging marketplace conditions.

Comparisons for the balance of 2003 and beyond should be better as SPX benefits from aggressive headcount reductions, sourcing initiatives, and other cost-reduction actions, and some strengthening of the U.S. economy that should result in the gradual recovery of markets. EBITDA margins are expected to range between 15%-20%, with return on permanent capital averaging in the mid-teens percent area.

Balance sheet leverage and cash flow protection are satisfactory, S&P said. Netting excess cash balances against debt (cash in excess of $50 million), and including the present value of operating leases as debt, adjusted debt to EBITDA for 2002 was about 2.7x, and funds from operations to adjusted debt was 31%. Prospectively, total debt to EBITDA is expected to average about 2.5x, and funds from operations to total debt should be maintained at about 30%, appropriate levels for the ratings.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.