[2] Fitch Lwrs Hasbro's Sr Debt to `BBB'; Rating Outlook Stable.

Business Editors

NEW YORK--(BUSINESS WIRE)--October 12, 2000

Hasbro, Inc.'s $1.15 billion senior debt is lowered to `BBB' from `A-' by Fitch following the announcement that operating performance in 2000 and beyond will be significantly below expected results and that the company has refocused its strategy. Hasbro's new strategy entails enhancing its focus on core brands and reducing its reliance on licensed properties. The company's $700 million commercial paper program is affirmed at `F2'. The Rating Outlook is Stable.

Hasbro continues to maintain a solid market position as the second largest toy manufacturer in the U.S. and maintains an extensive portfolio of game and toy brands. Concerns center on the company's ability to successfully reduce its reliance on faddish toys while enhancing the performance of the core brands. In addition, the expected deterioration in the company's financial profile as well as the highly competitive nature of the toy industry are also reflected in the assigned ratings. Importantly, Fitch expects that Hasbro will successfully amend its bank credit facilities to avoid any potential covenant violations.

The weakness in several of Hasbro's licensed products, including Pokemon toys and Star Wars, has forced the company to focus its efforts on improving the performance of its core brands, including Playskool, Tonka, Milton Bradley and Parker Brothers. In connection with this initiative, Hasbro plans to take a $140-$170 million restructuring charge prior to year-end to facilitate the closure of certain facilities in Ohio and California, reduce headcount by about 5% and narrow its product line from current levels. In addition, the company reported that it is exploring strategic alternatives for its interactive business.

As a result of these announcements, earnings before interest, taxes, depreciation and amortization (EBITDA) is expected to decline significantly from the $668 million generated in 1999 and EBITDA as a percent of revenues will fall below the 15.8% reported in 1999. In addition, leverage and coverage will weaken dramatically from the 1.7 times (x) and 9.7x, reported, respectively for 1999. However, as a result of the company's actions, Fitch expects operating profitability and bondholder protection measures to begin to return to more historical levels over the next several years.

Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Insurance, Corporates, Structured Finance, Sovereigns and Public Finance Markets worldwide.