AKI Inc. Sr Nts Rtd 'B+', AKI Hldg Debs 'B-' by S&P.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 6/15/98--Standard & Poor's today assigned its single-'B'-plus rating to AKI Inc.'s planned $115 million senior notes due 2008. In addition, Standard & Poor's assigned its single-'B'-minus rating to the planned $25 million in gross proceeds of senior discount debentures due 2009 to be issued by holding company parent AKI Holding Corp. These securities will be privately placed under Rule 144A Rule 144A A Securities & Exchange Commission rule modifying a two-year holding period requirement on privately placed securities to permit qualified institutional buyers to trade these positions among themselves. . Also, a single-'B'-plus corporate credit rating was assigned to AKI Inc. and AKI Holding. The ratings outlook is negative. Proceeds from the debt offerings will be used primarily to repay bridge financing Bridge Financing A method of financing, used by companies before their IPO, to obtain necessary cash for the maintenance of operations. Notes: These funds are usually supplied by the investment bank underwriting the new issue. incurred in the December 1997 acquisition of the company. AKI is the leading global marketer and manufacturer of cosmetics sampling products, including fragrance, skin care, and makeup samplers. These products are primarily designed to reach consumers' homes in the form of magazine and catalog inserts, remittance Money sent from one individual to another in the form of cash, check, or some other manner. Financial statements sent by a creditor to a debtor frequently refer to the process of submitting a monthly remittance. REMITTANCE, comm. law. envelopes, statement enclosures, and blow-ins. Customers include most of the world's largest cosmetic companies. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma sales for the 12 months ended March 1998 approximated $81 million, and pro forma earnings pro forma earnings Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. before interest, taxes, depreciation, and amortization (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) totaled about $22 million. Ratings reflect AKI's heavy consolidated debt burden, small cash flow base, and narrow business focus. Pro forma debt to EBITDA is in the mid 6 times (x) area. Pro forma EBITDA to total interest is in the mid 1x area, while coverage of pro forma cash interest is at the high 1x level. The holding company discount debentures do not pay cash interest for five years. These factors are tempered by AKI's strong niche market A niche market also known as a target market is a focused, targetable portion (subset) of a market sector. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. positions, long-standing customer relationships, healthy EBITDA margins in the high 20% area, and minimal capital expenditures. In addition, the company has favorable growth opportunities to expand its business from the traditional fragrance base to the skin care and makeup categories, as well as to the consumer products market. OUTLOOK: NEGATIVE Ratings may be lowered if AKI does not improve its cash flow over the intermediate term and strengthen its consolidated financial profile.---CreditWire CONTACT: Donald Wong Donald H. Wong, is the President of Kowloon Restaurant in Saugus, Massachusetts as well as the President of the Saugus Business Partnership. In 2003 he was appointed by Governor Mitt Romney as a member of the newly-created Diversity and Equal Opportunity Advisory Council as well as , 212/208-1660 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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