American Architectural Products Asgned Rtgs by S&P.

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 11/26/97-- Standard and Poor's Wednesday assigned its single-'B' senior unsecured debt rating to American Architectural Products Corp.'s (AAPC) $110 million 144A senior notes due 2007.

Standard & Poor's also assigned its single-'B' corporate credit rating to the company.

The ratings outlook is stable.

The ratings reflect the prospect of improving operating results following the integration of acquired operations, offset by risks associated with a short operating history, an aggressive acquisition strategy, a highly leveraged capital structure, and cyclical markets.

American Architectural Products Corp., formed in 1996 with the consolidation of several manufacturers, produces windows and doors used primarily in residential repair/remodeling and new construction. Product offerings include aluminum, wood, and vinyl windows, with emphasis on upper midwestern markets.

Though an increasing proportion of sales is to more stable repair/remodeling markets, and economic and construction trends are relatively favorable, demand for the company's products is cyclical. In addition, AAPC is expected to continue to grow aggressively via acquisition.

Two pending acquisitions will double the company's size while expanding its presence in southern U.S. markets, and about $35 million in proceeds from the planned note offering will be available for future acquisitions. While the company is now only marginally profitable, it is expected to achieve greater operating efficiency and cost reductions once recent acquisitions have been fully integrated.

As a result, operating margins should improve from very weak levels of about 7-8% to the 10-12% range over the next few years, barring an economic downturn. However, even with expected improvements in the cost structure, high debt levels will keep credit protection measures thin.

The funds from operations to total debt ratio is expected to only reach about 10% during the next two years, while earnings before interest, taxes, depreciation, and amortization (EBITDA) interest coverage should be in the 1.5-2.0x range. The company will have substantial liquidity with more than $35 million of cash on the balance sheet pro forma for the offering.

OUTLOOK: STABLE

The company's growth via acquisition strategy should enable it to lower operating costs, and improve profitability and cash flow. However, there is little likelihood of a ratings upgrade until the company has demonstrated that it can successfully integrate acquired operations and strengthen credit protection measures, Standard & Poor's said. -- CreditWire

CONTACT: Cynthia Werneth, New York, 212/208-1707

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