American Commercial Lines Sr Nts Rtd 'B' by S&P.

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 6/23/98-- Standard & Poor's today assigned its double-'B'-minus corporate credit rating to American Commercial Lines L.L.C. (ACL). In addition, Standard & Poor's assigned its single-'B' senior unsecured debt rating to the proposed issue of $300 million senior notes due 2008 by ACL and subsidiary ACL Capital Corp.

Standard & Poor's also assigned its double-'B' bank loan rating to ACL's $535 million credit facility.

The unsecured debt rating reflects the effective subordination of the notes to substantial secured debt (pro forma $435 million). The bank loan rating has been increased one notch from the corporate credit rating because of the estimated value of fleet collateral relative to maximum potential secured borrowings.

Ratings for Jeffersonville, Ind.-based ACL reflect high financial leverage, pro forma for the company's proposed recapitalization, which is somewhat mitigated by the company's leading market position in the domestic inland waterways barging industry. Relative to other sectors of the transportation business, inland barging is the most cost efficient mode for hauling dry bulk cargo (for example grain and coal) and the second least expensive mode (after pipelines) for hauling bulk liquids. Volumes shipped by the barging industry have grown slowly over time, although year-to-year volumes (and profitability) may be impacted by the size of the U.S. grain harvest, demand for U.S. grain exports, and service disruptions caused by flooding or drought. The profitability of the larger carriers has been challenged in recent years by a secular trend  toward lower rates, but certain carriers have improved their financial performance through internal cost reduction efforts and by acquiring and assimilating competing fleets. While the barging industry historically has had few barriers to entry, new entrants will be disadvantaged by rates that currently discourage new barge construction and the presence of larger operators (such as ACL) that derive significant productivity advantages from economies of scale and scope.

Within the industry, ACL is the largest operator of dry bulk commodity barges and the second largest operator of bulk liquids barges in the U. S. after Kirby Corp. (triple-'B'/Stable/--). ACL also provides a variety of ancillary barging services, including barge manufacturing (Jeffboat L.L.C.), communications (Waterway Communications L.L.C.), terminaling (American Commercial Terminals L.L.C.), and fleeting, cleaning, shifting, and repair services (Louisiana Dock Company L.L.C.), which reduce procurement and operating costs.

ACL is well-diversified across commodities and has a relatively stable customer list, which testifies to the high quality of service provided by the company. ACL's unit operating costs and incident rate also rank among the lowest in the industry. The age of company-owned and chartered domestic barges is about 16 years and 23 years for towboats. This age profile is consistent with ACL's competition, but will require substantial future expenditures for replacement and modernization. Management's growth strategy is to continue consolidating the mature domestic barging industry, where it has acquired and successfully assimilated five large carriers since 1988. In addition, the company is expanding internationally (about 5% of pro forma consolidated revenues and earnings, before, interest, depreciation, and amortization in 1997). ACL's international operations are expected to demonstrate profit and cash flow improvement as freight density increases.

ACL is highly leveraged as a result of a series of transaction that will include the incurrence of debt to finance a $695 million dividend to former parent CSX Corp. (triple- 'B'/Stable/A-2), the acquisition of National Marine Inc. (NMI), and the reduction of CSX's economic interest in ACL to about 34%. Pro forma shareholders' equity will record a deficit of approximately $117 million, which reflects the results of the recapitalization and the purchase accounting for the acquisition of NMI more than the company's historic profitability. Standard & Poor's anticipates pro forma EBITDA interest coverage of about 2.2 times (x) as the company has identified at least $16 million of likely administrative and operating cost savings from the acquisition of NMI (exclusive of the elimination of a $15 million annual management fee paid to CSX). Further improvements are possible. Although ACL currently has low near-term maintenance capital spending requirements, capital spending should significantly increase during the next five years for fleet replacement. Financial flexibility is strengthened by an undrawn $100 million credit facility and a light principal amortization schedule.

OUTLOOK: STABLE ACL is expected to remain opportunistically acquisitive while increasing capital spending to modernize its fleet, Standard & Poor's said. -- CreditWire

   CONTACT:  Bruce Schwartz, New York, 212/208-8092