Archibald Candy's Sr Secd Nts and Bank Loan Rated 'B' by S&P.NEW YORK--(BUSINESS WIRE)--June 19, 1997--Standard & Poor's CreditWire -- Standard & Poor's today has assigned its single-`B' rating to Archibald Candy Corp.'s $85 million senior secured notes due 2004 and $20 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility due 2000. A single-'B' corporate credit rating is also assigned to the company. The outlook is stable. The bank facility is rated single-'B', the same as the corporate credit rating. This facility is secured by a first priority lien on the company's accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying , raw materials and finished goods inventories, and certain real estate assets. While the facility derives strength from its secured position, Standard & Poor's expects that in a bankruptcy scenario, the collateral package is not likely to retain sufficient value to fully cover the facility. The rating is based on preliminary documentation, and is subject to review once final documentation is received. The ratings reflect Archibald's weak financial profile, including the refinancing risk associated with the $22.6 million of mandatorily redeemable preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. at the company's parent, Fannie May Holdings Inc. This is partially offset by the company's solid niche position in the competitive, highly seasonal $1.2 billion boxed chocolate candy category. Archibald pursues a multi-channel distribution strategy and currently maintains 337 company-operated retail stores which generate approximately 73% of sales. While these stores provide the company with good market presence East of the Rocky Mountains, the company-operated stores are an expensive method of distribution relative to the third-party retail and non-retail channels due to the high cost associated with operating retail stores. Since 1994, the company has pursued a strategy of closing underperforming company operated retail stores to improve profitability. Future growth is expected to come from increased penetration of third-party and non-retail channels rather than category growth. 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 leverage is relatively high with total debt to earnings before interest, taxes, depreciation, and amortization Earnings before interest, taxes, depreciation, and amortization (EBITDA) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. (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 ) of about 4.8 times (x) for the rolling 12 month period ended March 1997. Including the holding company's preferred stock as debt, this ratio increases to 6.0x. Pro forma EBITDA to interest is weak at 2.0x, declining slightly to 1.9x including cash dividends as interest. Standard & Poor's views Archibald and its parent company on a consolidated basis because Archibald is the parent's only source of cash flow and the preferred is mandatorily redeemable in 2001, prior to the maturity of the $85 million senior secured issue. There are virtually no other debt maturities at Archibald until the revolver matures in 2000. Capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. needs are modest, and are expected to be in the $4 million area in fiscal 1998. The $20 million revolver will be undrawn un·draw tr.v. un·drew , un·drawn , un·draw·ing, un·draws To draw to one side, as a curtain. Adj. 1. undrawn - not represented in a drawing undelineated - not represented accurately or precisely at closing, but will be used to fund seasonal working capital needs. OUTLOOK: Stable. The outlook reflects Standard & Poor's expectations that the company will retain its market position and maintain a financial profile in line with the current rating. -- CreditWire CONTACT: Pamela L Atkins, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (1) 212-208-8343 |
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