Bell Sports Rtgs Lowered,Off S&PWatch;New Rtgs Assgnd.NEW YORK--(BUSINESS WIRE)--July 31, 1998--Standard & Poor's today assigned its single-'B'-minus rating to Bell Sports, Inc.'s $110 million 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. privately placed senior subordinated notes due 2008. A double-'B'-minus rating was assigned to the company's $60 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. A single-'B'-plus corporate credit rating also was assigned to Bell Sports, Inc. At the same time, Standard & Poor's lowered its outstanding corporate credit rating on the holding company, Bell Sports Corp., to single-'B'-plus from double-'B'-minus. The rating on Bell Sports Corp.'s subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". was lowered to single-'B'-minus from single-'B'. These ratings are removed from CreditWatch, where they were placed Feb. 18, 1998. The ratings outlook is stable. The downgrades reflect higher debt levels and decreased interest coverages and cash balances resulting from the impending im·pend intr.v. im·pend·ed, im·pend·ing, im·pends 1. To be about to occur: Her retirement is impending. 2. $193 million leveraged buyout leveraged buyout, the takeover of a company, financed by borrowed funds. Often, the target company's assets are used as security for the loans acquired to finance the purchase. of the company by Brentwood Associates Buyout Fund II, L.P. and Charlesbank Capital Partners LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control . Bell Sports Inc. and its holding company, Bell Sports Corp., are analyzed on a consolidated basis. The ratings reflect Bell Sports' good position in the bicycle products industry, a degree of product diversity, and improving operating performance, offset by thin total interest coverage. The company is a leading supplier of bicycle helmets and bicycle accessories, covering a wide range of price points, to mass merchants and independent bicycle dealers. Bell Sports holds the leading position in the U.S. bicycle helmet market, with a market share of about 67%. Sales to domestic mass merchants account for slightly more than half of sales, and the company is the exclusive helmet supplier to the two largest mass merchants. However, bicycle helmet demand historically has been volatile, reflecting the timing of state mandatory helmet legislation for children, the entrance of new players, reduced mass Reduced mass is the "effective" inertial mass appearing in the two-body problem of Newtonian mechanics. This is a quantity with the units of mass, which allows the two-body problem to be solved as if it were a one-body problem. merchant shelf space, and competitive pricing. The company believes that domestic bicycle helmet demand has stabilized. However, Standard & Poor's remains concerned about the long-term stability The long-term stability of an oscillator, the degree of uniformity of frequency over time, when the frequency is measured under identical environmental conditions, such as supply voltage, load, and temperature. of domestic demand given the company's already high market share and the industry's relatively low barriers to entry. The company is attempting to improve its geographic diversity, and has increased international sales over the past several years. However, only 25% of sales are international, as helmet usage in international markets is substantially less than in the U.S., and the company has relatively low market share in the European bicycle accessories market. Several acquisitions have been made over the past few years that have reduced the reliance on the somewhat volatile bicycle helmet market and have built a presence in the relatively stable bicycle accessories market. About 52% of sales in the fiscal year ended April 30, 1998 were derived from bicycle accessories, versus only about one-third in fiscal 1995. Domestic mass merchant customers are replacing the company's non-branded bicycle accessories with Bell-branded accessories, providing the company with growth opportunities due to the strength of its brand name. Operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. increased sharply over the past two years despite minimal sales growth, due to lower advertising expenditures and improving operating efficiency. Including $3.7 million of cost savings and $39 million of holding company debt, 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 consolidated operating cash flow coverage of total interest expense declined to 2.1 times (x) in fiscal 1998 from an actual level of 5.7x. Cash interest coverage of 2.6x and moderate capital expenditure requirements provide flexibility for management to grow the company until the senior discount notes require mandatory cash interest payments in 2004. Cash balances declined to a pro forma level of $3 million from $35 million at June 27, 1998, and Standard & Poor's expects that a modest amount of additional debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay may likely be required as the company continues to pursue complementary acquisitions. The bank facility is rated double-'B'-minus, one notch higher than the corporate credit rating. The revolving credit agreement Revolving credit agreement A legal commitment in which a bank promises to lend a customer up to a specified maximum amount during a specified period. revolving credit agreement See line of credit. is secured by pledges of substantially all of the tangible and intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. of the company. Availability under the facility will be limited to a maximum amount based on specific percentages of the company's eligible domestic receivables and inventory. Under Standard & Poor's simulated default scenario, both the borrowing base constraint and lender access to all other company assets should provide a good measure of protection to lenders. OUTLOOK: STABLE Bell Sports faces the maturity of approximately $24 million of 4.25% convertible subordinated debentures in 2000. However, the company currently has adequate borrowing capacity under its revolving credit agreement to refinance this obligation. -- CreditWire
CONTACT: Hal F Diamond, 212/208-1331
http://www.ratings.standardpoor.com
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