Clark USA Ratings Affirmed by S&P After Announcement.NEW YORK--(BUSINESS WIRE)--S&P CreditWire 11/5/97--Standard & Poor's today affirmed its single-`B'-plus corporate credit and senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. and 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. ratings of Clark USA Inc., and its double-`B' corporate credit and senior unsecured debt ratings of Clark Refining & Marketing Inc. The ratings outlook remains stable. About $750 million in rated debt securities are affected. The affirmations follow the announcement that an equity investment fund has acquired TrizecHahn Corp.'s 65% controlling interest controlling interest The ownership of a quantity of outstanding corporate stock sufficient to control the actions of the firm. Controlling interest often involves ownership of significantly less than 51% of a firm's outstanding stock because many owners fail for $135 million in cash. The change in ownership to the investment fund, which is controlled by The Blackstone Group Blackstone Group L.P. (NYSE: BX) is a prominent private equity and investment management firm founded in 1985 by Peter G. Peterson and Stephen A. Schwarzman. The company is based in New York City, in River House on Park Avenue at Fifty-first Street, with offices in Atlanta, , ends the previously announced plan for a public spin-off of the Clark shares, but is expected to have a neutral impact on credit risk. Blackstone is supportive of efforts to reduce Clark's exposure to refining risks, which may include entering an alliance or partnership arrangement for Clark's refinery in Port Arthur, Texas Port Arthur is a city in Jefferson County within the Beaumont-Port Arthur metropolitan area and is situated in southeast Texas. As of the 2000 U.S. Census, the city had a total population of 57,755. . Importantly, financial policy is expected to remain unchanged, including Clark's long-standing commitment to maintaining a large cash balance in the $150 million-$200 million range. Clark is expected to proceed with its previously announced plan to refinance portions of its long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. to reduce interest expense and extend maturities. Ratings on Clark USA, a holding company, and on Clark Refining, its operating company operating company A business that engages in transactions with outsiders. , reflect difficult conditions in the oil refining industry and an extended record of weak financial performance, partially offset by the protection of high cash balances. In 1997, financial performance has rebounded to measures more supportive of current ratings because of a combination of internal improvements and better market conditions. Clark is the sixth-largest refiner and marketer in the U.S., with one Texas Gulf Coast refinery and two Illinois refineries representing 350,000 barrels per day Barrels per day (abbreviated BPD, bbl/d, bpd, bd or b/d) is a measurement used to describe the amount of crude oil (measured in barrels) produced or consumed by an entity in one day. of overall capacity. Clark also operates 814 gas stations in 12 states, primarily in the Midwest. Chicago, Cleveland, Milwaukee, and Toledo are the company's largest markets. Like other refining companies, Clark has been unable to earn satisfactory returns on regulation-driven capital investments in the 1991-1995 period, or to pass on to customers higher crude oil costs when crude prices rise. As a result, Clark recorded low cash flow and profit margins during the period. In contrast, 1997 has been a better year for Clark, with near-maximum capacity utilization Capacity Utilization measures the rate at which a firm makes use of their capital productive capacities, such as factories and machinery. Capacity Utilization generally rises when the economy is healthy and falls when demand softens. and a widened spread between the prices of crude oil and refined products. Completion of the Express pipeline from Canada in 1997, which supplies less expensive heavy crudes to Clark's two Midwest refineries, is strengthening margins, as is management's focus on raising refinery throughput. Yet given continued domestic overcapacity, improvement in profitability will be limited. Clark is expected to utilize a part of its current $300 million cash balance for debt reduction. The company is also expected to continue expanding its retail network by acquiring convenience stores The following is a list of convenience stores organized by geographical location. Stores are grouped by the lowest heading that contains all locales in which the brands have significant presence. in its core areas. However, sizable cash balances will be retained in accordance with management's financial policy. OUTLOOK: STABLE The stable outlook reflects expectations that improving cash flow and lower interest costs will permit financial risk measures to recover to levels supportive of the ratings. ---CreditWire CONTACT: Josh Gonze, 212/208-1678 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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