Dailey International's Rtgs Lwrd to 'B-' by S&P.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 8/20/98-- Standard & Poor's today lowered its corporate credit and senior debt ratings on Dailey International Inc. to single-'B'-minus from single-'B'. The outlook is now negative. About $275 million in rated debt securities are affected. The downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. follows the announcement of the resignation of Dailey's president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. and two quarters of poor financial results. In early 1998 Dailey completed three debt-financed acquisitions and increased staffing levels in preparation for expected growth. However, with low oil prices and a decreased drilling rig count, Dailey encountered a sharp downturn in demand. Margins have compressed dramatically. Dailey has two core businesses, both in oilfield services. In one segment -- rental of specialized downhole tools used in directional drilling Directional drilling (sometimes known as slant drilling outside the oil industry) is the science of drilling non-vertical wells. Directional drilling can be broken down into three main groups: Oilfield Directional Drilling, Utility Installation Directional Drilling (commonly -- Dailey is a leading supplier, but demand depends heavily on drilling activity. In the other segment -- directional and air drilling services -- long-term growth prospects are good, but Dailey must compete with larger, entrenched en·trench also in·trench v. en·trenched, en·trench·ing, en·trench·es v.tr. 1. To provide with a trench, especially for the purpose of fortifying or defending. 2. competition. Under a newly appointed interim chief executive, Dailey will likely chart a new strategic direction involving an end to the aggressive debt-financed growth plan and concentration on conserving cash. Capital expenditures could be reduced significantly. Total debt of $275 million represents a severe burden given deflated de·flate v. de·flat·ed, de·flat·ing, de·flates v.tr. 1. a. To release contained air or gas from. b. To collapse by releasing contained air or gas. 2. expectations for revenue and cash flow. While Dailey has no bank credit line, short-term liquidity is not a concern since Dailey has cash balances in excess of $50 million, which equals about two years of interest expense. 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 ) for the first six months of 1998 was $14.4 million, indicating very weak annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. EBITDA interest coverage ratio of 1.1 times (x). OUTLOOK: NEGATIVE The negative outlook represents the potential for further deterioration in business prospects over the next few years. In addition, Dailey may not derive the expected benefits of its recent acquisitions. Dailey's competitors, particularly in drilling services, are financially stronger and better suited to offer lower prices if that becomes necessary to win new contracts.---CreditWire
CONTACT: Josh Gonze, New York (1) 212-208-1678
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