Fitch Affirms Kennametal's `BBB' Rating.

Business Editors

CHICAGO--(BUSINESS WIRE)--Sept. 21, 2000

Kennametal, Inc.'s senior unsecured debt is affirmed at `BBB'. The Rating Outlook is Stable.

During the company's fiscal year ended June 30, 2000, Kennametal was able to reduce debt by more than $160 million and bring Debt/Capital below 50% for the first time since it acquired Greenfield in November 1997. Cash flow has improved since 1999, reflecting the cost reduction program initiated in 1999 as well as attention being given to controlling working capital and capital expenditures. Interest coverage (EBITDA/Interest) should continue to improve from its 1999 level of 3.7x, compared to 4.7x for the 12 months ended March 31, 2000 and a coverage ratio expected to exceed 5x during the next 1-2 fiscal years. Given the higher operating margins demonstrated in fiscal 2000, we look for Debt/EBITDA (2.7x for the 12 months ended March 31, 2000) to decline toward 1x over the next 3-4 years, assuming no acquisitions during that time. Kennametal would consider favorable acquisition opportunities but management's priorities currently are on strengthening productivity and identifying sources for internal sales growth.

Kennametal's agreement to acquire the 17% of JLK Direct Distribution (JLK) it does not already own represents a reversal of its earlier plan to sell JLK. Kennametal will need to address weak results at JLK that included factors such as inventory management systems and customer service. While we believe management is well prepared to address the issues at JLK, retaining the subsidiary will negatively affect overall margins, at least temporarily, and slow the improvement in credit ratios that would have occurred more quickly under the sale scenario.

Kennametal, headquartered in Latrobe, Pa., is one of the largest global providers of tools and related products to the metalcutting, mining, highway construction, and other industries.

Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Insurance, Corporates, Structured Finance, Sovereigns and Public Finance Markets worldwide.