S&P Affirms Mail-Well Inc and Unit's Ratings;Outlk Pos.

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 2/13/98 -- Standard & Poor's today affirmed the double-'B'-minus corporate credit and single-'B' subordinated debt ratings of Mail-Well Inc. and its wholly owned operating subsidiary, Mail-Well I Corp.

The outlook remains positive.

The affirmation follows a common stock offering by Mail-Well Inc. that generated net proceeds of $91 million, which will be used to help fund the company's ongoing acquisition program. In January Mail-Well acquired Poser Business Forms Inc., a nationwide printer of custom labels, envelopes, and business forms for the distributor market, for $60 million in cash. Recently, it was announced that Mail-Well will acquire the label division of Lawson Mardon Packaging Inc. for about $62 million.

Through a series of acquisitions Mail-Well has become the largest envelope manufacturer and printer in North America, as well as a significant high-end commercial printer, and is expected to continue to be a consolidator in these industries. The company has been successful in quickly integrating acquired operations and improving operating efficiency through centralized purchasing and facilities rationalization.

Pro forma for the transactions, debt to capital will improve somewhat to the mid-60% area from the mid-70% range. Debt leverage, though likely to climb again as a result of future acquisitions, is not expected to exceed the mid-70% area, the upper end of management's stated target range (adjusted for off-balance sheet liabilities). Operating margins should remain fairly stable, averaging 10%-12%, depending on paper price fluctuations and competitive pressures. Earnings before interest, taxes, depreciation, and amortization interest coverage is likely to be in the 3.0 times (x) to 4.0x range, depending on debt levels, and assuming historical acquisition multiples and the pace of integration remain unchanged. Interest coverage and net earnings will benefit from a lower average interest rate following a recent convertible debt issue and planned bank debt refinancing.

OUTLOOK: POSITIVE

In the near term, improvement in operating performance is likely to be offset by higher interest expense as debt levels climb to fund ongoing acquisitions. However, over the next few years, if acquisitions are funded in a balanced manner, credit protection measures should strengthen somewhat, which could lead to a modest ratings upgrade. -- CreditWire

CONTACT: Cynthia Werneth, New York (1) 212-208-1707

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