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VALCOR, INC. AND VALHI, INC. DEBT ISSUES RATED BY DUFF & PHELPS

 CHICAGO, July 2 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has assigned a rating of `BB-' (Double-B-Minus) to Valcor, Inc.'s planned $125 million issue of senior notes due 2003. Proceeds from the issue will be used to repay outstanding indebtedness under bank term loans and to upstream $100 million to its parent company, Valhi, Inc. Valhi plans to use its distribution from Valcor, together with other available funds, to redeem its remaining 12.5 percent senior subordinated notes due 1998. Separately, Duff & Phelps has assigned ratings of `B' (Single-B) to Valhi, Inc.'s $102 million outstanding of senior secured liquid yield option notes (LYONs) due 2007, and `B-' (Single-B-Minus) to its $131 million 12.5 percent senior subordinated notes.
 Valcor was formed in May 1993 for the purpose of serving as a financing vehicle to allow Valhi to redeem its 12.5 percent senior subordinated notes. Valcor consists of Valhi's forest products, fast food, and hardware products operations. D&P's rating of Valcor recognizes the good niche positions of Valcor's three operating units and operating cash flow that will likely be sufficient to meet debt service obligations. However, the units also operate within industries which are highly competitive and cyclical. Of concern, therefore, is the relative variability and low predictability of Valor's operating cash flows coupled with the high degree of financial leverage which will result from the new debt issue.
 We do not expect Valcor to reduce its debt leverage over the near- or intermediate-terms, since dividends will probably be upstreamed to Valhi (the covenants of the proposed debt issue permit dividend payment of up to 50 percent of consolidated net income). Moreover, Valcor plans to undertake a major expansion of its Ireland medium-density fiberboard (MDF) plant in 1994, which will likely be debt-financed, further limiting Valcor's financial flexibility. Debt to total capital, including operating leases, was 38 percent at yearend 1992, versus a pro forma ratio of 86 percent at March 31, 1993.
 Our ratings of Valhi's parent-level debt reflect its holding company structure and the structural subordination to the proposed Valcor notes, other outstanding Valcor debt, and the debt of Valhi's other wholly owned subsidiary, The Amalgamated Sugar Company. Although we do not generally view the subsidiaries' debt covenants regarding dividend payments to Valhi as particularly restrictive, any subsidiary debt will have debt service priority on a cash flow basis. Additionally, Amalgamated Sugar's bank debt and government loans are secured by a pledge of the subsidiary receivables and inventory.
 The D&P ratings also consider the probability that any available free cash flow at Valhi will likely be used for dividends or investment opportunities. The retirement of Valhi's senior subordinated notes will eliminate the dividend restriction imposed by the debt covenants. The ratings incorporate our expectations that Valhi's common dividend will be reinstated and that the company will return to making leveraged acquisitions at some time in the future. Furthermore, problems at Valhi's unconsolidated affiliates, Tremont Corp. and NL Industries, Inc., might require cash infusions from Valhi.
 Valhi, Inc., headquartered in Dallas, Texas, owns 49 percent of NL Industries and 48 percent of Tremont in addition to its 100 percent ownership of Valcor and Amalgamated Sugar. Valhi has an additional interest in NL Industries via Tremont's 18 percent ownership of the company. Harold Simmons, the chairman of Valhi, Valcor and NL, controls 90 percent of Valhi's stock.
 -0- 7/2/93
 /CONTACT: Doris S. Nakamura of Duff & Phelps Credit Rating Co., 312-368-3130/
 (VHI)


CO: Valcor, Inc.; Valhi, Inc. ST: Texas IN: CHM SU: RTG

LD -- NY046 -- 8304 07/02/93 16:47 EDT
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Date:Jul 2, 1993
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