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Calcot $200M Commercial Paper Program Affirmed At 'F1' By Fitch IBCA - Fitch IBCA Financial Wire -

NEW YORK, Feb. 27 /PRNewswire/ -- Calcot, Ltd.'s $200 million 3(a)3 commercial paper program is affirmed at 'F1' by Fitch IBCA. The program is used to fund advances made to patrons for cotton received during the harvest season and is fully supported by two credit facilities totaling $200 million. Borrowing under the program is secured by collateral including cash, deposits on margin accounts, accounts receivable and inventory, and rank senior to amounts owed by Calcot to its patrons.

The affirmation reflects the company's improved financial profile, low cost structure and strong membership base. Also considered is less restrictive legislation allowing for increased crop choice by growers and uncertainty surrounding the impact of recent economic events in Asia on future pricing.

Fiscal 1997 operating performance improved over fiscal 1996, which was impacted by higher world supply and lower prices. As a result, revenues and debtholder protection measures improved considerably during 1997. Calcot's fiscal 1997 revenues increased by 6.6% over fiscal 1996 to approximately $685 million and its EBITDA margin improved to 7% from 3.8% over the same period. The revenue and margin improvement, combined with significant short- term debt reduction, returned fiscal 1997 debtholder protection measures to pre-1996 levels. Leverage, measured by total debt to EBITDA, decreased to 1.8x in fiscal 1997 from 5.1x in fiscal 1996, while interest coverage increased to 3.2x from 1.8x. Additionally, fiscal 1997 net free cash flow (EBITDA less capital expenditures, cash interest and cash taxes) was approximately $31.2 million, up from $9.6 million in fiscal 1996.

Calcot maintains a low level of fixed asset investment, easily and inexpensively idled in a downturn. The cooperative's low cost structure also provides Calcot's patrons with a higher level of income compared to noncooperative cotton growers. As a result of the Farm Bill passed in 1996, growers have increased flexibility to convert acreage to higher priced crops. However, Calcot's higher level of patron income helps attract and retain a strong membership base.

Approximately 80% of Calcot's sales are exported to the Far East where customers are more willing to pay a premium for the higher grade of cotton produced by Calcot's patrons. The long-term effect to Calcot of weak Asian markets is still uncertain. However, due to the cooperative's heavy reliance on exports to Asia, it is possible Calcot's operating performance will be negatively impacted and debtholder protection measures may weaken modestly over the intermediate term. However, this impact is mitigated by the protection afforded by the collateral supporting the company's short-term borrowings. At Dec. 31, 1997, collateral coverage of total debt was 1.5x.

 -0- 02/27/98

/CONTACT: Mark L. Swirsky, 212-908-0531, or Suzette R. Josif, CPA 212-908-0560, both of Fitch/

CO: Calcot, Ltd. ST: IN: AGR PAP FIN SU: RTG

KE -- NYF043 -- 6211 02/27/98 10:09 EST
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Publication:PR Newswire
Date:Feb 27, 1998
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