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Published on 8/6/2003 in the Prospect News Convertibles Daily.

Moody's rates Kaydon convert Ba3

Moody's Investors Service assigned first-time ratings to Kaydon Corp., including the 4% convertible senior subordinated notes due 2023 at Ba3. The outlook is stable.

The ratings reflect a conservative capital structure, significant cash balance, good niche market positions, strong profit margins and cash flow generation, Moody's said.

The ratings, however, are constrained by considerable revenue and profit volatility, exposure to cyclical end-markets, potential acquisition risks, recent sizable stock buyback and legal liabilities.

Moody's notes that Kaydon maintains a highly liquid and conservative balance sheet with a cash balance of approximately $228 million, slightly higher than gross debt of $200 million, at June 30.

Credit metrics are strong for its rating category, also, with last 12 months EBITDA of $63.5 million, gross debt/EBITDA leverage of about 3.2x and EBITDA covered interest and dividends about 2.8x. Cash flow generation has been solid, with free cash flow representing nearly 17% of gross debt.


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