Moody's raises Arrow outlook to stable

Moody's Investors Service revised the outlook of Arrow Electronics Inc. to stable from negative and affirmed the Baa3 senior unsecured rating.

Moody's also affirmed Arrow's shelf registration for senior unsecured debt, subordinated debt and preferred stock at prospective Baa3, prospective Ba1 and prospective Ba2, respectively and its $450 million revolving credit facility maturing December 2006 at Baa3.

Moody's said the change in the rating outlook to stable reflects recent corporate actions to reduce leverage, revenue growth that has been stronger than expected, operating margin growth that has outpaced revenue gains and expectations for margin and interest coverage enhancement to offset any dampening of cash flow generation due to continued revenue growth.

On Feb. 20, Arrow issued 13.8 million shares of common stock at $23.50 per share. Net proceeds of $313 million have been used to redeem $209 million of 8.70% senior notes due 2005 and a portion of the zero coupon debentures putable in February 2006.

Operating margin of 3.7% in the March 2004 quarter has been the highest since the March 2001 quarter. EBITDA to interest coverage for the last 12 months ending March 31 was 2.8x, substantially improved from 1.7x in the March 2003 quarter.

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