S&P may boost Remington Arms

Standard & Poor's said it placed its ratings, including the CCC+ corporate credit rating, on Remington Arms Co. Inc. on CreditWatch with positive implications based on improving business operations.

Remington announced that an affiliate of Cerberus Capital Management LP will acquire Remington for about $370 million. S&P said it believes the acquisition will add no incremental debt to Remington's highly leveraged capital structure. Remington expects to leave its existing bonds in place.

Remington's revenue and EBITDA increased by 8.6% and 28.5% year-over-year, respectively, driven by successive price increases, the agency said. Although these price increases were defensive in nature to offset higher raw-material costs, Remington has been able to recoup some of these costs and modestly improve its EBITDA margin to closer-to-historical levels. Most importantly, Remington was able to generate very modest positive free cash flow, S&P said.

In resolving the CreditWatch listing, the agency said it will evaluate the company's new capital structure once it has been determined. It could raise the corporate credit rating if Remington continues to improve its operating performance and the new structure affords sufficient financial flexibility to meet the company's seasonal working capital swings. If Cerberus issues incremental debt to finance the acquisition, or if Remington's business fundamentals and liquidity position deteriorate, S&P said it could affirm the existing ratings.

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