Manitowoc Co. Inc. Downgraded To #B+# On Spin-Off T Proposed Senior Secured Notes Rated #B+# (Recovery: #3#)

Stocks and Financial Services Press Releases Wednesday January 27, 2016 09:16
NEW YORK--27 Jan--Standard & Poor's

NEW YORK (Standard & Poor's) Jan. 26, 2016--Standard & Poor's Ratings Servicestoday said that it has lowered its corporate credit rating on Wisconsin-basedcrane manufacturer Manitowoc Co. Inc. to 'B+' from 'BB-'. The outlook isstable.

At the same time, we assigned our 'B+' issue-level rating and '3' recoveryrating to the company's proposed $250 million senior secured second-lien notesdue 2024. The '3' recovery rating indicates our expectation of meaningful(50%-70%; lower half of the range) recovery in the event of a payment default.

We expect Manitowoc to use the proceeds from the spin-off transaction, alongwith a $1.3 billion dividend from Manitowoc Foodservice Inc., to repay itsexisting debt and related fees and expenses.

"The downgrade follows Manitowoc Co. Inc.'s nearly completed spin-off of itsfood service equipment manufacturing business," said Standard & Poor's creditanalyst Jaissy Lorenzo. "The food service business previously helped to offsetsome of the cyclicality inherent in the company's cranes segment and providedit with some diversification." The remaining company's exposure to highlycyclical and competitive end markets and its limited size and scope increaseits vulnerability to economic downturns. In addition, the company has moderatecustomer concentration. Therefore, we have revised our assessment ofManitowoc's business risk profile to weak from fair.

The stable outlook reflects our expectation that significant declines in thecompany's operating performance, caused by the stronger dollar and softness inthe oil and gas sector and the emerging markets, will be partially offset byrestructuring initiatives. We expect Manitowoc Co. Inc.'s margins to improveto the mid-to-high single digit percent area while it maintains adebt-to-EBITDA metric of less than 5x over the next 12 months because of therecent cost-reduction initiatives that management implemented in response tothe weak operating environment.

We could lower our ratings on Manitowoc if management's restructuringinitiatives do not improve its operating performance as expected, causing thecompany's credit measures to remain significantly weaker for a sustainedperiod--for instance, a total debt-to-EBITDA metric of greater than 5x. We

could also lower the ratings if a weaker operating performance ordebt-financed activities lead to the same result.

Although less likely in the near term, we could raise our rating on ManitowocCo. if the company can enter into a period of sustained margin improvementsuch that the company's adjusted total debt-to-EBITDA metric decreases below3x under good market conditions to provide it with a cushion during cyclicaldownturns. If the company can improve and sustain its margins, this would alsobenefit its business risk profile.


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