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Standard & Poor's lowers Brunswick’s long-term ratings

Standard & Poor's Ratings Services lowered its long-term ratings on Brunswick Corp., including the corporate credit rating and senior unsecured debt rating, to BB- from BB+.

In addition, the ratings were placed on CreditWatch with negative implications, indicating the possibility for further downward rating action in the near term. Total debt outstanding as of June 28 was $727.7 million.

This is the second time in recent months Standard & Poor’s has lowered Brunswick’s credit rating. In July, it was lowered from BBB- to BB+.

“The ratings downgrade and CreditWatch placement are based on unprecedented economic pressures on recreational marine demand caused by consumer sentiment, high fuel prices, shrinking credit availability, and the effect of financial market instability in reducing non-financed sales,” said Standard & Poor's credit analyst Andy Liu. “We are also concerned about the effect of market conditions on Brunswick's dealer base.”

The lowering of the company’s credit rating last week followed Brunswick’s announcement that it was accelerating its efforts to resize the company and remove $300 million in fixed costs by the end of 2009.

By the end of this year, plants in Arlington, Wash., and Roseburg, Ore., will be permanently closed, and the Navassa, N.C., plant will be mothballed. The Pipestone, Minn., permanent closure is expected to be completed during the first quarter of 2009.

The company said these actions will result in the eventual elimination of approximately 1,450 hourly and salaried positions at these facilities.

To resolve the CreditWatch listing, Standard & Poor's will meet with Brunswick to discuss the company's strategy amid a worsening recreational marine downturn and its plans to ensure sufficient liquidity.

“From S&P’s statement, it seems pretty clear that they believe Brunswick is proactively taking steps to manage the things we can control,” Dan Kubera, Brunswick director of media relations, said this morning. “Also from their comments, their action was based on economic and consumer factors affecting the entire marine industry that are outside of our control.”

Moody's Investors Service placed Brunswick on review for a possible downgrade following its announcement. The company has a Baa3 long-term rating and P3 commercial paper rating with Moody’s.

"The review for possible downgrade reflects our concerns that the events in the financial markets over the last month will result in a significant contraction in discretionary consumer spending over the next few quarters," said Kevin Cassidy, Senior Credit Officer at Moody's Investors Service.

“While we believe that Brunswick will continue to take appropriate and difficult steps to protect its credit metrics and liquidity, we expect the events over the last month will prolong the marine industry downturn and that the company's financial flexibility will be reduced,” he added.

— Beth Rosenberg


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