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Brunswick downplays lower credit rating

Brunswick issued a statement Tuesday saying Standard & Poor’s Ratings Service’s decision to lower the company’s long-term corporate credit rating to “BB+” from “BBB-“ will not have “any significant effect.”

“Both our strong balance sheet and ability to generate cash provide us with substantial liquidity and serve us well in economic circumstances such as those affecting the United States,” the boatbuilder said in a statement. “We will continue to focus on operating our businesses well in these market conditions.”

The statement also says Brunswick Acceptance Co., the joint venture with a subsidiary of General Electric Capital Corp. that provides dealer floor-plan financing, is unaffected by the S&P announcement.

“We are, and expect to remain, in compliance with the financial requirements of the joint-venture agreement, in spite of the weak market environment,” stated Brunswick. “The venture was recently renewed and extended through June 2014.”

Brunswick had $730 million in total debt outstanding as of March 29, according to S&P.

S&P’s credit analyst Andy Liu, in a statement, said S&P based its concerns on the “cyclical and secular trends in the recreational marine industry and their effect on Brunswick's credit quality.

“The ratings on Brunswick reflect our concerns about the declining recreational marine industry, which is being buffeted by rising gas prices, low consumer confidence, and lower credit availability; the potential for bank covenant pressure from restructuring charges; and the effect that a steep decline in profitability is having on credit measures,” the ratings company said in a statement. 

Brunswick, in its statement, said “With regard to our $650 million revolving credit facility, there are no borrowing constraints resulting from the ratings action.” The company does not anticipate any borrowing under the facility for the remainder of 2008.

Looking forward, Brunswick anticipates amending the revolving credit agreement to enhance its ability to remain in compliance with the facility’s leverage covenant and to ensure sufficient borrowing capacity if the recreational market downturn continues into 2009. “We also intend to refinance our $250 million senior, unsubordinated floating rate notes due in 2009.

“We will continue to execute our previously announced plans to resize our company and reduce fixed costs by $300 million.”

Brunswick expects to generate positive cash flow in 2008 and to end the year with cash in excess of $400 million, up from $267 million at the end of the first quarter of 2008.

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