S&P affirms H&E Equipment ratings

Standard & Poor's said it affirmed its ratings on H & E Equipment Services LLC, including the B+ corporate credit rating, B- senior secured notes and BB- senior secured bank loan, and removed them from CreditWatch.

The outlook is negative.

The affirmation is based upon S&P's expectations that the company's weaker-than-expected performance in the second quarter of 2003, concern about the prospects for continued challenging conditions (especially in the company's core Gulf Coast and crane operations), and liquidity issues (stemming from an unexpected adverse legal ruling) are manageable at the current rating.

S&P said the improved performance in the third quarter and somewhat better industry conditions, if continued, should enable H & E to maintain a credit profile adequate for the rating.

Secondly, the company has met the appeal requirements stemming from the adverse legal judgment by posting the required letter of credit with the approval from its bank group. Unsuccessful resolution of this appeal should be manageable at the current rating.

The weaker operating performance has contributed to higher-than-expected leverage, with total debt to EBITDA at about 5x (adjusted for the present value of operating leases) and weaker interest coverage at about 1.7x. S&P said it expects total debt to EBITDA to average about 4.0x-4.5x over the intermediate term and EBITDA interest coverage at about 2.0x-2.5x.

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