S&P upgrades Shiloh

Standard & Poor's upgraded Shiloh Industries Inc. including raising its $260 million revolving credit facility due 2004 to B from CCC+. The outlook is stable.

S&P said the upgrade reflects the progress Shiloh's new management team has made during the past six quarters to stabilize the company's operating results, improve the liquidity position, and reduce debt.

Shiloh sells into highly competitive, cyclical, and seasonal markets, since the vast majority of its customers are original equipment manufacturers in the automotive industry, S&P noted. The company lacks geographic and customer diversity, as all of its manufacturing capacity resides in North America and more than 50% of its revenues are generated from the three U.S. OEMs.

Operating results and liquidity began to erode beginning in mid-2001 because of softness in Shiloh's end-markets, combined with challenges arising from facility expansions and start-up operations that overextended the company's resources, S&P said. However, Shiloh has nearly effected a turnaround since early 2002 when new management began to reduce the workforce, initiate operating efficiencies, eliminate unprofitable products, and lower working capital requirements. EBITDA was taken to $34 million for fiscal 2002, ended Oct. 31, from zero in the fourth quarter of 2001.

Shiloh's financial profile is expected to improve during the next several years, although leverage will remain high, S&P said. For the 12 months ended April 30, 2003, Shiloh achieved total debt to EBITDA of 5.2x and EBITDA interest coverage of 2.6x. Standard & Poor's expects Shiloh to achieve debt to EBITDA of 3.5x to 4x and maintain EBITDA interest coverage of 2.5x or better. Large debt-financed acquisitions or investments are not factored into the ratings.

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