TEXT - S&P comments on American Railcar Industries
Dec 19 - Standard & Poor's Ratings Services said today that its ratings and outlook on American Railcar Industries Inc. (ARII, B+/Stable/--) are not immediately affected by the company's proposed offer to acquire The Greenbrier Cos. Inc. (B+/Stable/--) for $20 per share, or about $543 million payable in cash, subject to completion of satisfactory due diligence. Greenbrier's board of directors subsequently rejected the offer but has indicated that it remains willing to continue discussing a combination between the two companies. A potential combination of the two companies could have some benefits for credit quality, including the consolidation of the supply base in the highly competitive North American railcar manufacturing industry, increased market share and product diversification, and possible cost synergies from manufacturing and leasing operations. However, we believe these would likely be offset by the expected increase in financial leverage resulting from the transaction. We estimate that ARII's offer, assuming a primarily debt-funded financing, would have translated into leverage increasing to about 4x from less than 2x currently. Although we think that leverage in the 4x-5x range would likely remain commensurate for the 'B+' rating, this would need to be evaluated in consideration of the company's strategic and operational plans, integration risks, liquidity profile, and financial policies. Standard & Poor's will continue to monitor any related developments that could affect credit quality as they unfold.