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TEXT-S&P rates Kennametal Inc snr unsecured notes
November 5, 2012 / 7:20 PM / 5 years ago

TEXT-S&P rates Kennametal Inc snr unsecured notes

Nov 5 - As Standard & Poor's Ratings Services previously announced, on Nov.
2, 2012, we assigned our 'BBB' issue-level rating to Kennametal Inc.'s proposed
senior unsecured notes due 2019. The company expects to use the proceeds to
repay its outstanding revolving credit facility balance of approximately $300
million and the balance for general corporate purposes. The proposed notes
contain a change-of-control provision.

The 'BBB' rating and stable outlook on the U.S.-based metalworking tools 
manufacturer reflects our assessment of the company business profile as 
"satisfactory" and its financial risk profile as "intermediate" under our 
criteria. The satisfactory business risk assessment is based on our 
expectation that Kennametal's product innovation and global footprint will 
enable the company to maintain its good position in the global metalworking 
tools industry. We expect that its profitability, while structurally improved 
since the last downturn, will remain volatile because of the cyclical and 
competitive nature of its markets. Weakening demand in global industrial 
markets has started to hurt performance. We assume revenues could decline by 
mid-single digits in fiscal 2013 and adjusted EBITDA margins could be 16%-17%, 
down from a peak of close to 20% in 2012.

The intermediate financial profile reflects Kennametal's moderate debt and 
credit metrics that likely will continue to fluctuate with the industry cycle 
and potential acquisition activity. Leverage of about 1.7x debt to EBITDA as 
of Sept.30, 2012, pro forma for the proposed debt issuance, could in our view 
increase to around 2x in the coming quarters, but we expect it will remain 
less than 2.5x and that funds from operations to debt will be above 35%, which 
we view as commensurate for the rating. The company will have less debt 
capacity to fund additional growth or shareholder initiatives, however.

RELATED CRITERIA AND RESEARCH
     -- Summary: Kennametal Inc., July 19, 2012 
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008


RATINGS LIST 

Kennametal Inc.
 Corporate credit rating               BBB/Stable/--

New Rating

Kennametal Inc.
 Senior unsecured notes due 2019       BBB

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