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.