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Grove shrugs off poor S&P rating

May 13, 1999|By RICHARD F. BELISLE, Waynesboro

SHADY GROVE, Pa. - Grove Worldwide's chief financial officer said Thursday his company's future is undamaged by being placed on CreditWatch by Standard and Poor's.

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The New York-based credit rating firm has set Grove's corporate credit rating at BB-, dropping Grove's borrowing capacity to the junk-bond range, said Standard and Poor's spokeswoman Christina Pretto.

Grove's debt as of Dec. 31 was $482 million, according to Standard and Poor's.

Pretto said Grove earned its poor rating because of its deteriorating operating performance and delayed results of its cost-cutting programs.

Steven L. Cripe, senior vice president and chief financial officer at Grove, said the company is in debt because it was bought with borrowed money.

The company was sold to Keystone Inc., a Fort Worth, Texas, investment firm, in March 1998 for $605 million.

Cripe said the low credit rating "doesn't mean anything unless we go out and borrow money in the marketplace."

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Cripe said Grove has had a difficult six months. In January it announced the pending layoff of 500 of its 2,500 employees, a number that was cut to 210 in February when the layoffs occurred.

Grove recently announced it was beginning to hire back 100 of its furloughed workers.

Grove also went through a major restructuring of its top management after Keystone bought the company.

"It's been tough," said Cripe, who has been on board with Grove for about six months.

He said the Standard and Poor's rating will not damage Grove. "It's a solid company," he said.

In the first quarter of the year, Grove reported a 20 percent reduction in sales and a 65 percent reduction in earnings, according to a release from Standard & Poor's.

Sales were down in all product lines, with heightened competition, a difficult pricing environment, and an economic downturn in certain international markets affecting business for Grove, the release said.

A cost-reduction program begun in early 1998 was supposed to generate up to $50 million in cost savings by 2002, but it has met with modest success so far, according to the release.

The timing and magnitude of potential cost savings are now in question, Standard and Poor's analysts said.

Grove is a leading manufacturer of mobile hydraulic cranes, aerial work platforms and truck-mounted cranes.

Standard and Poor's will meet with Grove executives to review the company's recent performance, discuss the status of its restructuring program and the prospects and time frame for achieving operating improvements, the release said.

If it appears financial performance will fall below previously expected levels or operating improvements will be substantially delayed, ratings could be lowered further, Pretto said.

She said her company has been rating Grove since April 1998, about the time Keystone took over.

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