Belden (BDC) Outlook Lowered to Negative by S&P; Sees Challenges to Reducing Leverage

Standard & Poor's Ratings Services revised its outlook to negative from stable and affirmed its 'BB' corporate credit rating on St. Louis-based Belden (NYSE: BDC).

Our issue-level and recovery ratings on the company's secured and subordinated debt are unchanged.

"The outlook revision reflects our view that headwinds in Belden's broadcast and industrial segments may preclude the company from reducing leverage to less than 4x during the next 12 months, from leverage estimated in the high-4x area at June 28, 2015 pro forma for acquisitions, and that the company may not be able to pursue its merger and acquisition strategy within the constraints of the rating," said Standard & Poor's credit analyst Christian Frank.

The rating reflects our view that Belden is likely to reduce leverage to the mid-3x area in 2016 in the absence of material acquisitions or share buybacks, and our view of its highly competitive and cyclical markets. However, Belden has a leading position within some of its niche markets and we expect its EBITDA margins to continue their upward trend.

Belden's business risk profile is characterized by its highly competitive and cyclical cable, connectivity, and networking markets, and its exposure to volatile raw material pricing.

The negative outlook reflects our view that headwinds in certain segments may preclude Belden from reducing leverage to levels more consistent with the 'BB' rating.

We could lower the rating if limited organic revenue growth or acquisitions preclude the company from reducing leverage to less than 4x during the next 12 months.

We could revise the outlook to stable if a recovery in broadcast segment revenues, moderation of one-time costs, and cost controls result in leverage in the mid-3x area in 2016 and we come to believe that the company can sustain such a financial profile while pursuing its acquisitive growth strategy.

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