The ratings on Harbor Freight Tools USA Inc. (HFT) reflect Standard&Poor's Ratings Services' expectation that there will be no significant debt reduction in the near term because of high capital spending to support aggressive growth plans. The rating also takes into account the company's very aggressive financial policy, as it has a history of debt-financed dividends to its owner. Therefore, although credit measures are currently much better than medians for the 'B' rating category, we expect that this may be transitory as we fully anticipate future debt-financed dividends. We believe that HFT will improve its covenant cushion from a recent 9.5% to over 10% in the near future. HFT has a vulnerable business profile characterized by its still
