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Amir Rosenthal
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Vice President, Chief Financial Officer,
General Counsel & Secretary

KATY INDUSTRIES, INC. REFINANCES DEBT; COMPLETES EARLY REDEMPTION OF PREFERRED INTEREST IN LARGEST SUBSIDIARY AT 40% DISCOUNT; SELLS IDLE MANUFACTURING FACILITY

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MIDDLEBURY, CT ~ February 4, 2003 ~ Katy Industries, Inc. (NYSE: KT) today reported that it has completed a refinancing of its debt through a new credit agreement agented by Fleet Capital Corporation. The new credit agreement provides for $110 million of committed loans through a syndicate of banks, consisting of $20 million of term debt and a $90 million revolving loan facility.

The new agreement replaces a $140 million facility completed in June 2001, which had consisted of a $30 million term loan and a $110 million revolving credit facility. Katy had repaid the entire balance of the previous $30 million term loan under the old credit agreement in October 2002 as a result of funds generated by free cash flow in 2001 and 2002 and through the sale of a subsidiary in October of 2002. The syndicate of banks participating in the new credit agreement consists entirely of banks who had participated in the syndicate from the former credit agreement.

The funds raised by the new $20 million term loan were used in part to redeem early, at a 40% discount, $16.4 million of an 8% preferred interest in Katy's largest subsidiary, Contico International, L.L.C. (Contico), which had been held by its former owner. The $6.6 million gain (pretax) on the early redemption will not be recognized on the company's income statement, but rather will be a direct benefit to shareholders' equity; however, the gain will positively impact earnings per share in 2003. The remainder of the proceeds of the $20 million term loan will be used to pay down revolving loans (after costs of the transaction), creating additional borrowing capacity.

Simultaneous with the completion of the refinancing transaction, Katy's Woods Industries, Inc. subsidiary completed the sale of an idle electrical wire fabrication facility in Mooresville, Indiana. The facility had been closed in December 2002 as a result of an overall restructuring plan which focuses on sourcing finished goods from third party vendors. Net proceeds from the sale were used to pay down new revolving loans.

"The completion of the refinance of our credit agreement will reduce our finance costs by approximately $1 million annually," said C. Michael Jacobi, President and CEO of Katy. "The additional borrowing capacity created by the remainder of the term loan proceeds will be a key source of liquidity as we work through a period of restructuring several of our businesses in 2003. Selling the wire facility in Indiana was a positive step in our plans to monetize idle and under utilized assets."

This press release may contain various forward-looking statements. The forward- looking statements are based on the beliefs of the company's management, as well as assumptions made by, and information currently available to, the company's management. Additionally, the forward-looking statements are based on Katy's current expectations and projections about future events and trends affecting the financial condition of its business. The forward-looking statements are subject to risks and uncertainties, detailed from time to time in Katy's filings with the SEC, which may lead to results that differ materially from those expressed in any forward-looking statement made by the company or on its behalf. Katy undertakes no obligation to revise or update such statements to reflect current events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Katy Industries, Inc. is a diversified corporation with interests primarily in Electrical/Electronics and Maintenance Products.

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