S&P puts Remington on positive watch, Rayovac on negative watch

Standard & Poor's put Rayovac Corp. on CreditWatch negative including its $100 million revolving bank loan due 2008, $300 million term B loan due 2009, €125 million term B loan due 2009, €50 million term A loan due 2008 and €50 million revolving credit facility due 2008 at BB- and Remington Products Co. LLC on CreditWatch positive including its $180 million 11% senior subordinated notes due 2006 at CCC.

S&P said the CreditWatch placements follow the announcement that Rayovac will acquire Remington for about $322 million, including the assumption of debt.

Rayovac's acquisition of Remington follows its October 2002 purchase of Varta AG's consumer battery business, which S&P considered to present significant integration risks because of its size.

Therefore, it is likely that the Remington acquisition will result in at least a one-notch or possibly (although less likely) a two-notch downgrade for Rayovac despite the addition of the Remington brand franchise to Rayovac's product portfolio.

For Remington, there is the possibility of a one- or two-notch upgrade depending on the outcome of S&P's review.

Moody's puts Rayovac on downgrade review, Remington on upgrade review

Moody's Investors Service put Rayovac Corp. on review for possible downgrade including its $150 million senior secured revolving credit facility due 2009, €50 million senior secured revolving credit facility due 2009, $300 million senior secured amortizing term loan due 2009, €125 million senior secured amortizing term loan due 2009 and €50 million senior secured amortizing term loan due 2008 at Ba3 and Remington Products Co., LLC on review for possible upgrade including its $180 million senior subordinated notes at Caa2.

Moody's said the reviews are in response to the announcement of Rayovac's agreement to purchase Remington for $322 million including the assumption of Remington's debt.

The acquisition price, which is expected to be largely debt-financed, represents multiples of 0.9x and 6.9x, respectively, of Remington's trailing 12 months $360 million in sales and $47 million in EBITDA. As such, the transaction is expected to meaningfully increase Rayovac's financial leverage at a time when it also faces potential profit and cash flow impacts from the heightened competitive activity in its North America battery segment, Moody's said.

Rayovac's international operating results have benefited from the successful integration of Varta AG's consumer battery business (acquired in October 2002), but the benefits may be required to offset the margin pressures associated with the company's new merchandising strategy in North America.

The acquisition is likely to trigger a required change of control offer to Remington's subordinated noteholders, which would allow for repayment at a premium.

Remington has greatly improved its operating results and cash flow generation over the past couple of years through disciplined cost reduction efforts, Moody's noted. The company's focus on its core shaving and grooming categories with strong brand support and product development initiatives has resulted in meaningful market share gains.

S&P cuts Denny's

Standard & Poor's downgraded including cutting its $120 million 12.75% senior unsecured notes due 2007 and $592 million 11.25% senior notes due 2008 to CCC- from CCC and $125 million senior secured revolving credit facility due 2004 to B from B+. The outlook is negative.

S&P said the downgrade is based on Denny's deteriorating operating performance and cash flow protection measures as well as S&P's heightened concern that continued poor performance will constrain the company's liquidity.

Operating performance continued to decline in the first half of 2003, as EBITDA dropped 37% to $47.7 million, S&P noted. A weak economy, intense competition in the restaurant industry, and rising costs hurt operating performance. Same-store sales fell 0.5% in the first half of 2003, following a 1% decline in all of 2002. Operating margins for the 12 months ended June 25, 2003, fell to 17%, from 18.5% the year before, with most of the decline coming in the first half of 2003. Margins were hurt by a decline in sales leverage and higher food, labor, and utilities costs.

As a result, cash flow protection measures are very thin, with lease-adjusted EBITDA covering interest by only 1x for the six months ended June 25, 2003. S&P said it does not expect that the company will be able to reverse this trend in the near term.

The negative outlook reflects S&P's concern that Denny's will be challenged to improve its operating performance and liquidity position amid the current economic environment and competitive restaurant industry.

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