Moody's rates Jacuzzi notes B3

Moody's Investors Service assigned a B3 rating to Jacuzzi Brands, Inc.'s planned $370 million seven-year senior secured notes and confirmed the company's senior secured notes at B3 and unsecured debt at Caa2. The outlook is stable.

Moody's said the confirmation reflects Jacuzzi's progress in evolving from a portfolio of diversified businesses into a company focused on branded bath and plumbing products and consumer vacuum cleaners with leading market positions and significant brand name strength worldwide. In the process, net proceeds from asset sales have been applied to debt reduction, which totaled about $684 million since September 2001, and the current secured bank debt and certain secured notes have extended the company's debt maturities to 2004 through 2006.

The stable outlook reflects the growth prospects for revenue, earnings and cash flow for the company's businesses - Jacuzzi and Eljer bath and spa products, Zurn commercial and industrial plumbing products and Rexair's Rainbow vacuum cleaners - over the near-to-intermediate term.

The outlook also incorporates Jacuzzi's improved liquidity profile and Moody's expectation that debt levels will continue to be moderately reduced through internally-generated free cash flow. The outlook also reflects the company's asbestos litigation exposure, which has experienced a slowdown in new claims filed and to date has not required cash outlays, but will require ongoing monitoring.

Moody's noted that the proposed secured bank facilities and senior secured note issuance will further extend maturities from the current 2004 through 2006 timeframe, to 2008 and 2010. This will eliminate the potential for cash calls associated with the current bank credit facility maturity in October

2004.

Successful completion of the refinancing plan could have positive credit implication with respect to the rating outlook, Moody's said.

S&P rates Jacuzzi notes B

Standard & Poor's assigned a B rating to Jacuzzi Brands Inc.'s planned $370 million of senior secured notes due 2010 and confirmed its existing ratings including its senior secured debt at B+.

S&P said the transaction is a positive for credit quality since it will eliminate near-term refinancing risks.

Jacuzzi Brands' ratings incorporate its well-established positions in bath and plumbing products and prospects for strengthening bath products profitability, offset by very competitive industry conditions (partly reflecting fragmented market shares), the relatively narrow focus of its principal product lines, weak operating margins in some of its major bath products, and an aggressive debt load, S&P said.

Earnings of Jacuzzi's domestic bath operations are expected to strengthen from the substantially depressed levels of recent years, which primarily reflected decreased volumes in the spa and whirlpool bath businesses, S&P said. The lower volumes resulted from reduced unit sales of certain home center product lines for which the company declined requests for price and service concessions. Over the next few years, domestic bath earnings should benefit from: an improved cost structure because of consolidation of the company's whirlpool bath manufacturing facilities; a recent agreement for the company to be the primary supplier of whirlpool baths to Lowe's Cos. Inc.; and the ongoing increase in new specialty retailer locations for premium priced spas.

Following a major divestiture of businesses during 2002 (as well as some small noncore assets in recent months), total debt has been reduced to roughly $500 million, well under half of the amount outstanding at fiscal year-end 2001, S&P said. During the next few years, annual discretionary cash flows are expected to be at least $20 million, a large portion of which will be utilized to further de-lever. The funds from operations to total debt ratio is expected to be solidly in the 10% to 15% range within the next 12 months. Total debt to EBITDA is expected to improve to less than 4.0x, while further strengthening to the 2.0x to 2.5x range is also in store for EBITDA interest coverage.

Fitch to upgrade Jacuzzi, rates notes B, loans BB, BB-

Fitch Ratings said that on completion of the proposed refinancing it expects to upgrade Jacuzzi Brands including raising its senior unsecured debt to B from B- and assign a B rating to its $370 million senior secured notes due 2010, a BB rating to its $200 million asset-based credit facility due 2008 and a BB- to its $65 million term loan due 2008. The outlook is stable.

The upgrade on the senior unsecured rating reflects the proposed debt restructuring and pending removal of refinancing risk related to the maturity of the $300 million in bank facilities in October 2004, Fitch said. The recommended ratings on the proposed debt are based upon the recovery prospect of the security given to each class of debt.

The ratings continue to reflect the company's leading brands in its Bath and Plumbing segments and early success in increasing sales in its Bath operations, Fitch said. The ratings also consider Jacuzzi Brands' sensitivity to changes in levels of consumer spending and construction activity.

Jacuzzi Brands is focused on strengthening its Bath, Plumbing, and Rexair segments by investing in its brands and reducing overhead costs, Fitch said. The company's largest segment, Bath, accounted for 67% or about $711 million of revenues in the fiscal year ended Sept. 30, 2002. This segment has experienced operating difficulties due to the loss of inventory positions in the whirlpool bath and spa divisions at the large home improvement retailers in 2000 and 2001. However, this business has shown early signs of improvement. In the first half of 2003, Bath segment sales grew 14.2% due to increased distribution in the spas and UK bath and sinks businesses. In addition, the company has signed an agreement with Lowe's to be its principal supplier of stocked whirlpool bath products. The rollout of inventory into the Lowe's stores should be completed by September 2003.

Fitch anticipates that Jacuzzi Brands' revenues will grow moderately as the company increases distribution and continues to introduce new products.

This together with additional debt reduction from cash flow generation is expected to result in strengthened credit measures in 2004, Fitch said. For the 12 months ended March 31, 2003, leverage, measured by total debt to EBITDA was 3.9x and EBITDA coverage of interest was 2.1x. Operating cash flow also strengthened primarily due to lower working capital requirements.

Moody's rates Vought notes B2, loan Ba3

Moody's Investors Service assigned a B2 to Vought Aircraft Industries, Inc.'s planned $250 million senior unsecured notes due 2011 and a Ba3 to its proposed amended $506 million senior secured credit facility consisting of a $150 million revolving credit facility due 2006, a $36.7 million term loan A due 2006, a $74.1 million term loan B due 2007, a $122.3 million term loan C due 2008 and a $122.8 million term loan X due 2008. The outlook is stable.

Moody's said the ratings reflect relatively high post-transaction debt levels, committed and drawn, thin near-term cash flow generation due to the extended weak commercial aerospace environment, and the company's reliance on demand from major aircraft OEM's, as well as uncertainty regarding development expenditures for new aircraft programs.

Ratings also consider the fact that the company has successfully managed its business despite the weak market, substantial contribution from U.S. military contracts, the strategic benefits anticipated from the acquisition of The Aerostructures Co., which provides a substantial amount of revenue from Airbus as well as increased content on military platforms, financial flexibility afforded the company by the new debt structure, and support from a strong, experienced equity sponsor The Carlyle Group, Moody's said.

The outlook is stable, as Moody's expects the company to maintain modest levels of profitability while its revenue base stabilizes at the assumed trough of the commercial aerospace market.

After the proposed acquisition and re-financing, Vought anticipates total debt to be $566 million on a pro forma balance sheet of approximately $1.6 billion, with $279 million of negative equity. On a pro forma 2003 basis, the company estimates approximately $1.4 billion in revenue, and $219 million in EBITDA, after adjusting for non-cash transaction-related costs, Moody's said. This implies leverage of 2.7x EBITDA, and 2.6x EBITDA before non-recurring estimated facility consolidation costs, without taking into account potential benefits from synergies such as facilities rationalization.

Moody's puts Buhrmann on upgrade review

Moody's Investors Service put Buhrmann NV on review for possible upgrade including its $350 million 12.25% senior subordinated notes due 2009 at B3 and senior secured credit facilities at B1.

Mood's said the review follows Buhrmann's announcement of the proposed sale of its Paper Merchanting division to Australian-based PaperlinX for gross proceeds of €746 million.

The company has announced that it intends to apply the net proceeds of the transaction, currently estimated at €650 million, to repay debt. As of 31 March 2003, Buhrmann's total debt, including securitized receivables, stood at €1.7 billion.

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