S&P lowers Dan River outlook

Standard & Poor's lowered its outlook on Dan River Inc. to negative from stable including its senior unsecured debt at B-.

S&P said the revision follows Dan River's disclosure in its recent 10-Q filing that barring significant improvement in its current business activity the company will likely violate credit facility financial covenants in the fourth quarter of 2003.

In addition, S&P said it is concerned that the company's credit measures may be weaker than anticipated for the full year. Moreover, the timing of any recovery in these credit protection measures is uncertain.

Dan River's ratings reflect the company's aggressively leveraged financial structure and very competitive and cyclical industry conditions, S&P said. These factors are somewhat mitigated by the company's good position in both the home fashions business and the men's shirting fabrics market.

The company has suffered a decline in sales, despite management's efforts to rationalize capacity, including the closing of facilities. For the quarter ended June 28, 2003, sales declined by about 24% and operating income adjusted for restructuring charges was zero, down from about $13 million the previous year.

Credit protection measures have weakened, with EBITDA interest coverage of about 2.7x and leverage of 3.6x for the 12 months ended June 28, 2003. S&P said it is concerned that continued weak operating performance and soft economic conditions could hinder the company from meeting both the fourth quarter financial covenants required in its bank facility and S&P's Poor's targeted benchmarks for the full year.

For Dan River to sustain its current ratings, S&P expects the company to maintain EBITDA interest coverage of above 2.5x, total debt to EBITDA of less than 3.5x, and operating margins above 12%.

Fitch confirms Boyd Gaming

Fitch Ratings confirmed Boyd Gaming Corp. including its senior secured bank facility at BB+, senior unsecured debt at BB- and senior subordinated notes at B+. The outlook is stable.

Fitch said the ratings reflect Boyd's geographically diverse asset base, strong free cash flow generation, focused balance sheet management and visible growth prospects (namely, The Borgata).

Offsetting factors include the material tax increases enacted in Illinois, Nevada and New Jersey in 2003 which are expected to result in a $15 million - $20 million hit to run-rate EBITDA.

Longer term, risk factors include new competition for Boyd's Delta Downs facility, where Pinnacle Entertainment plans to open its new casino facility in early 2005, and the potential for a Native American casino within 15 miles of Boyd's Blue Chip Casino in Michigan City, Fitch noted. Recently announced capital spending plans at these two properties could minimize the impact; however, Fitch believes that the combined impact on EBITDA in 2005 could be in the $35 million - $50 million range.

Over the past six quarters, Boyd's credit profile has improved dramatically thanks to improved operating results, incremental EBITDA from Delta Downs and focused debt reduction. At June 30, 2003, last 12 month leverage and coverage stood at 4.1 times and 3.0x, respectively, versus 4.4x and 2.7x in the prior year period and 5.1x and 2.4x at year-end 2001, Fitch said. During the first half of 2003, Boyd reduced debt by $35.5 million, bringing debt to $1.1 billion.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.