S&P says Scotts unchanged

Standard & Poor's said The Scotts Co.'s ratings are unchanged including its corporate credit at BB with a positive outlook following the company's announcement that it has revised its earning guidance.

Third quarter sales, which represent the peak of the gardening season, are now expected to be flat compared with the same prior year period, mostly due to poor weather conditions in April.

S&P said it still expects Scotts to continue to improve its financial profile and reduce debt during the outlook period as a result of the company's restructuring and cost-saving initiatives, despite the weather-related impact on sales.

Moody's confirms Alliance Gaming

Moody's Investors Service confirmed Alliance Gaming Corp.'s ratings including its $24.3 million senior secured revolving credit facility due 2006 and $189.5 million senior secured term loan due 2006 at B1 and $149.5 million 10% senior subordinated notes due 2007 at B3 and maintained a stable outlook.

Moody's said the confirmation is in response to Alliance Gaming's announced that it will divest itself of three non-core businesses, United Coin Machine Co., Video Services Inc. and Bally Wulff, and will refinance its $190 million senior secured term loan facility due 2006 and $150 million 10% senior subordinated notes due 2007.

The confirmation considers the positive operating trends at Alliance's core business, Bally Gaming and Systems, which currently accounts for about 60% of consolidated EBITDA. Bally Gaming and Systems continues to experience increases in gaming devices sold, unit selling prices and more importantly, the number of recurring revenue machines in service, Moody's said. As a result, in the first nine months ended March 31, 2003, EBITDA has increased over 60%.

The confirmation also takes into account Moody's expectation that a majority of asset sale proceeds will be used to reduce debt.

Pro forma for the announced asset sales, debt/EBITDA is less than 3.0 times, Moody's said.

While the planned asset sales will reduce debt and enable Alliance to focus on Bally Gaming and Systems, its high margin, high growth core business, Alliance remains vulnerable to direct competition from International Game Technology, a significantly larger and financially stronger company with a leading market share position, Moody's added.

Moody's puts Liberty Media on review

Moody's Investors Service put Liberty Media Corp.'s Baa3 senior unsecured rating on review for downgrade, affecting $8 billion of long-term debt.

Moody's said the review is because of the potential for Liberty to materially increase its debt balances resulting from its plan to acquire the 57.5% of QVC that is does not already own from Comcast Corp. for approximately $8 billion in notes and equity, the possibility of an investment in Vivendi Universal Entertainment that may increase debt levels further and Moody's expectation that Liberty will continue to actively evaluate other investing opportunities that may limit the prospect of debt reduction from these heightened levels.

While Liberty will consolidate QVC and gain access to 100% of QVC's cash flow, which Moody's regards as a positive structural change because Liberty will be able to use that cash flow for debt reduction instead of relying almost exclusively on asset values and hedging strategies for debt protection, Moody's estimates that it will incur in excess of $5 billion of debt to make the acquisition, which is a relatively high six times multiple of QVC's EBITDA.

Liberty's investment activity may strain certain asset coverage and liquidity metrics that have been the underpinning of its investment grade rating over the intermediate term.

S&P raises Massey Energy outlook

Standard & Poor's raised its outlook on Massey Energy Co. to stable from negative and assigned a BB+ rating to its $355 million secured credit facility. Existing ratings were confirmed including the senior secured debt at BB+ and senior unsecured debt at B+.

S&P said the outlook revision reflects the enhancement to Massey's liquidity with the establishment of its new bank credit facility, which has alleviated near-term maturity concerns.

S&P said the enhanced rating on the credit facility - one notch above the corporate credit rating - reflects the strong prospects for full recovery in a default scenario.

The ratings on Massey Energy reflect its substantial coal deposits and contracted production, which are tempered by high costs that have increased volatility in the company's financial performance, S&P said. With most of its 2.2 billion tons of reserves in central Appalachia, the company benefits from the region's high-BTU, low-sulfur metallurgical coal deposits. Relative to its peers, Massey's reserves contain a higher percentage of metallurgical coal deposits, which usually receives a higher premium than steam coal, given metallurgical coal's favorable properties.

However, Massey's mix of met coal sales has declined over the years given the difficulties experienced in the integrated steel industry and lower demand for that coal. S&P said it expects Massey will continue to sacrifice metallurgical margin to penetrate the less volatile utility market.

Massey's financial performance is acceptable for the rating category, S&P said. As of March 31, 2003, funds from operations to total debt for the last 12 months were 29% while last 12-months EBITDA interest coverage was 3.5x (excluding other revenue). A significant portion of other revenue is derived from the Appalachian Synfuel LLC facility, which is expected to operate through 2007 at which time the benefit of deferred tax credits expires and the facility is no longer profitable.

S&P cuts Domino's, rates notes B-, loan B+

Standard & Poor's downgraded Domino's Inc. including cutting its corporate credit rating to B+ from BB- and $275 million 10.375% senior subordinated notes due 2009 to B- from B and assigned a B- rating to its $403 million senior subordinated notes due 2011 and a B+ rating to its $125 million revolving credit facility due 2009 and $610 million term loan due 2010. The outlook is stable.

S&P said the downgrade is in response to Domino's refinancing which added about $400 million of incremental debt. The proceeds were used to repay the company's existing debt, redeem $200.5 million of its preferred shares and pay a $200 million common dividend.

As a result, pro forma lease-adjusted total debt to EBITDA increased to about 6x, compared with 3.7x under the previous capital structure, S&P said. Moreover, financial flexibility will be reduced as interest payments and amortizations will have substantially increased.

The ratings reflect the company's participation in the highly competitive pizza industry, a narrow product focus and a significant debt burden, S&P said. These factors are mitigated in part by the company's established brand identity, simple and cost-efficient operating system, and improved profitability.

Domino's has steadily improved its operating performance, S&P noted. Same-store sales for domestic franchise stores, which represent about 60% of the company's store base, decreased slightly in the first quarter of 2003, following gains of 3.0% in 2002 and 3.6% in 2001. Moreover, operating margins expanded to 17% for the 12 months ended March 23, 2003 from 15.5% the year before.

Pro forma for the refinancing transaction, cash flow protection measures are weak with lease-adjusted EBITDA coverage of interest less than 2x and FFO to total debt of 9%, compared with 2.8x and 18% respectively under the previous capital structure, S&P said.

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