Moody's cuts some GenCorp ratings

Moody's Investors Service downgraded some ratings of GenCorp Inc. including lowering its $150 million 5.75% convertible subordinated notes due 2007 to B3 from B1. Its $313 million senior secured credit facilities were confirmed at Ba2. The outlook is stable.

Moody's said it confirmed the credit facility because of the value of collateral securing it and its relative priority in the capital structure.

Moody's said the downgrade reflects GenCorp's weak financial metrics despite some recent improvement in operating performance of certain business units and expectations for modest near-term free cash flow generation in relation to debt outstanding.

In addition, leverage will increase with the recently announced acquisition of substantially all assets of the Atlantic Research Propulsion business of Sequa Corp. for about $133 million, which the company plans to finance primarily with debt.

Moody's expects deterioration in the company's credit metrics with last 12 months EBITDA to debt increasing from the current 2.8x level and coverage as measured by last 12 months EBIT to interest decreasing from 3.8x (as of May 28, 2003).

The ratings recognize the business logic and potential operating benefits of the Atlantic Research Propulsion transaction and assume that pending regulatory approvals will be received, Moody's added.

S&P says DaVita unchanged

Standard & Poor's said DaVita Inc.'s ratings are unchanged including its corporate credit at BB- with a positive outlook in response to its acquisition of dialysis programs that serve 450 patients from Rockford Health System.

This is the second such acquisition DaVita has made in recent weeks and both transactions are consistent with the company's business expansion strategy, S&P said.

With $300 million in cash at March 31, 2003, and a $200 million senior secured bank credit facility, the company has adequate financial resources to fund the relatively small acquisition without diminishing its credit profile, S&P noted.

S&P upgrades Benchmark

Standard & Poor's upgraded Benchmark Electronics Inc. including raising its $275 million senior secured credit facility to BB- from B+ and $80.2 million 6% convertible subordinated notes due 2006 to B from B-. The outlook is stable.

S&P said the upgrade reflects Benchmark's stable profitability and improved credit measures, despite weak end markets in the highly competitive electronic manufacturing services (EMS) sector.

Ratings reflect the company's mid-tier industry position, significant customer concentration and challenges posed by weak electronics end markets, S&P noted. These concerns are offset in part by consistent operating performance, strong contractual relationships with leading original equipment manufacturers, and a moderately leveraged financial profile.

Despite challenging industry conditions, operating margins have remained between 6% and 7% since fiscal 1999, S&P said. Credit measures improved, largely aided by a $110 million equity issue in April 2002, as well as good cash flow generation, which led to modest debt reduction and increased financial flexibility.

Debt protection measures are strong for the rating level; EBITDA interest coverage is more than 7x and total debt to EBITDA is about 1.5x. Benchmark's strong balance sheet and financial profile help mitigate its second-tier market position, S&P said.

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