Moody's raises PLDT outlook

Moody's Investors Service raised its outlook on Philippine Long Distance Telephone Co. to stable from negative, affecting $1.7 billion of debt including its senior unsecured debt at Ba3 and preferred stock at B2.

Moody's said the revised outlook is based on the reducing risk of a change in management strategy as First Pacific, Philippine Long Distance's largest shareholder, recently confirmed its continuing commitment to the company and its current business plan; and diminishing refinancing risk, given Philippine Long Distance is now well advanced in either establishing committed lines of finance or generating sufficient free cash flow to cover debt maturities in 2003 and 2004.

Moody's said Philippine Long Distance's ratings reflect its position as the leading integrated telecommunications provider in the Philippines with significant revenues and strong EBITDA margins (56% at December 2002); its improving financial risk profile on the back of a strengthening operating performance facilitating debt reduction; its fundamental completion of infrastructure build-out, with ongoing capex now more a function of expected growth in usage.

Concerns are the ongoing high level of financial leverage, notwithstanding that it is reducing; exposure to movements in the peso/dollar exchange rate, with a significant proportion of debt denominated in dollars (89% at December 2002), although partly mitigated by international settlement income and local tariff adjustment mechanisms together with currency hedges that cover 39% of total debt; and the potential for adverse political and regulatory developments within the Philippines that could impair the company's revenue and competitive position.

S&P rates Wimm-Bill-Dann notes B+

Standard & Poor's assigned a B+ rating to Wimm-Bill-Dann Foods OJSC's planned $150 million bonds. The outlook is stable.

S&P said the ratings on Wimm-Bill-Dann are constrained by the company's need for substantial investment in plant and working capital over the next several years to support its growth strategy and maintain its leading position in the steadily growing Russian packaged food market.

Wimm-Bill-Dann need to substantially invest to support its growth is expected to result in increased borrowing and requires sound management in order to sustain growth, boost profitability, and control working capital in the difficult Russian and Commonwealth of Independent States operating environment.

An increase in personal incomes is driving the Russian food industry, spurring the steady consumption of staple foods, and raising consumption of enriched products, S&P noted. Meanwhile, consumer preferences are inclining toward brand products.

Intensifying competition, however, forces market participants to invest considerable funds into extending operations, or, as seen in 2002 in the juice segment, to compete in pricing, with the ensuing deterioration of margins as a result.

Moody's rates Wimm-Bill-Dann notes B3

Moody's Investors Service assigned a provisional B3 rating to Wimm-Bill-Dann's planned $150 million in senior unsecured notes. The outlook is stable.

Moody's said the rating reflects Wimm-Bill-Dann's increased leverage as a result of the transaction; expected growth in absolute debt levels over the next three years to fund the company's geographic expansion within Russia and former CIS countries, continued development of its dairy business and launch of its water business; likelihood of a number of bolt-on acquisitions, particularly in the dairy and water businesses to fulfill its strategy; expectation of negative free cash flow over the next two years as a result of the aforementioned expansion strategy; competitive threats posed by national as well as international food and beverage companies, including the threat of a repeat of last year's price war in the juice market; future growth highly dependent on take-off of new products and geographic expansion; working capital exposure as the company continues to expand; and some exposure to commodity price fluctuations in its juice business.

Positives are Wimm-Bill-Dann's leading position in the Russian dairy and juice markets; its strong brand portfolio; considerable growth opportunities in its target markets combined with a favorable outlook for the Russian food market; expected ability of business plan to withstand negative shocks; management's track record of managing growth; sound corporate governance; and a favorable outlook for the Russian economy.

The stable outlook reflects Moody's opinion that while the company is positioned at the lower end of its ratings category, the strength of its existing product portfolio and the flexibility afforded to the business plan by its capital structure should facilitate a strengthening of its rating over time.

Moody's puts Highwoods on review

Moody's Investors Service put Highwoods Properties, Inc. on review for possible downgrade to junk including Highwoods Realty LP's senior debt and Exercisable Put Option Securities Trust's senior debt at Baa3 and Highwoods Properties, Inc.'s preferred stock at Ba1.

Moody's said the review was being prompted by its concerns surrounding Highwoods' weakening financial profile, including a low fixed charge coverage, weak operating margins and material near-term debt maturities.

The continued weakness in the office and industrial real estate markets in the Southeastern U.S., and concerns regarding the amount of cash flow to meet dividends beyond 2003 should earnings performance decline further, are additional issues.

In November 2002, Moody's cited that the major challenge to Highwoods' rating would be potential further drops in operating income, especially if such a decline brought fixed charge coverage below 2.0x, Moody's said. At March 31, 2003 adjusted EBITDA/fixed charges (including interest expense, preferred dividends, capitalized interest, ground rent and principal amortization) was at roughly 1.8x.

The rating agency also noted that rating pressure could result should Highwoods pursue leveraged acquisitions, including joint ventures, and/or material share repurchases beyond those that had been already disclosed.

The REIT's recent performance continues to be hurt by the economic downturn, corporate tenant bankruptcies and job layoffs, and excess supply in many of its markets, Moody's said. Because many of the markets in which Highwoods invests have low competitive barriers, material sublease and supply levels are also crimping Highwoods' operating results in both its office and industrial property portfolios. The problems in the telecommunication sector, and woes of WorldCom, US Air and some other major tenants, are contributing factors. US Air recently rejected 119,000 square feet out of 414,000 square feet, contributing to higher vacancies.

S&P raises Ineos outlook

Standard & Poor's raised its outlook on Ineos Group Holdings plc to stable from negative and confirmed its BB corporate credit rating.

S&P said the revision reflects the group's good operating performance and improved financial ratios in 2002.

Despite a challenging economic environment, Ineos benefited from a strong rebound in the phenol market in 2002, which, combined with the robust performance of its other divisions, enabled it to meaningfully reduce debt in the past year, S&P said.

Notably, the group's key ratio of funds from operations to net debt stood at about 20% at year-end 2002, which is well in line with the current rating category.

The stable outlook mainly reflects the anticipation that Ineos will continue to maintain funds from operations to net debt in the 15%-20% range over the business cycle, S&P said.

Despite some uncertainty in the current market environment, the rating agency expects expects Ineos' EBITDA generation in 2003 to remain at least in line with that of 2002.

Fitch upgrades GMM Yankees

Fitch Ratings upgraded Grupo Minero Mexico, SA de CV's guaranteed yankee senior notes due 2008 and 2028 to B from B- and confirmed GMM's Grupo Mexico Export Master Trust No. 1 series C and series D notes at B and series E at AAA. The outlook is now stable and the notes are no longer on Rating Watch Negative.

Fitch said the upgrade is due to a new security interest provided to all creditors under the recent restructuring agreement. The bondholders were unsecured prior to the debt restructuring; all other terms and conditions are unchanged.

GMM has continued to remain current with all payment obligations associated with the Yankee bonds.

The stable outlook and remove from watch follows the successful closing of a restructuring agreement between GMM and its creditors.

Following this restructuring, GMM's copper mining assets, competitive cost structure and long-term business fundamentals should allow the company to produce reasonably healthy cash flows at more normal copper prices versus today's depressed prices, Fitch said.

S&P rates Banco Votorantim bonds B+

Standard & Poor's assigned a B+ rating to Banco Votorantim SA's new $75 million euro bonds due November 2005.

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