S&P puts Central Parking on watch

Standard & Poor's put Central Parking Corp. on CreditWatch negative including its $175 million revolving credit facility due 2008 and $175 million term loan B due 2010 at BB+, $200 million revolving credit facility due 2004 and $200 million term loan due 2004 at BB and Central Parking Finance Trust's $110 million 5.25% convertible trust preferred securities at B.

S&P said the CreditWatch listing reflects Central Parking's weak operating performance for the most recent quarter ended March 31, 2003 and S&P's expectation for weaker than expected credit protection measures in 2003.

In addition, Central Parking was not in compliance with financial covenants in its $350 million senior secured credit facility.

Revenues for the 12 months ended March 31, 2003 have remained relatively flat compared with the previous year's figures; however, lease-adjusted EBITDA margins have declined, falling to 22.4% from 26.4% the previous year, primarily because of the continued weak economic environment and severe winter weather, S&P said. Credit protection measures were already somewhat weak for the ratings, and the company's poor operating performance has resulted in further weakening.

Lease-adjusted EBITDA coverage of interest expense for the 12 months ended March 31, 2003 was about 1.6x, down from about 1.9x in the previous year, S&P said.

Moody's rates Key Energy notes Ba2

Moody's Investors Service assigned a Ba2 rating to Key Energy Services' new $150 million senior unsecured notes and confirmed its existing ratings including its $150 million senior secured revolving credit facility maturing 2005 at Ba1, $275 million 8 3/8% senior unsecured notes due 2008 at Ba2 and $97.5 million 14% senior subordinated notes due 2009 and $49.7 million 5% convertible subordinated notes due 2004 at Ba3. The outlook is stable.

Moody's noted Key intends to use the proceeds from the new notes offering to repay debt under the revolver and to eventually refinance higher coupon debt. The company has stated a plan to leave the revolver undrawn and use it, along with retained proceeds, to repay the 14% senior subordinated and the 5% convertible notes between now and January 2004.

Key's ratings would be pressured should plans or priorities change regarding the use of proceeds, Moody's said. Although management has stated it does not intend to repurchase stock in the immediate future, any stock buybacks would put ratings under pressure. Acquisitions would be based on their merits against the backdrop of sequential quarterly earnings and cash flow trends.

Key's ratings are restrained by still substantial leverage for the ratings; uncertain pace of the sector recovery as evidenced by a 13% decline in EBITDA for the first quarter of 2003; vulnerability to sector cyclicality; a business concentrated in the mature and declining U.S. market; substantial capital requirements needed to complete Key's rig refurbishment program; and the potential for acquisitions as the company pursues growth opportunities, Moody's said.

The ratings are supported by past reduction of leverage and balance sheet strengthening after near ruinous leveraged acquisitions completed through 1999; geographic diversification of its operations; management's recent track record of issuing new equity for acquisitions; enhanced downcycle earnings and cash flow arising from sector consolidation; and Key's position in the more durable well services segment of oilfield services.

The stable ratings outlook is based on management's stated commitment to reduce leverage in conjunction with a rising rig count (up 33% from a year ago), and the strength of exploration and production company cash flows in the current commodity price environment, Moody's added.

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