S&P raises Tower Automotive outlook to stable

Standard & Poor's affirmed the BB corporate credit rating on Tower Automotive Inc., including the senior unsecured debt at BB and subordinated debt at B+. The outlook was raised to stable from negative, following Tower's completion of the sale of $222 million of common equity.

Proceeds from the sale were used to reduce borrowings on the company's bank credit facilities, improving Tower's financial flexibility by increasing borrowing availability under the revolver and strengthening its credit statistics, which should permit the company to remain comfortably within its bank financial covenant requirements, S&P said.

The ratings reflect a leading niche position, albeit in a cyclical and highly competitive industry, offset by an aggressive financial profile.

There was significant deterioration in operating performance during the year. In 2001, the company reported a net loss of $267.5 million, including a restructuring and asset impairment charge of $383.7 million. Benefits from restructuring actions, reduced launch activity and stronger North American production schedules should result in improved performance during 2002.

Tower's recent equity offering improved the company's credit statistics, with total debt to EBITDA declining to 3.0 times from 3.8 times. Only modest further improvement is expected in credit protections measures this year and that will depend to some extent on the market acceptance of several key new platforms, S&P added.

S&P expects the company's funds from operations to debt, treating the trust preferred securities as equity, to average in the mid-20% area and debt to EBITDA to average about 3.0 times over the course of the business cycle, acceptable levels for the rating.

Moody's rates Trinity bank debt Ba1

Moody's Investors Service assigned a Ba1 rating to the $400 million of secured bank credit agreements of Trinity Industries, confirmed its Ba1 senior implied and Baa3 ETC ratings and revised the outlook to negative.

Moody's said the actions reflect the difficult environment for Trinity's businesses which has significantly reduced its operating cash flow and weakened debt protection measures.

The negative outlook considers the poor operating results in Trinity's rail car division and the limited outlook for a near-term upturn in demand for rail cars, Moody's added. It also considers the continued increase in consolidated debt from growth in the company's railcar leasing unit.

The ratings could be pressured down if the company is unable to materially improve financial performance in the rail car division over the coming year, Moody's said.

Moody's lowers SMTC debt ratings

Moody's Investors Service downgraded the ratings on SMTC Corp.'s outstanding debt. Lowered ratings include SMTC's $40 million guaranteed senior secured term A due 2004 and $100 million guaranteed senior secured revolver, both cut to B3 from B2, senior implied to B3 from B2 and senior unsecured to Caa1 from B3. The outlook was changed to stable from negative.

"The ratings downgrades take into account the stringent covenants that accompany the most recent amendments to SMTC Corporation's guaranteed senior secured credit facility, and the challenges that may confront the company in meeting its FY2002 internal forecast upon which the covenants governing the credit facility are inextricably related," Moody's said. "The amended minimum EBITDA requirements are based on expectations of further sequential improvement in operating performance, which is not assured due to the continued uncertainty in the company's communications and networking end markets."

At March 31, the company had $1.8 million of cash and substantial limitations on its ability to draw from its revolver. Debt to capitalization was 67% at March 31 and LTM EBITDA was negative $6.5 million.

Ratings are supported by a more seasoned financial management, sequential improvements in revenues and profitability since third quarter 2001, the strength of the company's service offerings, increased focus on ROIC and commitment to improve internal financial controls, Moody's said. The stable outlook is based on improved operating performance, which could lead to fewer restrictions under the revolver.

Moody's rates Kinetic Concepts' loan Ba3

Moody's Investors Service assigned a Ba3 rating to Kinetic Concepts Inc.'s new $30 million term loan E due 2005. All other ratings were confirmed including its $50 million revolver due 2003, $27.5 million term A due 2003, $90 million term B due 2004, $90 million term C due 2005 and $95 million term D due 2006, all at Ba3; $200 million 9.625% senior subordinated notes at B3; senior implied rating at B1; and senior unsecured issuer rating at B2. The outlook is stable.

Proceeds from the term E were used to repay outstanding debt under the revolver, increasing availability to about $40 million from about $10 million. At March 31, the company had $529 million of total debt, LQA leverage of 4.0x and LQA leverage coverage of 3.4x.

Ratings reflect high leverage, deficient cash flow generation, significant concentration of revenues in one product line and weaknesses in the surfaces and specialty beds businesses, Moody's said. In addition, the company's limited financial flexibility combined with debt amortization over the next few years could lead to liquidity issues.

Positive influences on the ratings include, continued growth of the V.A.C., the company's wound closure product line, position as the second largest provider of specialty beds, mattresses and overlays and worldwide distribution and service platform, Moody's said.

Fitch may review United Defense outlook

Fitch Ratings said it may review its outlook on United Defense Industries, Inc. if the Crusader program is canceled but that its BB senior secured debt rating would not be affected. Fitch currently has a positive outlook on the company.

"In addition, given the apparent support the program continues to have in Congress, Fitch believes it is premature to assume the Crusader program has ended, although the probability of termination or reduction has greatly increased," the rating agency said.

Fitch said it believes a compromise could be a high probability outcome in what is becoming primarily a political issue.

"One compromise might be the application of Crusader technology to a new program more in line with the Army's goal of a lighter, more mobile force. Such an outcome could mitigate the impact of the Crusader decision on UDI. The DOD has already spent approximately $2 billion in development costs on the Crusader," Fitch noted.

Although Crusader accounts for more than 20% of United Defense's revenues, its share of EBITDA is lower because it is a lower-margin program in the development stage, Fitch said.

In addition, Fitch said it believes United Defense would still have positive free cash flow post-Crusader, allowing continued debt reduction in the absence of acquisitions.

Finally, while the full cancellation of Crusader would shrink United Defense's income, it could also shrink the balance sheet, supporting credit quality, Fitch said.

S&P lowers NTL

Standard & Poor's downgraded NTL Inc. and related companies.

Ratings affected include NTL Communications Corp.'s $1.05 billion 11.5% deferred coupon notes due 2006, $400 million 10% notes due 2007, $1.3 billion 9.75% deferred coupon notes due 2008, $450 million 12.375% senior deferred notes due 2008, $599.3 million 7% convertible subordinated notes due 2008, £330 million 9.75% senior deferred notes due 2009, €350 million 9.875% notes due 2009, €250 million 9.25% notes due 2006, €175 million 11.5% deferred coupon notes due 2009, €300 million 12.375% bonds due 2008 and $1 billion 6.75% notes due 2008, all cut to D from C; NTL Inc.'s $100 million 13% exchangeable preferred stock due 2009, cut to D from C; Cablecom (Ostschweiz) AG's CHF4.1 billion bank loan due 2010, cut to C from CC; Diamond Cable Communications plc's $285.101 million 13.25% senior discount notes due 2004, $530.855 million 11.75% senior discount notes due 2005 and $420.5 million 10.75% senior disc notes due 2007, all cut to D from C; NTL Business Ltd.'s £2.5 billion bank loan due 2005, cut to C from CC; and NTL Communications Ltd.'s £1.3 billion bank loan due 2006, cut to C from CC.

S&P puts William Hill on positive watch

Standard & Poor's put William Hill Ltd. on CreditWatch with positive implications.

Ratings affected include William Hill Ltd.'s £380 million bank loan due 2004 rated BB- and William Hill Finance plc's £150 million 10.625% senior subordinated notes due 2008 rated B.

S&P cuts Polymer Group

Standard & Poor's downgraded Polymer Group Inc.'s senior secured ratings to D from CC.

S&P said the action follows Polymer Group's filing a prepackaged Chapter 11.

Polymer Group's corporate credit rating was already at D after it missed an interest payment on its notes, S&P said.

Moody's rates American Commercial senior notes Caa2, sr sub notes Caa3

Moody's Investors Service assigned a Caa2 rating to American Commercial Lines LLC's proposed $120 million 11¼% senior unsecured notes due January 1, 2008 and a Caa3 rating to the proposed $116.5 million 12% payment-in-kind senior subordinated notes due July 1, 2008. The notes will be issued in an exchange for a like amount of ACL's existing 10¼% senior unsecured notes due June 2008, currently rated Ca, as part of the acquisition and recapitalization of ACL by Danielson Holding Corp.

Pending completion of the restructuring, Moody's said it confirmed ACL's $413 million senior secured facilities at B3.

On completion of the acquisition and recapitalization, Moody's said it intends to upgrade ACL's senior implied rating to Caa1 and issuer rating to Caa2. The rating on the senior secured facilities will be unchanged at B3. The outlook will be changed to positive from negative.

The outlook change will reflect the improved financial environment with the reduction in cash interest expense and the covenant relief provided by the amended bank facility, Moody's said.

In addition, the improved outlook recognizes the meaningful financial commitment made by Samuel Zell and Danielson Holdings by purchasing over 50% of the existing $295 million senior note issue and cash outlay necessary to acquire the ACL membership interest, the rating agency added.

© 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.