Moody's rates Dex Media West loan Ba3

Moody's Investors Service assigned a Ba3 rating to Dex Media West LLC's proposed $2.1 billion secured credit facility and confirmed the recently assigned B2 rating for the $535 million proposed senior unsecured notes due 2010 and B3 rating for the $780 million proposed senior subordinated notes due 2013. The outlook is stable.

Moody's said the credit facility rating reflects its senior position in the capital structure and reflects the absence of tangible asset coverage.

The existing ratings continue to reflect the magnitude of total funded debt pro-forma for the new debt issuances, the absence of tangible equity, high financial leverage, and modest free cash flow as a percentage of its sizable debt.

The stable ratings outlook continues to reflect Moody's expectation of continued profitability and meaningful reduction in financial leverage in the near-to-intermediate term.

The bank loan rating ascribes some value to the intangibles at approximately $4 billion. Double digit return on assets appears to justify the sizable level of intangibles. The magnitude of total secured debt representing approximately 62% of the pro-forma capital structure precludes notching above the Ba3 senior implied rating.

Moody's rates USI loan B1

Moody's Investors Service assigned a B1 rating to USI Holdings Corp.'s new $155 million senior secured bank credit facility consisting of a $30 million four-year revolving credit facility and a $125 million five-year term loan. The outlook is stable.

Moody's said the ratings reflect USI's integration initiatives in 2000 and 2001 following the company's formation through a substantial number of acquisitions from 1994 to 1999. Moody's expects that the company's earnings, cash flows and margins will continue to steadily improve following these operational enhancements along with improved insurance pricing conditions.

Moody's believes that the company has focused on improving and integrating its operations, the full benefits of these initiatives will be realized in future years.

USI's successful completion of its initial public offering in October 2002, which raised approximately $90 million in equity, and recent improved financial performance have significantly reduced the company's financial leverage profile, Moody's noted.

USI benefits from revenue diversification from property and casualty, health and benefits businesses. Moody's believes USI is a viable alternative in the small to middle market account arena.

Negatives include the company's relatively weak and volatile earnings history and the significant intangible asset component of its balance sheet, Moody's said. The company has achieved more stable earnings over the last five quarters but other financial measures, such as margins, cash flow to total debt and interest coverage remain lower than rated peers.

Moody's rates Building Materials loan Ba2

Moody's Investors Service assigned a Ba2 rating to Building Materials Holding Corp.'s new $300 million senior secured bank credit facility and confirmed its existing ratings including its senior implied at Ba2. The outlook remains stable.

Moody's said the stable outlook reflects its expectation that BMHC will exercise capital structure discipline as it seeks growth opportunities in construction services and that it will continue to expand the proportion of revenues and earnings from the top 20 homebuilders within its overall business mix.

The ratings acknowledge BMHC's conservatively capitalized balance sheet, its strategy of pursuing increasing penetration of the production homebuilder market, its focus on growing the proportion of higher-margin value-added products within its sales mix, its targeting of the professional contractor (which means that it does not compete with Home Depot and other DIY retailers), and its strong industry position in faster growing areas in the western and southern states.

At the same time, the ratings incorporate BMHC's flat earnings performance over the past three years, its exposure to fluctuations in raw material prices, the challenges management faces in integrating acquisitions, the proportion of sales coming out of Texas and Colorado and the company's vulnerability to the real estate cycle.

BMHC has strengthened its balance sheet since 1999, with total debt/total capitalization being reduced from 46.5% in that year to 38.5% at year-end 2002, and with total debt/EBITDA improving from 2.7x to 2.4x, Moody's said. This has helped offset the declining margins and weak returns that have occurred over this period. Going forward, Moody's would expect BMHC to maintain its balance sheet discipline, at least until it begins generating on a consistent basis margins and returns that are representative of its rating category.

S&P puts KoSa on developing watch

Standard & Poor's put KoSa BV on CreditWatch developing including its $250 million revolving credit facility due 2004, $250 million term loan B due 2006 and $585 million term loan A due 2004 at BB+.

S&P said the CreditWatch placement follows the announcement that KoSa's parent, Koch Industries Inc. has entered into exclusive negotiations with E.I. DuPont de Nemours & Co. regarding the possible purchase of DuPont's DuPont Textiles & Interiors business. DTI, with about $6.5 billion in sales, consists of DuPont's nylon fiber, polyester fiber and Lycra brand fiber businesses. In addition, Koch subsequently revealed that it could combine DTI with its KoSa polyester business, although the structure of any such combination or related financing plan has not been announced.

Accordingly, the ratings on KoSa could be lowered, affirmed, or raised depending on the financial structure of the proposed transaction, as well as following a full assessment of the business profile of the combined entity, S&P said.

S&P said it expects KoSa's existing debt, which consists solely of bank borrowings under committed credit facilities, would be refinanced as part of a financing plan related to the proposed transaction.

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