Moody's downgrades EOTT

Moody's Investors Service downgraded EOTT Energy Partners, LP. The action ends EOTT's downgrade review but the company remains on review, with direction uncertain until it releases full updated financial information and/or completes is review of strategic alternatives. EOTT's last release was for the third quarter of 2001, nearly seven months old. Ratings lowered include EOTT's $235 million of 11% senior unsecured notes due 2009, cut to B3 from B1.

Noting EOTT did not meet the April 16 extended deadline to file its 2001 10-K, Moody's said the fact that the company's latest public operating and liquidity data is seven months old is incompatible with the prior ratings, given the volatile nature of its business, sensitivity to third-party confidence in its liquidity and continuing lack of a term bank facility.

EOTT cited the Feb. 11, 2002 termination of Anderson as EOTT's auditor as the reason its 2001 audit has been delayed, Moody's said.

The rating agency noted EOTT may also need at least another month to attempt to complete negotiations for term banking facilities, whose letter of credit capacity is vital to EOTT's ability to gather and trade crude oil. The senior unsecured note ratings may need to be notched down from the senior implied rating at the time, Moody's said, depending on the nature of the collateral package ultimately granted in support of EOTT's hoped for $300 million term bank facility.

Moody's puts Nortek's ratings on review for downgrade

Moody's Investors Service placed the rating of Nortek Inc. on review for possible downgrade on news that Kelso & Co. LP has submitted an offer to acquire Nortek's outstanding stock for $40 per share. Affected ratings are Nortek's $175 million 9.25% senior notes due March 15, 2007, $310 million 9.125% senior notes due Sept. 1, 2007, $210 million 8.875% senior due Aug. 1, 2008, all at B1, $250 million 9.875% senior subordinated notes due June 15, 2011 at B3, $45 million Ply Gem secured bank credit facility due Aug. 26, 2002 at Ba3, a senior implied rating of B1 and an issuer rating of B2.

Kelso & Co. is proposing to take Nortek private in a cash transaction that may use up to $120 million of Nortek funds. Nortek currently has about $220 million of cash on its balance sheet, the Moody's release said.

"Moody's review will focus on the sufficiency of liquidity at Nortek in light of the possible utilization of up to half of the company's cash balances to help fund the transaction," the release said. "The review will also focus on the impact on Nortek's debt leverage and interest coverage from the possible greater utilization of a new secured bank credit facility being negotiated to replace the Ply Gem facility. In addition, the review will consider the likelihood of management's ability to realize cost savings from operating efficiencies amounting to approximately $10 million to $13 million per year, which could help to offset the reduced liquidity."

Fitch lowers Metris

Fitch Ratings downgraded Metris Cos. Inc.'s secured credit facility to B+ from BB+ and senior debt to B+ from BB. Also, Direct Merchants Credit Card Bank NA, a wholly owned subsidiary, had its long-term deposit rating lowered to BB from BB+. The outlook remains negative.

The downgrades reflect heightened regulatory scrutiny that the company will now be facing, "which includes prior OCC approval for dividends between DMCCB and Metris, as well as the development of more rigorous reporting requirements and implementing certain functional enhancements," Fitch said.

The negative outlook reflects the company's ongoing challenge to manage credit quality and profitability through 2002m the ratings agency added.

Metris Companies Inc. is a Minnesota-based marketer of consumer credit cards and related enhancement products. At March 31, 2002, the company reported $11.77 billion of managed loans, and $1.17 billion of common and preferred equity.

Moody's raises Fisher Scientific outlook

Moody's Investors Service confirmed Fisher Scientific International Inc.'s ratings and changed the rating outlook to positive from stable. Confirmed ratings include its $175 million senior secured revolver due 2004 and $294 million senior secured credit facilities at Ba3, $150 million 7.125% senior notes due 2005 at B1, $600 million 9% senior subordinated notes due 2008 at B3, a senior implied rating of B1 and a senior unsecured issuer rating at B1.

The rating outlook change reflects the company's improving credit profile, favorable operating performance, stability of revenue stream, diversification across product lines, customers and geographic locations, recent progress achieved at the international and lab workstation segments and positive growth trends in the science and clinical diagnostic distribution sector, Moody's said.

Negative factors affecting the rating include, high leverage, negative tangible equity, industry competition, industry margins and the company's acquisitive growth strategy, the rating agency added.

"Moody's anticipates that growth will be generated organically as well as through small acquisitions, with the acquisitions financed prudently with a combination of cash, debt and equity," Moody's said. "If acquisitions are financed as expected, and the current trend of deleveraging continues, a ratings upgrade may be warranted during the next 12-24 months. However, should greater than expected acquisition activity lead to a deterioration in the credit metrics, an outlook change may result."

As of Dec. 31, 2001, the company's EBITDA/Interest coverage was 2.7 times, debt to EBITDA leverage was 3.8 times and free cash flow to debt coverage was 12%.

S&P upgrades Fisher Scientific

Standard & Poor's upgraded Fisher Scientific International Inc. The outlook is stable.

Ratings affected include Fisher's $150 million 7.125% senior notes due 2005, $175 million revolving credit facility due 2004, $125 million tranche A bank loan due 2004, $100 million tranche B bank loan due 2005 and $69.2 million tranche C bank loan due 2005, all raised to BB- from B+, and its $400 million 9% senior subordinated notes due 2008, raised to B from B-.

S&P said the upgrade reflects Fisher Scientific's improving cash flows and strengthened financial profile, offset by the company's still substantial LBO-related debt burden.

The rating agency noted Fisher Scientific's broad product offerings, diverse customer base, exclusive distribution arrangements with equipment manufacturers and agreements with most major domestic group purchasing organizations are barriers to entry for new competitors.

In addition, consumable products, which represent about 80% of sales, provide a stable base of recurring revenues. Fisher has also focused on increasing its mix of higher margin, self-manufactured products, which now account for about 21% of total products sold, S&P added.

While a $290 million equity offering in 2001 improved operating performance and strengthened credit protection measures, the company still has a heavy debt burden, the rating agency said. Funds from operations to lease-adjusted debt and cash flow coverage of interest are expected to average more than 15% and 2.5 times, respectively.

S&P lowers eKabel Hessen

Standard & Poor's downgraded eKabel Hessen GmbH and put it on CreditWatch with negative implications.

Ratings affected include eKabel's €385 million 14.5% notes due 2010 and $175 million 14.5% notes due 2010, both cut to CCC- from CCC+, and Kabel Hessen GmbH & Co. KG's €850 million bank loan due 2009, cut to B- from B.

S&P rates new Stoneridge notes B, bank facility BB

Standard & Poor's assigned a B rating to Stoneridge Inc.'s upcoming $200 million senior notes due 2012 and a BB rating to its new $100 million revolving credit facility due 2007 and its $100 million term loan due 2008. The outlook is negative.

S&P noted Stoneridge's sales for the quarter ended March 31, 2002 were $157.7 million compared with $156.1 million for the same period in 2001. EBITDA rose slightly to about $23 million compared with about $20 million in 2001.

"The improvement in EBITDA was mainly the result of expanded North American auto production and continued focus on cost-cutting initiatives by the company," S&P said.

Stoneridge continues to undertake initiatives to improve operating performance and cash generation, including implementing lean manufacturing, reducing overhead and aggressively managing working capital, the rating agency continued. These measures are expected to improve profitability in the intermediate term.

But S&P said financial flexibility is limited as Stoneridge had about $30 million in availability on its $100 million revolving credit facility as of March 31, 2002. The new credit facility is expected to result in improved liquidity and financial flexibility.

Moody's cuts Argo-Tech outlook

Moody's Investors Service lowered its outlook on Argo-Tech Corp. to negative from stable and

confirmed its existing ratings including its $130 million senior secured credit facility due 2004 at B1 and its $195 million senior subordinated 8 5/8% notes due October 2007 at B3.

Moody's said it lowered Argo-Tech's outlook because of its concern that continued near-term softness in airline traffic will increase the company's financial risk profile through further contraction in the commercial aerospace aftermarket. The projected decreased demand follows several quarters of declines in air travel, exacerbated by the fall-off post-Sept. 11.

Argo-Tech's balance sheet remains highly levered with debt, Moody's continued, noting that at the end of fiscal 2001 on Oct. 27, 2001 debt was 4.7 times EBITDA and 2.5 times tangible assets. Debt to sales is in excess of 1.4 times for the year.

Fitch downgrades Levi Strauss notes

Fitch Ratings downgraded Levi Strauss & Co.'s senior unsecured debt rating to B+ from BB- and confirmed its secured bank facility rating at BB. It also cut the outlook to negative from stable.

Fitch said the lower outlook reflects the ongoing challenges Levi faces in stimulating top-line sales growth.

The downgrades is in response to Levi's continued decline in top-line sales, coupled with the slower than expected pace of improvement in credit protection measures, Fitch said. Also considered is the competitive operating environment, which shows no signs of easing.

However the company benefits from solid brands with leading market positions as well as the geographic diversity of its revenue base and solid cash flow generation.

Fitch said the modest gains in profit margins, with EBITDA margin increasing to 13.0% in 2001 from 12.8% in 2000, led to slower than expected improvement in the company's credit profile. Leverage as measured by total debt/EBITDA declined to 3.5 times in 2001 from 3.6 times in 2000, still somewhat higher than expected.

Fitch said the two-notch differential between the senior unsecured debt and the secured bank facility reflects the significant progress Levi has made in reducing its bank debt outstanding.

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