S&P cuts Northwestern preferred issue

Standard & Poor's downgraded Northwestern Corp.'s $100 million 8.1% trust preferred securities due 2032 issued through Northwestern Capital Financing III to D from C. Northwestern's corporate credit remains at B on CreditWatch negative.

S&P said the downgrade to the preferred issue is the result of the company's failure to make dividend payments due on July 15.

The Northwestern Capital Financing III preferred stock issue is the last in the series of several trust preferred securities that the company decided to defer dividends on as previously announcement by the company's board of directors on May 23.

The rating on Northwestern reflects an extremely burdensome debt level, nonperformance of its telecommunications and HVAC subsidiaries, constrained liquidity and management turmoil, all of which are threatening the long-term viability of the company, notwithstanding the company's ownership of regulated electric and gas businesses, S&P said.

Over the past several months, the magnitude of the company's problems has been further exposed, evidenced by the unexpected restatement of the audited financial statements for the first nine months of 2002, the very high level of impairment charges for nearly the entire value of Expanets Inc. and BlueDot (as well as write-offs for its Montana First Megawatts project), and recognition that the company is facing continuing difficulties with its internal accounting and control procedures, S&P said. In addition, the departure of senior management, shareholder class action lawsuits, and SEC inquiries could make it difficult for the remaining management team to effect a successful turnaround.

Moody's cuts Romacorp

Moody's Investors Service downgraded Romacorp, Inc including cutting its $57.0 million 12% senior unsecured notes due 2006 to Ca from Caa1 and maintained the negative outlook.

Moody's said the downgrade was prompted by the substantial possibility that the company will not make a forthcoming interest payment on the senior unsecured notes, the company's constrained liquidity position as weak operating cash flow pressures credit facility covenants, and Moody's expectation that operating performance will remain weak over the fiscal year ending March 2004.

Moody's said the negative outlook reflects its opinion that ratings will remain pressured unless the company demonstrates the ability to increase revenue and cash flow, reverse declining comparable store sales and improve its liquidity position.

The ratings acknowledge the meaningful probability that the company will not be able to support its minimal obligations and that substantial impairment would follow a default, Moody's added. In addition, the ratings recognize the company's highly leveraged financial condition, liquidity pressures that are intensified by the borrowing facility covenants and operating income largely attributable to net franchising income.

The ratings also consider that, while Tony Roma's is the largest restaurant chain specializing in ribs, other much larger casual dining chains offer ribs as a menu selection.

However, strengths of the company are the well known "Tony Roma's - Famous for Ribs" brand name, the concentration of domestic restaurants in fast-growing regions and the company's ownership of a significant proportion of its restaurant real estate, Moody's said.

Moody's cuts Mark IV

Moody's Investors Service downgraded Mark IV Industries, Inc. including cutting its $250 million 7.5% non-guaranteed senior subordinated unsecured notes due 2007 to Caa1 from B3 and $180 million guaranteed senior secured revolving credit facility due 2007, $292 million guaranteed senior secured term loan A due 2007 and $201 million guaranteed senior secured term loan B due 2007 to B1 from Ba3. The outlook is stable.

Mark IV remains a highly leveraged company which has demonstrated only nominal improvement in its key credit protection measures following the September 2000 leveraged buyout of the company by BC Partners and Interbanca SpA, Moody's said.

The downgrades reflect Mark IV's persistent high leverage (both before and after considering the deeply subordinated shareholder-related PIK notes), and weakening of most key credit protection measures during the most recent fiscal year ended February 2003, Moody's said.

Mark IV has been unable to generate the improvement in its credit profile that was anticipated upon the execution of the leveraged buyout due to various dynamics including the fact that the recessionary economic conditions that ensued globally were not factored into the original projections.

The company's operations have failed to date to generate cash after capital expenditures to reduce debt; debt reduction from asset sales occurred later than expected and a significant anticipated asset sale never occurred, thereby resulting in incremental PIK interest attributable to the shareholder-related notes; and margins have declined slightly due to increased pension expense and certain other factors, rather than improve as expected by an originally estimated 2%.

Moody's said it remains concerned that weak automotive and heavy duty truck production volumes could further delay revenue and margin improvement during the balance of 2003 and into 2004.

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