Moody's puts Rural Cellular on review

Moody's Investors Service put Rural Cellular Corp. on review for possible downgrade including its $1.2 billion senior secured credit facilities at B2, $300 million 9.75% senior subordinated notes due 2010 and $125 million 9.625% senior subordinated notes due 2008 at Caa1, $248 million 11.375% senior exchangeable preferred stock due 2010 at Caa2 and $201 million 12.25% junior exchangeable preferred stock due 2011 at Caa3.

Moody's said the review is prompted by Rural Cellular's slower than expected subscriber growth since Moody's last downgraded the company in December 2002, the increased financial leverage of the company after its $115 million drawing under its revolving credit facility in May 2003 and the high probability of bank covenant violations by the end of the year.

Moody's noted in its December ratings action that the ratings would be lowered further if the probability that the company could not maintain compliant with its financial covenants were to grow, which appears to be the case at present.

Additionally, leverage (total debt/EBITDA, excluding preferred stock) has increased to over 6 times in the first quarter, which remains excessive for the current rating categories, particularly in the context of the company's peer group, where Moody's ratings tend to be lower.

While Rural Cellular has been generating meaningful amounts of free cash flow, the company has not been meaningfully reducing debt and instead drew an additional $115 million in the second quarter of 2003. Over the past four quarters through the first quarter of 2003, Rural Cellular has increased its cash position by over $53 million to $55.3 million at March 31, 2003. Nonetheless, during this time the company's debt balances were virtually unchanged, and have now been pushed higher by the recent revolver draw.

S&P cuts Milacron

Standard & Poor's downgraded Milacron Inc. including cutting its $110 million revolving credit agreement due 2004 to B- from B+ and $115 million 8.375% notes due 2004 and €115 million 7.625% guaranteed bonds due 2005 to CCC+ from B. The outlook is negative.

S&P said the downgrades reflect Milacron's announcement that ongoing weak end markets are continuing and no significant improvements are expected, heightening concerns over Milacron's prospective earnings, cash generation and range of financing alternatives, given at least $115 million in debt maturities in March 2004.

While new orders in the second quarter of 2003 came in slightly higher than expected and will be shipped in the third quarter, very competitive conditions, caused mostly by low capacity utilization rates throughout the plastics processing industries, continue to pressure profitability and cash generation in all three of Milacron's plastics machinery and mold technologies segments, S&P said. Consistent with recent performance, sales and earnings remained steady in the industrial fluids segment in the second quarter.

Milacron said it remains committed to returning to profitability by year-end despite weak end-market conditions and will be announcing actions to reduce costs and resize businesses to match current market conditions when it reports second quarter results on July 29, 2003.

The ratings on Milacron reflect an aggressive financial profile and a now-less-diverse business profile because of asset sales in 2002 that reduced debt, S&P said.

The company faces at least $115 million of debt maturities in March 2004 and is continuing to review alternatives to refinance these maturities, but the outlook for performance during the remainder of 2003 is likely to constrain the range of available alternatives.

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