S&P raises BGF outlook

Standard & Poor's raised its outlook on BGF Industries Inc. to stable from negative and confirmed its ratings including its corporate credit at CCC and subordinated debt at CC.

S&P said the outlook revision was prompted by an improvement in liquidity after BGF obtained a new $40 million five-year term loan and revolving credit facility that is secured by substantially all assets.

BGF's ratings reflect its high debt leverage, narrow product portfolio, and cyclical market conditions, S&P said.

Despite alleviation of near-term liquidity concerns, BGF continues to operate in a very challenging environment and S&P said it expects operating results and credit measures to remain very weak.

The company, a manufacturer of glass fiber fabrics, has experienced an extended period of poor demand in electronics and aerospace end markets as well as the bankruptcy filing of a major supplier and affiliate, Advanced Glassfiber Yarns LLC.

Moody's puts Millicom on upgrade review

Moody's Investors Service put Millicom International Cellular SA on review for potential upgrade including its 13.5% senior subordinated discount notes due 2006 at Caa3.

Moody's said the review follows Millicom's completion of its exchange offer earlier this year and reflects the material reduction in the company's interest burden resulting from the completed transaction.

The exchange, which was agreed to by 85% of bondholders, comprised of an exchange of $781 million of the company's 13.5% senior subordinated notes due 2006 for $562 million of new 11% senior notes due 2006, $64 million of 2% PIK senior convertible bonds due 2006 and $38 million in cash.

The transaction reduces Millicom's pro forma cash interest burden by approximately $43.5 million to $101.4 million from $144.9 million.

S&P upgrades Pecom

Standard & Poor's upgraded Pecom Energía SA including raising its notes to B- from CCC. The outlook is stable.

S&P said the upgrade is based on its expectation that because of the economic incentives as well as the existence of cross-default clauses between Pecom and Petroleos Brasileiros Pecom's financial flexibility will improve after the change in its controlling shareholder.

The financial flexibility of Pecom is limited by current market conditions and the company's financial profile. Although no capital infusions or financial aid by the shareholder is expected in the near term, the existence of cross-default clauses between Petrobras' indebtedness and Pecom's debt results in an incentive for the former to support its subsidiary.

According to S&P's criteria, the mere existence of such clauses does not merit equalization of the ratings.

However, in the current case, S&P factors in to the ratings some potential support to Pecom from its parent, Petrobras.

Pecom's liquidity is somewhat adequate. As of March 2003, Pecom's total debt amounted to $2.19 billion. Although the company's funding ability is reduced by current market conditions, the restructuring of all its obligations significantly reduces Pecom's refinancing risk.

S&P upgrades Pan American Energy

Standard & Poor's upgraded Pan American Energy LLC's local and foreign currency corporate credit rating to B from CCC+. The outlook is stable.

S&P said the upgrade is based on its expectation that Pan American will continue to show sound financial and operating performance despite the challenging conditions in Argentina.

As of March 2003, Pan American's total debt amounted to $701.4 million. Strong financial performance helped by unusually high crude oil prices and increased production allowed EBITDA interest coverage to reach a strong 10.9x in 2002 (15.6x in the first quarter of 2003) from approximately 2.4x in fiscal 1998.

S&P said it expects Pan American's coverage ratios to remain strong with FFO to total debt above 20% and EBITDA interest coverage of 4x throughout a normal price cycle. Debt to capitalization, of 18.1% as of March 2003, is expected to remain at moderate levels in the range of 20%-30%.

Although Pan American's financial flexibility is reduced by current market conditions, a strong cash flow generation ability (with funds from operations at 57.9% of the total debt in 2002 and 18.7% for the first quarter of 2003) boosted by the unusually high crude oil price during the 12 months ended March 2003, should help maintain liquidity strong in the short to medium term.

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