Moody's confirms CE Casecnan

Moody's Investors Service confirmed CE Casecnan Water and Energy Co., Inc.'s senior secured notes at B2. The is negative.

Moody's said the confirmation follows CE Casecnan's report that the National Irrigation Administration of the Philippines has paid the monthly invoice for water and electricity fees that was due on May 28 except the tax compensation portion of the water delivery fee.

Moody's says while the payments have been made there is no assurance that delay of payments is not going to recur in the future. Given NIA is CE's main source of liquidity, any potential delay in NIA payments in the future may affect CE's ability to honor its debt service obligations.

Further complicating the situation is that NIA has filed an Answer and Counterclaim (on March 31 2003) and subsequently a Supplemental Counterclaim (on April 23 2003) to existing arbitration proceedings with CE, seeking to declare the project agreement void. CE initiated arbitration against NIA in August 2002 concerning the failure of NIA to compensate CE for taxes paid by CE during the construction of the project. Further, in the absence of the project agreement being declared void, NIA is seeking to have the agreement reformed.

Moody's added that the ongoing reforms in the power sector have created significant uncertainty for CE and the overall lack of transparency of the contract renegotiation process is an area of concern.

S&P rates Woori Bank bonds BB+

Standard & Poor's assigned a BB+ rating to Woori Bank's proposed $200 million subordinated bonds (Lower Tier II capital).

The one-notch differential between Woori's counterparty rating and the proposed securities reflects the terms and conditions of the proposed subordinated securities and the overall financial status of the bank, S&P said.

The rating on Woori reflects the long-term benefits from the bank's more disciplined credit practices and heightened earnings potential through cross selling the products of its sister companies.

Woori's initiation of systematic credit evaluation programs to prevent damage from credit risks in the household and small and midsize enterprise sectors in 2001, will enhance the bank's credit culture, although material results are not likely for a few years, S&P said.

The ratio of problem credits (credits classified as precautionary or below) to total credit slightly rose to 6.4% at March 2003 from 6.0% at December 2002, but remains around the industry average of 6.5% at March 2003.

Moody's rates Morton's notes B2

Moody's Investors Service assigned a prospective B2 rating to Morton's Restaurant Group, Inc.'s planned $100 million 7-year senior secured notes. The outlook is stable.

Moody's said the ratings reflect its expectation that average unit volumes will slowly recover following the substantial downturn in customer traffic at white-tablecloth restaurants over past two years.

But Moody's said the ratings are limited by the company's highly leveraged financial condition (especially adjusted for off balance sheet lease obligations) and low return on assets, the high level of competition from chain and independent steakhouses at the company's $50-plus price point, and the declines in customer traffic caused by reduced budgets for business travel & entertainment over the previous two years.

The ratings also take into account the seasonality of the company's sales and cash flow (with the first and fourth quarters typically generating about two-thirds of annual cash flow) and the inability to modify the menu according to changes in consumer attitudes about beef given "Morton's" identification as a steakhouse.

The stable outlook reflects Moody's beliefs that the company will maintain good operating margins in spite of customer traffic trends and continue to grow profitably.

Fixed charge coverage of 1.4 times for the 12 months ending March 2003 is about half of levels achieved several years ago, Moody's said. Lease adjusted leverage has risen to about 5.9 times from about 4.5 times three years ago, even though leverage is now better than 6.8 times at the end of 2001.

S&P rates Morton's notes B

Standard & Poor's assigned a B rating to Morton's Restaurant Group Inc.'s proposed $100 million senior secured note offering. The outlook is stable.

S&P said the ratings reflect the company's participation in the highly competitive steakhouse segment of the restaurant industry, its reliance on business-oriented customers, weak cash flow protection measures and a highly leveraged capital structure.

Morton's relies on business-oriented customers using corporate expense accounts for a significant amount of its revenue, S&P noted. Moreover, a substantial portion of its guests are business travelers. As a result, the company has been vulnerable to a weak economy and fall-off in business travel. Operating performance declined over the past two years as same-store sales fell 2.9% in 2002 and 10.7% in 2001, while operating margins slipped to 15% in 2002, from over 16% in 2000. Margins were negatively affected by a decline in sales leverage, partially offset by lower food costs and a reduction in staff and overhead expenses.

Pro forma for the refinancing transaction, the company remains highly leveraged with lease-adjusted total debt to EBITDA of 6.5x, S&P said. Cash flow protection measures are weak and highly variable due to the company's small EBITDA base of about $21 million. Moreover, EBITDA coverage of interest of about 1.5x and FFO to total debt of 6% are also weak.

S&P rates Huntsman Advanced Materials notes B

Standard & Poor's assigned a B rating to Huntsman Advanced Materials LLC's proposed $345 million senior secured notes due 2008 and confirmed the corporate credit of HMP Equity Holdings Corp. and its affiliates Huntsman International Holdings LLC and Huntsman LLC at B+. The outlook is stable.

S&P said Huntsman Advanced Materials was formed to hold the businesses that encompass Vantico Group SA.

Pro forma for the transactions, Huntsman Advanced Materials will have sales of about $1 billion and debt of about $350 million.

Huntsman Advanced Materials' ratings reflect a below-average business position as the third-largest worldwide producer of base and advanced epoxy resins, as well as the company's leading niche positions in related curing agents, resin additives, epoxy-formulated products and adhesives, S&P said. However, the company's business profile is more than offset by a very aggressive financial risk profile.

Huntsman Advanced Materials benefits from good geographic diversity and worldwide reach, with about 50% of sales outside Europe, S&P said. However, the company's operating efficiency and cost structure is constrained by a lack of backward integration and world-scale plants, and exposure to certain commodity raw materials.

Huntsman Advanced Materials will be highly leveraged, with a debt to EBITDA ratio over 5.5x on a trailing 12 month basis, S&P said. At the outset, cash flow protection measures will be weak, with EBITDA interest coverage less than 2.0x and minimal funds from operations to total debt. Free cash flow will likely be limited while the company transitions to a more efficient base of operations and until industry prospects improve. Pro forma for the refinancing, which will lower interest costs, and expected synergistic cost savings, debt to EBITDA is about 3.9x and EBITDA interest coverage is almost 2.4x. This improvement will require realization of management's restructuring plan in a still-challenging economic environment, although certain cost savings are more likely early on due to renegotiated contracts. At the current ratings, actual EBITDA interest coverage should approach 2.5x and funds from operations to total debt should improve to at least 10%.

Moody's upgrades Fage

Moody's Investors Service upgraded Fage Dairy Industry SA including ratings its senior unsecured debt to Ba3 from B1. The outlook is stable.

Moody's said the upgrade reflects Fage's leading position in the Greek dairy market (number one in yoghurt and number two in milk), the strength of its brands, its national distribution network and its improved credit statistics.

However the Ba3 rating also reflects the company's moderate leverage, its large foreign exchange exposure and its high degree of concentration on the Greek market.

Leverage is moderate at 2.5 times total debt/EBITDA (or 1.7 times adjusting for foreign exchange gains) as of Dec. 31, 2002, free cash flow generation is limited and the company has a large foreign exchange exposure in dollar-denominated debt, Moody's said.

Moody's rates Mobile Mini notes B2

Moody's Investors Service assigned a B2 rating to Mobile Mini's proposed $150 million senior unsecured notes.

Moody's said Mobile Mini has built a well-established franchise in the storage leasing industry throughout the U.S., benefiting from the broad application of its core products across a diverse customer base.

Over the past several years, management has demonstrated strong growth, sound earnings and good profit margins.

Offsetting these strengths, however, the rating also considered Mobile Mini's negative free cash flow (after expansionary capex), relative size, significant level of intangible assets and relatively high leverage, Moody's said. The rating also reflects the remarketing risk associated with short term leases (8.5 months average contracted term, 19.5 months average actual term).

The rating also conveyed a degree of caution that Mobile Mini's financial flexibility could become stressed over time, if cash flow and earnings targets are not realized during future cyclical downturns, Moody's added. The company is exposed to a number of cyclical businesses.

S&P cuts Tembec

Standard & Poor's downgraded Tembec Inc. including cutting its $350 million 7.75% senior unsecured notes due 2012 and Tembec Industries Inc.'s $250 million 8.5% notes due 2011, $250 million 8.5% senior unsecured notes due 2011 and $350 million 8.625% senior unsecured notes due 2009 to BB from BB+. The outlook is stable.

S&P said the downgrade reflects Tembec's depressed profitability and cash flow protection due to protracted weakness across the company's primary markets, and inability to reduce debt in the near term to improve credit measures.

The length of the current downturn in the paper and forest products industry, and the severity of its effect on Tembec have been greater than expected, S&P said.

Despite stronger pulp prices in early 2003, depressed paper and lumber prices, punitive export duties on softwood lumber, a strong Canadian dollar, and the potential easing of pulp pricing through the second half of 2003 will limit debt reduction and improvement of credit measures from levels that are currently very weak for the ratings, S&P added.

The proposed joint venture that combines Tembec's lumber operations in Quebec and Ontario with those of Domtar Inc. should be positive for the company in the long term, as the new operation benefits from critical mass, stronger market share and the implementation of best practices. Nevertheless, due to the current weak market environment for lumber that is expected to continue, the effect of this initiative in the near term will be minimal, S&P said.

Moody's says Borden Chemical outlook still negative

Moody's Investors Service confirmed Borden Chemical Inc.'s ratings including its $488 million senior unsecured notes and debentures maturing 2016 through 2023 at B2, continued its negative outlook and assigned a B2 rating to its new $34 million of senior unsecured industrial revenue bonds due 2009 issued in the Parish of Ascension, La.

Moody's said the ratings continue to reflect Borden's high leverage with adjusted debt (including notes payable to affiliate net of restricted cash) to EBITDA of 6.2 times, negative book equity, modest interest coverage, deteriorated creditor protection measurements, and the company's thin, albeit trough-level, last 12-months EBIT margins of 3.3%.

The negative outlook reflects Moody's expectations that raw material prices will continue to pressure operating margins and that credit metrics could somewhat worsen in the near-term.

S&P rates NVR notes BB+

Standard & Poor's assigned a BB+ rating to NVR Inc.'s $200 million 5% senior unsecured notes due 2010 and confirmed its existing ratings including its $115 million senior unsecured notes at BB+. The outlook is stable.

The ratings reflect NVR's very strong debt protection and profitability measures and a solid market position in key mid-Atlantic markets, S&P said. These strengths are offset by NVR's demonstrated appetite for share repurchases and a unique business model that essentially pushes land investment and model homes off-balance sheet.

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