S&P confirms Insight Midwest

Standard & Poor's confirmed Insight Midwest LP including its senior unsecured debt at B+, Insight Midwest Holdings LLC's $1.975 billion secured bank loan at BB+ and Insight Communications Inc.'s senior unsecured debt at B-. The outlook is stable.

S&P said the confirmation follows Insight Communications' announcement that it plans to refinance the approximate $196 million in accreted value of indebtedness of Coaxial Communications of Central Ohio, Inc. and Coaxial LLC. Insight will also repay the $22.5 million senior credit facility at Insight Ohio. The transaction will be accomplished through borrowings from Insight Midwest Holdings LLC's existing credit facility, which will be increased to a total facility of $1.975 billion through an upsizing in the term loan B to $1.125 billion from $900 million.

S&P noted it has always included the Coaxial of Ohio and Coaxial debt in its leverage calculations for Insight Midwest, since Insight Ohio conditionally guarantees this debt. As such, the refinancing is considered to be credit neutral to Insight Midwest.

In addition, a put to all of Coaxial of Ohio's equity holders that is triggered by the Coaxial of Ohio repayment, will require about $30 million. Given operating cash flows and debt levels at Insight Midwest, this expenditure will not have a material impact on its financial metrics, S&P said.

In addition, the rating on the secured bank loan at Insight Midwest Holdings continues to be rated one notch above the corporate credit rating, despite the increase in the facility size to $1.975 billion from $1.75 billion. Insight Ohio will be added as a guarantor to the bank facility, and its 87,000 cable subscribers will be part of the collateral package. The resultant secured debt per subscriber under a fully draw facility scenario is about $1,600. Given values of cable subscribers received in recent sales transactions and the fact that most of Insight Midwest cable plant has been upgraded to 750 MHz or better, Insight Midwest's asset value provides a strong likelihood of full recovery of principal, S&P said.

The ratings on Insight Midwest reflect the company's favorable business profile, derived from the stable cash flows of its well-clustered midsize cable television markets, and the potential for new revenue from digital and broadband services, S&P said. These factors are offset by the company's aggressive debt profile, a result of acquisitions and system upgrades.

Insight Midwest is expected to remain relatively highly leveraged during the next few years, S&p added. Debt to EBITDA for 2002 was nearly 7x, excluding inter-company debt and management fees and including debt at Coaxial and Coaxial of Ohio. This metric is not expected to improve materially in the next few years because of on-going expenditures for deployment of advanced services during this time frame.

S&P upgrades Armkel

Standard & Poor's upgraded Armkel LLC including raising its $225 million 9.5% subordinated notes due 2009 to B from B- and $150 million senior secured term B loan due 2009, $70 million senior secured term A loan due 2007 and $85 million senior secured revolving credit facility due 2007 to BB- from B+. The outlook is stable.

S&P said the upgrade reflects Armkel's improved operating performance stemming from sales growth, ongoing cost-saving initiatives and reduced debt levels, which have resulted in a strengthening of the company's financial profile.

Since its formation less than two years ago, management has successfully operated the business and focused on improving operating efficiencies, which has led to stronger than expected credit measures.

Armkel's ratings are based on the company's high debt leverage, narrow domestic product portfolio and challenges faced by its international operations, which represent about 45% of sales, S&P said. Partially offsetting these factors are the company's solid operating margin (before depreciation, amortization, and nonrecurring items) of 26% for the 12 months ended Mar. 28, 2003 and strong defendable market share positions in certain domestic categories (Trojan condoms, Nair depilatories, and First Response pregnancy/ovulation test kits).

In addition, Armkel is realizing cost savings from manufacturing efficiencies, the elimination of certain overhead expenses, and shared distribution channels with Church & Dwight Co. Inc., a 50% owner of Armkel (remaining ownership by affiliates of Kelso & Company LP, a private equity firm).

Credit measures for the 12 months ended March 28, 2003 (adjusted for operating leases and nonrecurring charges) are in line with the revised rating, with EBITDA interest coverage of 2.6x and debt to EBITDA of about 4.0x, S&P said. The rating agency added that it expects that credit ratios will strengthen further over time, given management's on-going focus on improving the company's cost structure and deleveraging the balance sheet.

S&P rates Caraustar loan BB+

Standard & Poor's assigned a BB+ rating to Caraustar Industries Inc.'s new $75 million senior secured revolving credit facility and confirmed its existing ratings including its senior unsecured debt at BB and subordinated debt at B+. The outlook remains negative.

S&P said that although the commitment amount on the new facility is the same as the one it replaces, the new facility improves liquidity, given that the previous facility was limited to $47 million of borrowing capacity by recent bank amendments that also accelerated the maturity to April 1, 2004 from March 29, 2005.

The bank loan is rated one notch higher than the corporate credit rating. S&P believes there is a strong likelihood of full recovery in the event of default or bankruptcy.

The ratings reflect Caraustar's good market position in tubes and cores, improving volumes, limited product diversity, exposure to volatile raw material costs and an aggressive financial policy, S&P said.

Demand for Caraustar's products is primarily driven by consumer spending and industrial production, and the latter remains one of the weakest segments of the economy, S&P noted. Although 2002 was the third consecutive year of reduced industry demand for paperboard packaging, the company is gaining increased mill and converting volumes from existing businesses, as well as from new customers.

Still, meaningful volume improvement is unlikely until the U.S. economy recovers. In addition, industry overcapacity results in constant pricing pressure, although recently announced machine closures by Caraustar and other leading producers and the rationalization of overlapping converting facilities resulting from Caraustar's acquisition of Smurfit-Stone Container Corp.'s industrial packaging group should modestly improve the supply/demand imbalance.

The company expects modest capital spending in 2003 and should produce breakeven or slightly positive free cash flow this year. Therefore, net debt is not expected to increase (the company has no amortizing bank debt to repay, so it has been accumulating cash) even if the U.S economic recovery is delayed, S&P said. Over the intermediate term, gradually increasing volumes, higher operating rates, and acquisition synergies should drive earnings improvement and strengthen credit measures. However, to maintain its current ratings, Caraustar's debt to EBITDA needs to improve to the mid-3x area, and funds from operations to debt, currently subpar for the ratings at 10%, needs to improve to 20% over the next one to two years.

S&P says Premcor unchanged

Standard & Poor's said Premcor Refining Group Inc.'s ratings are unchanged including its corporate credit at BB- with a negative outlook.

S&P's comments come in response to the company's announcement that it is reducing its estimated spending requirements to meet clean fuels standards.

The new is positive for credit quality but not enough to warrant a change to Premcor's outlook or ratings, S&P said.

Through a combination of process improvement and the beneficial effect of the company's larger scale following its recent acquisition of the Memphis refinery, Premcor now estimates the capital required to comply with the clean fuels standards (both gasoline and diesel) to be $640 million, down from $682 million. Although reduced, this amount, combined with the company's announced $220 million expansion of its Port Arthur, Texas facility and high finance expenses, could strain the company's available capital resources if margins fall below midcycle levels over the intermediate term, S&P said. Given the inherent volatility of the refining industry, below-average margins during such a period are likely.

Moody's rates NOVA Chemicals liquidity SGL-2

Moody's Investors Service assigned an SGL-2 speculative-grade liquidity rating to NOVA Chemicals Corp.

Moody's said the SGL-2 rating reflects NOVA's good liquidity with a substantial cash balance following recent asset sales and reasonable availability under its credit facility.

The rating is tempered by working capital volatility stemming from elevated feedstock costs and potential significant near-term cash requirements related to the retractable shares agreement, the accounts receivable securitization program and the put under the $150 million unsecured debentures due 2026.

The ratings are supported by a significant increase in NOVA's cash balances following the sale of its 37.4% equity interest in Methanex for net proceeds of $450 million and the sale of its Fort Saskatchewan facility for net proceeds of $116 million (both events occurred in June). These transactions increased NOVA's cash balance to $440 million as of June 30, 2003 and allow the company to easily address a potential August 2003 put of $150 million of unsecured debentures due 2026.

NOVA has adequate lines of credit consisting of a $300 million secured revolver, which is currently undrawn (Moody's notes that availability under the secured revolver was reduced by $25 million, and that the $50 million unsecured revolver was terminated following NOVA's sale of its Methanex ownership interest).

S&P says Owens-Illinois unchanged

S&P said Owens-Illinois Inc.'s ratings are unchanged including its corporate credit at BB with a negative outlook following the company's announcement of weaker earnings in its quarter ended June 30.

Nonetheless, the company's performance was considerably weaker than expected and elevates concern given the decline in its North American and Asia-Pacific glass operations and the nearly $300 million increase in debt compared with last year's June quarter (partly resulting from increases in its inventory levels), S&P said.

The company's earnings also continue to be negatively affected by pricing pressure in its plastics segment, a reduction in its pension income and high natural gas costs.

A key consideration in maintenance of the current ratings on Owens-Illinois was the temporary nature of some of the recent operating challenges and the sale of long-term notes receivable following the end of the quarter, S&P said. The sale of the notes generated $163 million in proceeds and was used to reduce outstanding bank borrowings. Management continues to seek additional opportunities to reduce its costs and its high debt levels.

However, absent some indications of improvement in the company's financial performance, ratings on Owens-Illinois could be lowered by the end of 2003, S&P said.

Moody's rates National Beef notes B2

Moody's Investors Service assigned a B2 rating to National Beef Packing Co. LLC's proposed senior unsecured note issue. The outlook is stable.

Moody's said the ratings take into account National Beef's high financial leverage relative to its low margin processing business, profitability which is subject to commodity-driven volatility and modest free cash flow available for debt repayment.

The ratings also reflect the company's acquisitive growth strategy and Moody's concerns about relatively loose limitations on the level of discretionary dividends.

The ratings recognize National Beef's history of steady cash flow generation, the company's strength in value-added products and a management team with an established track record in the industry.

The stable ratings outlook anticipates that the company will use free cash flow to reduce leverage.

Pro forma for the transaction and based on financial performance for the 12 months ending May 31, 2003, National Beef will carry meaningful leverage, with debt representing 71% of total capitalization, and 3.19x EBITDA.

S&P rates Morris Publishing notes B+, loan BB

Standard & Poor's assigned a B+ rating to Morris Publishing Group LLC's planned $200 million senior subordinated notes due 2013 and a BB rating to its planned $200 million seven-year revolving credit facility and $250 million 7.5-year term loan. The outlook is stable.

The company has significant debt levels, a moderate-size cash flow base and a concentration of revenues and cash flow at its largest newspaper in Jacksonville, Fla., S&P noted In addition, Morris is subject to the impact of the economy on advertising revenues and the variability of newsprint prices.

These factors are tempered by the company's strong and geographically diverse newspaper market positions. This reflects newspaper operations primarily in small and mid-size communities located in Florida, Georgia, Texas, Kansas, Nebraska, Oklahoma, Michigan, Missouri, Alaska, Arkansas, South Dakota, Tennessee, and South Carolina where there is generally no meaningful competition from other newspapers.

The company has also historically been a free cash flow generator and pro forma for the debt financings, there are no meaningful debt maturities until the credit facilities mature. S&P said it does not expect any significant acquisitions and that excess cash flow will be used primarily for debt reduction in the intermediate term.

Debt to EBITDA at Morris Publishing has been in the mid-4x to low-5x range during the past five years, and is at about 5x, pro forma for the financings, S&P said. No financial information will be reported at the Morris Communications level. However, its debt to EBITDA ratio is not meaningfully different from Morris Publishing. With operating cash flow margins of more than 20% and manageable capital expenditures, the company has been generating free operating cash flow. These funds have been used primarily for debt reduction during the past two years.

S&P raises Willis Group outlook

Standard & Poor's raised its outlook on Willis Group Holdings Ltd. to positive from stable and confirmed its ratings including its counterparty credit ratings at BB+.

S&P said the change in outlook reflects Willis's continued improvement in operating performance in 2003 and consistent improvement following the company's IPO in June 2001.

As of June 30, 2003, Willis's long-term debt totaled $490 million; down from $677 million at midyear 2002 and in excess of $900 million before the IPO as the company has continued to pay down debt from free cash flow.

Operating performance continues to trend positively - as measured by an EBITDA margin of 32.6% at midyear 2003 compared with 20.2% as of June 30, 2002, S&P said.

Because of lower leverage and improved operating performance, EBITDA and EBIT interest coverage measured 12.2x and 11.5x, respectively, as of June 30, 2003, compared with 5.1x and 4.6x in the prior-year period.

S&P rates Ball notes BB

Standard & Poor's assigned a BB rating to Ball Corp.'s proposed $200 million senior unsecured notes due 2012 and confirmed its existing ratings including its senior secured debt at BB+, senior unsecured debt at BB and subordinated debt BB-.

S&P said Ball's ratings reflect the company's solid market positions and stable cash flow generation offset by its aggressive financial management.

Following its December 2002 acquisition of Germany-headquartered Schmalbach-Lubeca AG for approximately $909 million, Ball became the world's largest beverage can producer, with leading shares in the two largest can markets, North America and Europe. The acquisition also improved its geographic diversity and modestly reduced its high customer concentration. Ball is also benefiting from better growth prospects, as the European market is still growing in the mid-single-digit percent area, unlike the mature North American market.

Still, competition is intense, stemming from large global rivals and inter-material substitution.

Ball's profitability levels are expected to continue to improve as realizations of higher price levels, sales growth from Schmalbach-Lubeca, plastic packaging and aerospace operations should more than offset the impact of increased pension and interest costs.

Yet, as a result of the acquisition, Ball's total debt to capital ratio (adjusted for its accounts receivables securitization program) increased to 82%.

S&P cuts Citation

Standard & Poor's downgraded Citation Corp. including cutting its senior secured debt to B from B+. The outlook is negative.

S&P said the downgrade reflects weaker-than-expected cash flow generation, which has further weakened credit protection measures and significantly reduced liquidity, including heightened risk of potential bank covenant violations in the near-term.

S&P said Citation's ratings reflect the company's very aggressive financial profile and limited liquidity, which offsets the firm's solid position as a manufacturer of cast, forged and machined components.

Citation continues to experience soft market conditions, which have resulted in sales being below expected levels and have reduced the company's cash generation. In addition, Citation has experienced some operational issues, including equipment failures, excess scrap, launch issues, and rework on some components, all of which have reduced profitability.

Citation is undertaking initiatives to improve operating performance at its various facilities including improving process controls, reducing excess scrap, and improving the efficiency of its casting machines. Over the longer term these efforts should help strengthen profitability, credit protection measures, and liquidity from currently subpar levels.

As of June 29, 2003, total debt to EBITDA was about 6.2x, and EBITDA interest coverage was around 1.8x. S&P said it had been expecting total debt to EBITDA of 4x-5x and interest coverage of around 2x. In the near-term, credit measures are not expected to materially improve from current levels.

S&P puts Crompton on watch

Standard & Poor's put Crompton Corp. on CreditWatch negative including its senior unsecured debt at BBB-.

S&P said the CreditWatch placement reflects financial results that are being punished by higher raw material and energy costs, reduced unit volume from a generally weaker global economic environment and lower selling prices, thus stalling the expected recovery of credit quality measures.

This disappointing earnings performance is occurring at a time when weak cash flow protection measures, including funds from operations to total debt of only 15% for 2002, had been expected to begin a rebound toward appropriate levels, taking into consideration Crompton's definitive agreement to sell its organosilicones business to the specialty materials division of General Electric Co., S&P said.

At closing, Crompton will receive $645 million in cash and GE's plastic additives operation valued at $160 million. In addition, Crompton will receive earn-out payments, totaling $105 million to $250 million over a three-year period. With proceeds earmarked for debt reduction, this divestiture would provide a much needed boost to the company's subpar liquidity, although recent weak operating results have challenged assumptions supporting credit quality, S&P said.

Moody's rates Ball notes Ba3

Moody's Investors Service assigned a Ba3 rating to Ball Corp.'s proposed $250 million senior unsecured notes and confirmed its existing ratings including its $1.4 billion secured multi-currency facility at Ba2 and $300 million 7.75% guaranteed senior unsecured notes due 2006 at Ba3. The outlook is stable.

Moody's said the ratings reflect solid financial flexibility with good liquidity and strong profitability despite some potential softness in consolidated results (metal food containers, plastics, and beverage cans in Germany) due to pricing pressures and lower than expected volume. The latter was mainly caused by adverse weather conditions throughout the Northeast and the impact of deposit legislation in Germany.

The stable outlook continues to reflect Moody's expectation of steady operating and financial results, on a run-rate basis, with some tolerance for fluctuations in credit statistics over the intermediate term as Ball continues to assimilate the Schmalbach-Lubeca metal can business acquired in December 2002.

The ratings continue to reflect Ball's high financial leverage, the absence of tangible equity, increasing competition, and foreign exchange fluctuations. In Moody's opinion, coverage of interest expense after capital expenditures is moderate for the ratings category. Cash funding requirements for pension plans further constrain the ratings.

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