Moody's rates Sheridan B1

Moody's Investors Service assigned a B1 rating to Sheridan Acquisition Corp.'s proposed $100 million senior secured notes due 2011. The outlook is stable.

Moody's said the ratings are constrained by Sheridan's high leverage, relatively flat top-line growth prospects and susceptibility to market conditions, especially in its book printing operations.

The ratings are supported by the stability of sales at most of Sheridan's six operating companies, the company's leading market position, especially in the short-run medical, technical and scholarly journal printing business, and its high customer retention rates.

At the end of June 2003, Sheridan recorded total debt of $66 million, representing leverage of 2.6 times EBITDA. Following the leveraged buy-out, Moody's estimates that debt will increase to approximately $101 million, representing leverage of 4.2 times by year-end 2003.

Despite a soft sales environment and competitive pricing pressure in the printing sector as a whole, Sheridan's niche businesses have been largely buffered from the recent downturn in print spending. With the exception of its short-run book operations, Sheridan's six operating companies generally experienced little sales disruption and produced positive free cash flow results over the past two years.

S&P says Madison River unchanged

Standard & Poor's said Madison River Telephone Co.'s ratings are unchanged including its corporate credit at B with a negative after it released second quarter earnings.

Although the incumbent local exchange segment saw a moderate decline in lost voice access lines, a material rebound is not anticipated in the near term because of economic weakness, particularly in the company's Illinois operations, and because of the possible redeployment of Fort Stewart, Ga.'s 3rd Infantry Division, S&P noted.

The loss of about 760 ILEC voice access lines in the second quarter of 2003 was offset somewhat by the company's aggressive marketing of digital subscriber line service and the increased penetration of vertical services.

Consequently, Madison River's second quarter 2003 revenues were about 2.4% higher compared with the first quarter of 2003. However, due to increased marketing costs related to DSL and a new bundled service offering, the company's EBITDA margin declined to about 57% in the second quarter of 2003 compared with 62% in the first quarter, S&P said.

On the positive side, Madison River improved its liquidity position in the second quarter by completing an amendment to its Rural Telephone Finance Cooperative (RTFC) credit facility. This amendment provides a reduction in scheduled principal payments through 2010 and extends the maturity by one year to 2016.

Moody's cuts Summit Properties to junk

Moody's Investors Service downgraded Summit Properties Partnership LP's senior unsecured debt to Ba1 from Baa3. The outlook is stable.

Moody's said the downgrade reflects Summit Properties' replacement of its unsecured line of credit with a secured credit facility.

Moody's noted that even though Summit should achieve savings on interest expense and fees versus its unsecured facility it believes using a secured facility as the main working capital line for the REIT is inconsistent with an investment-grade rating as it materially weakens protection for unsecured bondholders.

The secured credit facility will significantly increase secured debt levels, which were on the high side: secured debt was 23% of gross assets June 30, 2003. In addition, the REIT's debt protection measures continue to be weak, with a fixed charge coverage ratio (including capitalized interest and principal amortization) of 1.6x as of June 30, 2003.

Fundamentals in some of the REIT's core markets, especially Atlanta and Raleigh, have not improved, and improvement is unlikely in the near term, Moody's said.

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