Moody's rates Silgan Holdings new notes, bank debt

Moody's Investors Service assigned a B1 rating to Silgan Holdings Inc.'s planned $200 million 9% add-on senior subordinated notes due 2009 and a Ba2 to its new $800 million secured credit facility and confirmed the existing ratings including its $300 million 9% senior subordinated notes due 2009 at B1 and the senior implied rating at Ba3. The outlook is stable.

The ratings reflect the company's solid financial condition, successful new product introductions, judicious capital investments, leading market position, proven low cost operations, record of successful integrations and adequate liquidity, Moody's said.

Negative factors influencing the ratings include high leverage, "moderate coverage of interest expense relative to the ratings category, and modest free cash flow as a percentage of total debt," the rating agency said.

The company's pro-forma debt is approximately $965 million to EBITA of approximately $168 million at 5.8 times. EBITDA less capital expenditures covers pro-forma interest expense approximately 2 times. At pro-forma Dec. 31, 2001, retained debt to cash is approximately 5%.

According to Moody's, the new proposed $800 million credit facility consists of a $400 million revolver, $100 million term A loans and $300 million term B loans. Outstandings are secured by a first priority perfected lien on all assets and stock of the borrower and its subsidiaries. Proceeds from the proposed credit facility and notes issuance are intended to refinance existing indebtedness and to pay for related fees. At the close of the transactions, liquidity should benefit from approximately $347 million availability under the proposed revolver.

S&P rates Silgan's notes, loan BB-

Standard & Poor's assigned a BB- rating to Silgan Holdings Inc.'s new $200 million 9% senior subordinated debentures due 2009 and to the proposed $1.05 billion senior secured bank facility. In addition, the company's credit rating was revised to BB- with a positive outlook from BB- with a stable outlook.

The credit facility is divided into a $400 million revolver due in 2008, a $100 million term A due in 2008, a $300 million term B due Nov. 30, 2008 and a $250 million uncommitted incremental term facility bank loan. Proceeds from the notes and the loan are expected to be used to refinance existing bank debt. The loan is secured by a first priority perfected security interest in all domestic assets and stock of domestic subsidiaries.

The outlook revision to positive from stable is based on the company's improved financial profile and added financial flexibility following the completion of the proposed debt transactions, S&P said. EBITDA interest coverage and funds from operations to total debt are expected to improve from the 3.1 times and 16% areas due to an increasing shift in product mix towards higher-margin plastic packaging products and improved pricing and value-added features in metal food containers. According to S&P, ratings may be raised if the company continues to improve its financial profile.

"The ratings reflect Silgan's average business position and steady cash flow generation, offset by a narrow product mix, limited geographic diversity, and aggressive debt leverage," the rating agency said.

Moody's upgrades United Defense

Moody's Investors Service upgraded United Defense Industries Inc.'s debt ratings including its $423 million senior secured term loan due 2009, $200 million senior secured revolver due 2007 and senior implied rating to Ba3 from B1 and its issuer rating to B1 from B2. The outlook is stable.

The upgrades are a result of the company's stable cash flow, rapid debt reduction, improved debt protection measurements and the generally favorable budget environment for the defense industry, according to Moody's.

"The stable rating outlook incorporates expectations for continued strong cash flow," the release said. "While recognizing UDI's significant market enterprise value, a further ratings upgrade requires reduction in debt and improved capitalization, with current equity at negative $166 million and substantial proportion of total assets consisting of intangibles and prepaid pension and postretirement benefit costs."

The company underwent recapitalization in August 2001. Proceeds were used to repurchase $183 million of senior subordinated notes and provide funds for a $382 million dividend payment. In December 2001, there was an initial public offering, which raised $401 million. United Defense received $165 million from the IPO, which was applied to the secured term loan.

Debt to EBITDA, which increased from 1.8x in 2000 to 2.5x in 2001, is expected to decrease to about 2.1x in 2002 due to EBITDA growth. Interest coverage, as measured by EBITDA (less capex)-to-interest expense will be in the 6x-plus range in 2002, the release said.

Moody's confirms Premcor, Port Arthur, off review

Moody's Investors Service confirmed the ratings of Premcor USA, Premcor Refining Group and Port Arthur Finance subject to parent company Premco, Inc. completing its initial public offering. The confirmation affects $1.6 billion of debt and ends a downgrade review begun in February 2002. Ratings affected include Premcor USA's senior unsecured rating of B3, Premcor Refining's senior unsecured note rating of Ba3 and subordinated note rating of B2 and Port Arthur's senior secured rating of Ba3.

Moody's said the confirmation reflects its view that barring market disruption Premcor can complete an IPO of scale, sufficient to underpin the ratings and begin positioning it for specific sizable organic expansions.

Moody's believes eventual acquisitions would be supported by opportunistic equity issuance designed to support Premcor's growth strategy, mitigating attendant interim risks and positioning the company for its next move.

Moody's added that it anticipates a sizable bond issue after the IPO to refinance near-term maturities.

Moody's rates Sanitec notes B2

Moody's Investors Service assigned a B2 rating to Sanitec International SA's proposed issue of €260 million senior notes due 2012, a B2 senior unsecured issuer rating, a Ba3 senior implied rating and a Ba3 rating to Sanitec OY's €555 million senior secured credit facilities. The outlook is stable.

Moody's said its rating reflects Sanitec's leading market position in the European bathroom products market, particularly in ceramics, limited sensitivity to economic cycles, in particular construction activity, as an estimated two-thirds of demand comes from the more stable renovation/improvement segments, the company's strong portfolio of well-established and leading local/regional brands throughout Europe (excluding Spain), scope for further margin and cash flow improvements going forward, through the integration of recent acquisitions, enhanced production efficiencies including a shift towards lower-cost regions and purchasing initiatives, a relatively well-diversified and stable customer base with well-established commercial relationships and a strong management team with significant experience in the industry and a proven track-record of integrating acquisitions and delivering on expectations.

Negatives include Sanitec's highly leveraged capital structure, with significant proportions of free cash flow used to meet mandatory debt amortization requirements under the senior secured credit facilities, execution risks associated with the company's strategy in particular relating to the integration of recently acquired businesses, adequate management of Sanitec's diversified brand portfolio, the optimization of the company's manufacturing base and plans for increased sales into Central and Eastern Europe, a concentrated and highly competitive market environment, the exposure of the company to macroeconomic cycles evidenced by the negative impact on performance of recent weakness in certain core markets, uncertainty as to current performance trends and the long-term strategic importance of the company's vacuum sewage business and potential changes in market distribution channels, including the consolidation/internationalization of wholesalers and the recent growth in DIY distribution channels, which may lead to pricing pressure going forward.

Overall, Moody's said it views Sanitec as well-positioned within its rating category, with potential for upward pressure on the ratings should the company successfully deliver on financial and operational expectations over the medium-term.

S&P rates Riverwood loan B

Standard & Poor's assigned a B rating to Riverwood International Corp.'s $250 million senior secured bank loan due 2007.

S&P rates Sanitec notes B

Standard & Poor's assigned a B rating to Sanitec International SA's new offering of €260 million subordinated bonds due 2012 and a BB- rating to Sanitec OY's €555 million bank loan due 2010. The outlook is stable.

S&P rates Seagate notes, loan BB+

Standard & Poor's assigned a BB+ rating to Seagate Technology's $350 million term loan, $150 million revolving credit facility and $400 million senior unsecured notes due 2009. The outlook is stable.

S&P takes Sunburst off watch

Standard & Poor's removed Sunburst Hospitality Corp. from CreditWatch with negative implications and confirmed its ratings. The outlook is negative.

Ratings affected include Sunburst's $180 million term loan due 2005, $80 million term loan due 2002 and $20 million revolving credit facility due 2005, all rated B+, and its $35 million 11.375% subordinated notes due 2007, rated B-.

S&P cuts Williams notes, loans to D

Standard & Poor's downgraded Williams Communications Group Inc.'s debt to D, including its $500 million seven-year secured senior term loan, $500 million six-year senior secured reducing revolving credit facility, $575 million 11.7% senior redeemable notes due 2008, $425 million 11.875% senior reedemable notes due 2010 and $575 million 11.7% senior redeemable notes due 2010, all previously rated C.

S&P said its action follows Williams' announcement it had filed for Chapter 11 bankruptcy court protection.

S&P downgrades Shiloh

Standard & Poor's downgraded Shiloh Industries Inc. The outlook is negative.

Ratings affected include Shiloh's $300 million revolving credit facility due 2005, cut to CCC+ from B-.

S&P downgrades Sierra Pacific

Standard & Poor's downgraded Sierra Pacific and its Nevada Power unit and put them on CreditWatch with negative implications, changed from CreditWatch with developing implications.

Ratings affected include Sierra Pacific Power Co.'s secured medium-term notes and senior secured notes, cut to BB from BBB-, preferred stock, cut to CCC+ from B, Sierra Pacific Resources credit facility, senior notes, floating rate notes and premium income equity securities, cut to B- from B+, Nevada Power's first mortgage bonds and senior secured notes, cut to BB from BBB-, credit facility and senior unsecured notes, cut to B- from B+, and quarterly income preferred securities, preferred stock and trust preferreds, cut to CCC+ from B.

S&P raises AK Steel outlook

Standard & Poor's raised its outlook on AK Steel Corp. to stable from negative. The company's corporate credit rating is BB.

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