S&P upgrades Standard Parking, rates loan B+

Standard & Poor's upgraded Standard Parking Corp. including raising its senior unsecured debt to B- from CCC- and subordinated debt to CCC+ from CC and assigned a B+ rating to Standard Parking's new $65 million senior secured credit facility due 2006. The outlook is stable.

S&P said the bank loan is rated one notch higher than the corporate credit rating because it believes that lenders could expect full recovery of principal in a stressed scenario.

S&P said the actions follow Standard Parking's announcement that it had refinanced its senior secured credit facility. The transaction enabled the company to repay onerous near-term bank maturities that were due to Bank One, and improved the company's liquidity position with an increased commitment under the new revolving credit facility.

Standard Parking's ratings reflect its narrow business focus, exposure to the air travel industry, and S&P's concerns regarding challenging industry conditions. Furthermore, the company is highly leveraged.

Only partially offsetting these risks are the company's No. 2 market position within the highly fragmented and competitive parking industry, as well as its geographic diversity and fairly predictable cash flow.

For the six months ended June 30, 2003, net revenues were down about 3% versus the same period last year largely due to the net reduction of about 32 contracts and the downturn in general economic conditions, S&P noted. Still, the company has managed to improve EBITDA margins to about 10% for the six months ended June 30, 2003, versus 7% for the same period the previous year, largely because of the reduction of several unprofitable management contracts.

The September refinancing eliminates onerous near-term bank debt maturities, and improves the company's liquidity. However, Standard Parking continues to be highly leveraged, S&P said. Lease-adjusted EBITDA was about $36.5 million for the 12 months ended June 30, 2003. Lease-adjusted EBITDA to pro forma full-year interest expense (reflecting the new capital structure), is about 1.6x, and lease-adjusted total debt at closing to EBITDA is about 6.1x. However, these measures are even weaker when taking into consideration $111 million of preferred stock and related payment-in-kind dividends.

S&P rates Pinnacle notes CCC+

Standard & Poor's assigned a CCC+ rating to Pinnacle Entertainment Inc.'s proposed $130 million senior subordinated notes due 2013 and confirmed its existing ratings including its senior secured debt at B+ and subordinated debt at CCC+. The outlook is stable.

S&P said the ratings reflect Pinnacle's relatively small portfolio of casino properties that are not generally market leaders, its high debt leverage, the expected increase in near-term growth-oriented capital spending and construction and start-up risks associated with its Lake Charles development project. These factors are somewhat offset by steadily improving same-store operating results, minimal near-term maturities, and adequate current liquidity.

The company's future growth opportunities include the construction of a $325 million dockside gaming facility in Lake Charles, La. This market currently consists of two dockside casinos; a nearby Native American facility and a renovated racetrack with slot machines (racino). While the market has steadily expanded, the Pinnacle project will increase capacity significantly, S&P noted. The facility is likely to be the nicest in the Lake Charles area, however, being the last entrant, a ramping up period is likely in order to create customer loyalty and growth in the market.

EBITDA for the 12 months ended June 30, 2003, rose to approximately $88 million as a result of improved performance at Belterra and Bossier City, in conjunction with aggressive cost controls, S&P said. Still, based on current operating trends and borrowings associated with planned capital spending, EBITDA coverage of interest expense and total debt to EBITDA are expected to be about 1.5x and more than 6x, respectively, for 2003.

S&P cuts NorthWestern

Standard & Poor's downgraded Northwestern Corp. including lowering its senior secured debt to D from CCC and senior unsecured debt to D from CC. The preferred stock remains at D.

S&P said the action follows Northwestern's decision to file for bankruptcy protection under Chapter 11 of the U.S. bankruptcy code.

Northwestern decided to file for bankruptcy after its attempt to restructure the company's debt out of court failed. In addition, Northwestern had $30 million of interest on unsecured bonds due on Sept. 15 which will not be paid, S&P noted.

Fitch cuts NorthWestern

Fitch Ratings lowered NorthWestern Corp.'s ratings including its $865 million outstanding first mortgage bonds, secured pollution control obligations and secured medium-term notes to DDD from B-, $865 million outstanding senior unsecured notes and medium-term notes lowered to DD from CCC, NWPS Capital Financing I, NorthWestern Capital Financing I, NorthWestern Capital Financing II and NorthWestern Capital Financing III's $305 million trust originated preferred securities to D from C and Montana Power Capital I's $65 million cumulative quarterly income preferred securities to D from C.

The downgrade reflects NorthWestern's announcement of a voluntary petition for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code.

The ratings assigned reflect relative recovery expectations between debt classes, based on Fitch's existing recovery analysis of the group. The DDD rating indicates the highest expected recovery, nominally between 90%-100%, while the DD rating reflects lower recoveries, nominally between 50%-90%. The lowest rating of D indicates recoveries of below 50%.

NorthWestern acknowledged that cash on hand has fallen to $20 million from $50 million of unrestricted cash at June 30. The company has arranged debtor-in-possession financing of $100 million.

NorthWestern also announced an agreement to sell troubled communications and data services subsidiary Expanets Inc., proceeds which will assist in the company's liquidity in the coming months.

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