Moody's cuts Portola outlook

Moody's Investors Service lowered its outlook on Portola Packaging, Inc. to stable from positive including its $110 million 10.750% senior unsecured notes due 2005 at B2.

Moody's said the change primarily reflects increased business and financial risk associated with the acquisition of Tech Industries, Inc. and lower than expected financial performance at Portola on a stand-alone basis.

Moody's also lowered its senior unsecured issuer rating to B3 from B2 reflecting increased severity of loss for non-guaranteed exposures in a distress scenario.

Moody's said the Tech acquisition appears to be a strategic fit as it is expected to bolster Portola's penetration in the cosmetics, fragrances and toiletries markets as well as provide new customers. The acquisition should provide Portola with international growth opportunities throughout its niche markets.

S&P upgrades PGN

Standard & Poor's upgraded PT Perusahaan Gas Negara including raising PGN Euro Finance 2003 Ltd.'s $150 million 7.5% notes due 2013 to B from B-. The outlook is stable.

S&P said the action is in line with the upgrade of Indonesia's sovereign ratings.

S&P raises local currency outlook on Bank Mandiri, Bank Negara, Bank Danamon

Standard & Poor's raised its outlook on the local currency ratings of PT Bank Mandiri (Persero), PT Bank Negara Indonesia (Persero) Tbk. and PT Bank Danamon Indonesia Tbk. to positive from stable. S&P confirmed its B long- and short-term ratings on the banks. The outlooks on the foreign currency ratings are stable.

S&P said the revisions follow its one-notch upgrade of the Republic of Indonesia.

The actions also recognize the continuing improvement in Indonesia's economy, which has increasingly enhanced the operating environment for Indonesia's banks, S&P noted.

Fitch rates Sberbank notes BB+

Fitch Ratings assigned a BB+ rating to the proposed loan participation notes to be issued by UBS (Luxembourg) SA for the sole purpose of financing a loan to the Savings Bank of the Russian Federation (Sberbank).

Sberbank is the largest bank in the Central and Eastern Europe, with total assets exceeding an equivalent of $34 billion at the end of 2002, Fitch said. The bank is 63.8% owned by the CBR, which is obliged by law to maintain a minimum of 50% + 1 voting share; the rest of the stock is widely held.

Sberbank's 17-strong Supervisory Council includes 11 officials of the CBR or the Russian government.

Owing to its vast nation-wide network of more than 20,000 outlets and its blanket state guarantee for private savings, Sberbank dominates Russia's retail banking with a 65% market share of the country's personal deposits, Fitch noted. It is also the major participant in the domestic government bond and interbank markets, and has been actively developing its corporate banking services, in particular lending to prime Russian corporate borrowers.

S&P cuts Steinway

Standard & Poor's downgraded Steinway Musical Instruments Inc. including lowering its $150 million 8.75% notes due 2011 to B+ from BB-. The outlook is stable.

S&P said the downgrade reflects Steinway's weakened credit protection ratios due to challenging industry fundamentals.

With lower consumer spending on discretionary luxury items, unit sales of pianos declined 10% for the first half of 2003 compared with the same period the previous year. Pianos represent about 60% of EBITDA. Unit sales of band instruments fell 11% in this same time period due to increased foreign competition and strikes at Steinway's band instrument plants. Band instruments represent about 40% of EBITDA.

Steinway's ratings are based on the company's below average financial profile, narrow product offering and the discretionary nature of the products. These factors are somewhat mitigated by Steinway's well-established market position in both the concert hall and institutional markets; its widely recognized brand names, including Conn, Selmer, and Steinway; and geographic diversification in the U.S., Europe, and Asia.

In recent years, as the company sells more pianos to conservatories, Steinway has somewhat improved the predictability of sales relative to those in the purely consumer market. However, S&P said it does not expect the market for band instruments to expand in the intermediate term.

With the decline in profitability in the first half of 2003, credit ratios have eroded, S&P added. EBITDA coverage of interest expense for the 12 months ended June 30, 2003, was 2.3x, versus an average of 3.4x for the past five years. The benefit to credit ratios from debt reduction during the past few years has been offset by lower profits. Total debt to EBITDA at June 30, 2003, was 5.8x versus a five-year average of 3.7x.

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