Moody's downgrades Sealy Mattress' debt ratings

Moody's Investors Service downgraded Sealy Mattress Co.'s debt ratings and revised the outlook to stable. Ratings lowered include Sealy's $100 million senior secured revolver due 2002, $125 million senior secured term loan A due 2002 and $330 million senior secured AXEL term loans due 2004 to 2006, all cut to B1 from Ba2, $250 million 9.875% senior subordinated notes due 2007 and $128 million 10.875% senior subordinated discount notes due 2007, both cut to B3 from B2, senior implied rating to B1 from Ba3 and senior unsecured issuer rating to B2 from B1.

"The rating downgrades reflect Moody's concerns regarding Sealy's increased sales, earnings, and balance sheet exposure to distressed affiliate entities, as well as ongoing margin and cash flow pressure associated with international expansion, increased retail/consumer economic challenges, expenditures required to improve regional and international operating efficiency, the substantial amortization of Sealy's term loans over the next few years, and near-term increases in cash interest payments (when interest on the discount notes becomes cash payable in December 2002)," the Moody's release said.

Ratings also reflect high leverage, moderate interest coverage, modest retained cash flow relative to debt, the deferrable nature of the bedding industry's products and strong competition in the sector, according to the release.

Positive factors affecting the ratings include, strong brand recognition, strong market share and vertical integration.

At March 2002, leverage was about 7.0 times on an EBITA basis, pro-forma cash interest coverage was around 1.5x on an EBITA basis and pro-forma retained cash flow was around 2% of total debt, the release said.

Moody's rates Tekni-Plex add-on B3

Moody's Investors Service assigned a B3 rating to Tekni-Plex, Inc.'s $40 million add-on to its 12.75% senior subordinated notes due 2010 and confirmed its existing ratings including its $275 million 12.75% senior subordinated notes due 2010 at B3 and its $440 million secured credit facility at B1. The outlook is stable.

Moody's put Petroleum Geo-Services on review

Moody's Investors Service put Petroleum Geo-Services ASA on review for possible downgrade, affecting $1.2 billion of debt including its Baa3 rated senior unsecured notes, Ba1 rated junior subordinated debt securities, the Baa2 rated guaranteed first preferred mortgage notes of Oslo Seismic Services, Inc.; and the Ba1 rated guaranteed trust preferred securities of PGS Trust I.

Moody's said the review is in response to the delay in the company's pending sale of its Atlantis subsidiary to Sinochem. The sale of Atlantis is a condition to effecting the pending merger between Petroleum Geo-Services and Veritas DGC (rated Ba3).

Moody's said that as it has noted previously it is highly likely that failure to complete the pending sale of Atlantis and the merger with Veritas would result in a downgrade of Petroleum Geo-Services ratings by at least one notch.

If Petroleum Geo-Services is successful in selling Atlantis to Sinochem, Moody's will review the status of the merger agreement with Veritas to determine the likelihood of maintaining an investment-grade rating for the merged entity.

S&P rates Tekni-Plex add-on B-

Standard & Poor's assigned a B- rating to Tekni-Plex Inc.'s $40 million add-on to its 12.75% senior subordinated notes due 2010 and confirmed its existing ratings on the company including its senior secured debt at B+ and its subordinated debt at B-.

S&P said the ratings reflect Tekni-Plex's "very aggressive financial profile, which overshadows the firm's fair business position."

Barriers to entry include strong market positions in its niche markets, innovative technologies, and a business mix that includes some highly specialized products, S&P noted.

Tekni-Plex also benefits from the consumer-oriented nature of its end markets and a wide breadth of products, which provide a measure of stability to operating results, the rating agency said.

The company's financial profile was significantly weakened following its recapitalization in June 2000, which led to increased debt levels. However, EBITDA interest coverage is expected to approach 2.0 times, supported by profitability growth through additional synergies derived from the Swan acquisition, new products, and market penetration, S&P said. Also, the deleveraging effect of the Swan acquisition and expectations that free cash will be used to further reduce debt in the intermediate term should improve the financial profile so that the ratio of total debt to EBITDA trends toward 4.5x-5.0x, an appropriate level for the rating.

S&P says AmeriGas buyback won't affect ratings

Standard & Poor's said AmeriGas Partners LP's fiscal second quarter earnings announcement will not immediately affect the company's ratings or outlook. The corporate credit rating is BB+ and the outlook negative.

"Earnings were fairly strong considering the unseasonably warm winter weather experienced throughout the U.S. during the period," S&P commented. An unexpected rise in commodity prices toward the end of the quarter bolstered results.

In addition, the company benefited from the continued successful integration of Columbia Energy Group's propane assets, evidenced by cost efficiencies revealed during the quarter. Although financial performance was better than originally expected, Standard & Poor's said it continues to be concerned that credit protection measures remain weak for the rating.

S&P cuts WKI notes

Standard & Poor's downgraded some WKI Holding Company Inc. ratings, including lowering its $200 million 9.625% senior subordinated notes due 2008 to D from C, and confirmed its senior secured bank loan at CC.

S&P said the action follows WKI's nonpayment of interest due May 1 on its $200 million 9 5/8% subordinated notes.

The rating agency noted the company was restricted from making the interest payment on the subordinated notes because it would have caused the temporary waiver of the bank covenant defaults to expire.

S&P cuts Imagen Satelital to D

Standard & Poor's downgraded Imagen Satelital SA's $80 million notes due 2005 to D from CC.

S&P said the action follows Imagen Satelital's failure to make a $4.4 million interest coupon payment due May 1 on its notes.

Imagen's high dollar debt burden, too onerous after the devaluation of the Argentine peso, and the deterioration of cable industry fundamentals due to the long-lasting recession in Argentina, are the main drivers for this default, S&P said.

S&P upgrades Kookmin Bank

Standard & Poor's upgraded Kookmin Bank including raising its $200 million 6.0637% subordinated notes due 2006 to BBB- from BB+. The outlook is stable.

S&P upgrades Shinhan Bank

Standard & Poor's upgraded Shinhan Bank including raising its $150 million 7.25% notes due 2002 to BBB- from BB+. The outlook is stable.

S&P lowers SC International watch

Standard & Poor's revised its CreditWatch on SC International Services Inc. to negative from positive. Ratings affected include SC International's $300 million 9.25% senior subordinated notes due 2007 rated BB+.

S&P said the action reflects concerns about Deutsche Lufthansa AG's long-term economic incentive to provide continued support for SC International, its wholly owned airline catering operation. In light of the challenging industry conditions and its negative impact on SC International's operating results, and Lufthansa's ultimate intention to monetize its investment in the non-core subsidiary, the extent of Lufthansa's support is not certain at this time.

The ratings previously incorporated material potential support from Lufthansa, S&P said. However, in light of SC International's financial difficulties resulting from the impact of the Sept. 11 attacks on the airline industry, the weak economy, and the ensuing delay in its planned IPO, there is increased uncertainty surrounding the implicit support from Lufthansa.

S&P acknowledged Lufthansa has provided SC International with financial support to date but said it is not certain what level of support could be expected from Lufthansa in the future.

S&P says Biovail stock buyback won't affect ratings

Standard & Poor's said Biovail Corp.'s announcement of a share repurchase will not affect the company's rating or outlook. Biovail has a BB+ corporate credit rating with a positive outlook.

"The company has over $400 million of cash on hand and generates strong cash flows from operations," S&P said. More importantly, Biovail's key pipeline product, Cardizem XL, remains on track for a near-term launch, S&P added.

Moody's rates Compton notes B2

Moody's Investors Service assigned a B2 rating to Compton Petroleum Corp.'s planned offering of $150 million of 10 year senior unsecured notes.

Although the outlook is stable, Moody's noted that the ratings may not withstand aggressive use of the revolver for acquisitions, particularly if 2002 natural gas and oil prices evolve to weakness.

Moody's said Compton's ratings are restrained by its small reserve scale; roughly 69% of proven reserves and 53% of production concentrated in one region, though Compton holds a substantial position in that region; rising unit production and reserve replacement costs; acquisition risk; a substantial part of historic capital outlays have been spent in the high cost 2000-2001 up-cycle; and a below average reserve life on proven developed reserves of 6.7 years (annualized fourth quarter production).

Positives include a relatively balanced record of methodically building key holdings; a high fully-funded proven developed reserve component (89% of reserves) supporting the debt structure; a seasoned management team and a board of directors consisting mainly of informed midstream and upstream oil and gas industry participants; a larger production base after 16.8% production growth from fourth quarter 2000 to fourth quarter 2001; diversification potential across four operating regions; significant gas processing infrastructure control; a significant prospect inventory; and Compton's operation 92% of its production.

Moody's rates D&E notes B2

Moody's Investors Service assigned a B2 rating to D&E Communications, Inc.'s proposed $175 million of senior notes due 2012. The outlook is stable.

Moody's said the ratings reflect the financial leverage, constrained liquidity position and integration risk associated with D&E's announced merger with Conestoga Enterprises, Inc. as well as the challenges facing management to deliver on cost synergies and cash flow growth expectations.

The ratings also recognize management's seasoned experience in the rural Pennsylvania telephone business, the complementary footprint of the merged networks, the predictability and defensibility of D&E's rural local exchange operations and the measured approach that management has taken with respect to its CLEC initiatives, Moody's said.

The stable outlook reflects the relative stability of D&E's core regulated business and the scalability of the company's capex model. Moody's said it will focus on management's ability to deliver cash flow sufficiency, and ratings could be lowered if we see any significant setbacks in the timing and scope of positive free cash results.

S&P rates Kinetic Concepts' loan B

Standard & Poor's assigned a B rating to Kinetic Concepts Inc.'s $30 million senior secured tranche E term loan due 2005. The company's corporate credit rating of B was affirmed and the senior subordinated debt is rated CCC+.

The ratings reflect the still vulnerable business and financial prospects of the durable medical product firm due to its heavy dependency on VAC, a device used to heal chronic wounds.

"From a financial standpoint, the recent addition of a new bank tranche added needed financial flexibility by repaying outstanding bank revolving credit debt," S&P said. "Nevertheless, the capital structure remains stretched by the debt associated with KCI's 1997 LBO."

S&P lowers Alestra

Standard & Poor's downgraded Alestra S de RL de CV and kept the company on CreditWatch with negative implications.

Ratings lowered include Alestra's $270 million 12.125% notes due 2006 and $300 million 12.625% notes due 2009, both cut to B- from BB-.

S&P puts Bradley on positive watch

Standard & Poor's put Bradley Operating LP on CreditWatch with positive implications.

Ratings affected include Bradley's $100 million 7.2 % senior unsecured notes due 2008 and $100 million 7% senior unsecured notes due 2004, both rated BB+.

S&P cuts DDi

Standard & Poor's downgraded DDi Corp. and maintained a negative outlook. Ratings affected include DDi's $300 million credit facility due 2003, cut to B from B+, its $100 million 5.25% convertible subordinated notes due 2008 and $100 million 6.25% convertible subordinated notes due 2007, both cut to CCC+ from B-, and Details Capital Corp.'s $60.054 million 12.5% senior discount notes due 2007, cut to CCC+ from B-.

S&P said the action follows DDi's announcement that it expects weaker profits due to a sharp drop in sales.

DDi's sales fell by more than one-half in its fiscal first quarter ended March 2002 from the same period in 2001, the company said. The decline resulted in subpar credit measures for its rating. Slumping end-market demand and increased pricing pressures have hurt operating performance, and management expects sales to remain depressed in the near term.

S&P said DDi's operating profitability fell well below its expectations to about 2% from nearly 30% in the same period in 2001.

Deteriorating cash flow protection measures are a concern as EBITDA coverage of interest is likely to be below 1 times in the first half of 2002, down from more than 5x in the first half of 2001, S&P added.

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