Moody's cuts Texas Petrochemicals

Moody's Investors Service downgraded Texas Petrochemicals LP including cutting its $225 million subordinated notes due 2006 to Caa3 from Caa1. The outlook remains negative.

Moody's said the downgrade was prompted by a significant deterioration in Texas Petrochemicals's operating performance and Moody's concern over the company's financial liquidity.

Texas Petrochemicals suffers from weak operating performance, negative tangible net worth, high leverage with debt to EBITDA of 6.8 times, and thin operating margins of 1.1% for the nine months ended March 31, 2003.

The downgrade also reflects the decline in demand for methyl tertiary-butyl ether (MTBE) as several states have enacted laws to eliminate its use as an additive in gasoline.

The ratings, however, consider the company's various leading market positions in North America and the recent strong performance of its butadiene segment.

The negative outlook reflects uncertainty over Texas Petrochemicals ability to improve operating performance and maintain compliance with the covenants under the senior secured credit facilities, Moody's said.

Moody's confirms PDVSA Finance

Moody's Investors Service confirmed PDVSA Finance Ltd.'s $400 million 6.45% notes due 2004, $300 million 6.65% notes due 2006, $300 million 6.80% notes due 2008, $400 million 7.40% notes due 2016, $400 million 7.50% notes due 2028, $400 million 8.750% notes due 2004, $250 million 9.375% notes due 2007, $250 million 9.750% notes due 2010, $100 million 9.950% notes due 2020, €200 million 6.250% notes due 2006 and $500 million 8.50% notes due 2012 at Caa1. The confirmation ends a review for downgrade begun in January 2003.

Moody's said the review was prompted by the continuing uncertainty and possibly worsening conditions surrounding Petroleos de Venezuela's ability to resume some level of normal operations after the strike that began in December 2002 and that seriously curtailed PDVSA's production and exports of crude oil and products.

The confirmation reflects sustained improvement in production, exports and collections; the ability of PDVSA Finance to comply with the debt service coverage ratio and the debt to equity ratio throughout the crisis; and the resolution of the two-month strike that virtually stopped all the company's production and exports, Moody's said.

PDVSA Finance's debt service coverage ratio has remained above the 4:1 level that triggers the retention of receivables. Supported by the recovery in collections, the debt service coverage ratio has improved in April to 5.8 times, as compared to 4.5 times in March 2003. Furthermore, the debt to equity ratio that PDVSA Finance is obligated to maintain at a level below 7:1 times, has remained stable at approximately 4 times.

S&P revises Rose Hills outlook

Standard & Poor's revised its outlook on Rose Hills Co. to developing from negative and confirmed its ratings including its subordinated debt at CCC-.

S&P said the ratings reflect its concern about Rose Hills' ability to generate sufficient cash flow and/or obtain external funding to refinance its subordinated debt due in 2004.

The company received an equity investment of $45 million from Alderwoods, used toward retiring the company's $52 million of outstanding bank debt that was to mature in 2003. This transaction eliminated the refinancing risk for 2003, and increased the likelihood of a successful refinancing of its $80 million of subordinated debt due in 2004.

However, the still significant magnitude of debt due in 2004, and weak liquidity because of its reliance on cash reserves and no in-place borrowing facilities, remain significant concerns, S&P said.

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