Fitch confirms Vestel

Fitch Ratings confirmed Elektronik Sanayi Ve Ticaret AS's (Vestel)'s senior unsecured foreign currency rating at B- and local currency rating at BB-. The foreign currency rating is constrained by the Turkish sovereign rating and has a positive outlook in line with the sovereign rating. The outlook for the local currency rating is Stable.

Fitch said the ratings reflect Vestel's strong presence in the European color television market, good relationships with major European retailers and wholesalers, increased customer diversification, competitive and low-cost television manufacturing, quality products and positive net free cash flow generation.

Vestel has been expanding its production capacity, enabling it to benefit from economies of scale, purchasing power in material procurement and flexibility in manufacturing, Fitch noted. Its competitiveness has also been enhanced by its increasing technological competence and geographical diversification efforts, as well as Turkey's proximity to Europe and its membership of the European Customs Union.

On the other hand, pricing pressures, competition on core products, short product and technology cycle, a likely prolonged strengthening of Turkish lira and a possible decline in operating profit margins are the risks facing Vestel.

Vestel achieved a more balanced debt maturity profile in 2002, following a $200 million bond issue in May 2002 and a €75m private placement in October 2002. This has eased its financial risks as the debt rollover pressure on management has decreased, Fitch said. In contrast to previous years, Vestel now enjoys a cash-rich position backed by strong net free cash flow generation in the first half of 2003.

S&P confirms Resource America, off watch

Standard & Poor's confirmed Resource America Inc. including its $115 million 12% senior notes due 2004 at B- and removed it from CreditWatch negative. The outlook is negative.

S&P said the confirmation and removal from CreditWatch reflect alternative financing, including announced asset sales, that would allow Resource America to repay its looming 2004 debt maturities without its proposed debt offering that is awaiting SEC approval.

However, the outlook remains negative and Resource America's ratings may be susceptible to a future ratings downgrade partially due to the potential liability presented by Atlas Pipeline Partners LP's acquisition of the Alaska Pipeline Co. from Semco Energy Inc., S&P said. Resource America is the general partner of Atlas.

As part of the financing, Friedman Billings Ramsey Group is making a $25 million preferred equity investment in Atlas, guaranteed by Resource America as the general partner, that is to be repaid through the issuance of additional Atlas partnership units in the near term. If Atlas is unable to repay Friedman, Resource would be liable for the repayment of the $25 million over an 18-month period that begins shortly after Resource America's senior notes mature in August 2004, potentially impairing liquidity.

To assure smooth repayment of 2004 debt maturities, Resource America also needs to complete recapitalizations of two of its real estate holdings. Resource America has stated that these financings will be completed by year's end. Failure to secure these financings likely would result in a ratings downgrade, S&P said.

S&P confirms Colowyo

Standard & Poor's confirmed Colowyo Coal Funding Corp.'s $192.8 million senior secured bonds due 2011 and 2016 at BB and maintained a negative outlook.

The Colowyo transaction securitizes the coal production payments generated from three coal sales contracts between the Colowyo mine and six electric utility coal purchasers: Tri-State (A/stable), Salt River (AA/stable), PacifiCorp (A/negative, Platte River (AA-/positive), Public Service Co. of Colorado (BBB+/watch pos) and the city of Colorado Springs (AA-/stable).

If Colowyo were a tightly structured transaction, the rating on the transaction would have reflected the lowest of the ratings among the counterparties involved using S&P's weak-link approach. However, because the transaction has some significant structural weaknesses, its rating is significantly below that of the counterparties.

The primary structural weakness of the transaction is a broadly defined force majeure clause contained in the coal sales contracts that allows the purchasers to take less coal during force majeure events, S&P said. This weakness is especially problematic for this transaction because the coal purchasers have the incentive to take advantage of this clause given that the contract price of coal is substantially higher than the current market price.

In the late 1990s, the coal purchasers made a series of force majeure claims that drove the debt service coverage from operations below 1.0x. On several occasions, the transaction was able to avoid a debt service payment default because the transaction had enough debt service reserve to cover the shortfall.

Colowyo, through a legal challenge, was able to invalidate many of the coal purchasers' force majeure claims and, as part of the settlement process, have the purchasers agree to a tighter definition of a force majeure event. Since the court ruling and the settlement in 2000, the coal purchasers have not made any significant force majeure claims and the debt service coverage has been very close to 1.0x in the past two and half years, S&P said.

Moody's puts SBS Broadcasting on upgrade review

Moody's Investors Service put SBS Broadcasting SA on review for possible upgrade including its €135 million senior notes due 2008 at B2.

Moody's said the review reflects the solid improvements in the company's financial performance over the past 18 months and the potential for a substantial further improvement in the company's financial position depending on the result of the proposed sale of the company's equity stake in Polish TV broadcaster TVN SP. zoo.

The review follows SBS' half year results, reported earlier this year, and the recent announcement that the company has entered into a share purchase agreement to sell its 30.4% stake in TVN to a wholly-owned subsidiary of ITI Holdings SA for €131.5 million in cash, Moody's added.

The sale is dependant on the buyer securing the necessary financing to fund the transaction.

Apart from the potential de-leveraging effect of the proposed TVN transaction, the review also reflects SBS' strong financial progress over the past 18 months. Over this period, the company has increased revenues while maintaining tight cost controls, allowing for a substantial increase in both operational and free cash flow levels.

For the 12 months ending 30 June, 2003, the company increased revenues to €538.5 million (2001: €479.9 million) while EBITDA increased to €54.5 million (2001: €20.9 million), Moody's said.

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