Moody's rates Warnaco notes B2

Moody's Investors Service assigned B2 rating to Warnaco Inc.'s proposed $210 million issue of guaranteed senior unsecured notes due 2013. The outlook is stable.

Moody's said Warnaco's ratings are constrained by the company's initial weak cash generation and the anticipated need for a potential repositioning of certain brands and reduction in owned manufacturing facilities in favor of a higher outsourcing mix. Further, the ratings are constrained by the price deflation at retail, as well as the uncertain impact of unpredictable consumer demand and a pending SEC investigation.

The ratings reflect the scale and the breadth of the company's portfolio of brands which cover a variety of market segments, pricing points and distribution channels; significant market share in swimwear and intimate apparel; reduced exposure to operating outlet stores; as well as improved operating margins and reduced leverage upon emergence from bankruptcy.

The stable rating outlook is based on the company's historical ability to maintain high revenue levels despite bankruptcy and the limited risk to earnings from the brands challenged by merchandizing or design issues (which Moody's estimates at less than 30% of revenues).

Warnaco emerged from bankruptcy on February 4, 2003 with a cleaner balance sheet and a reduced cost structure, Moody's noted. While in bankruptcy, the company exited from non-core or underperforming assets. In addition, approximately $2.2 billion of the pre-petition debt was forgiven, giving Warnaco much greater financial flexibility.

Pro forma lease adjusted leverage for the issuance of the new notes is modest, at approximately 2.4 times, as measured by adjusted total debt-to-EBITDAR, Moody's said. Pro forma interest coverage, as measured by EBIT-to-interest expense, is moderate at over 4 times for the 12 months ending April 5, 2003.

S&P cuts Bluewater

Standard & Poor's downgraded Aurelia Energy NV including cutting Bluewater Finance Ltd.'s $335 million 10.25% notes due 2012 to B from B+ and Bluewater Holding BV's $600 million revolving credit facility due 2009 to BB from BB+. The outlook is stable.

S&P said the downgrade reflects the continuing challenges faced by Bluewater to commission one of its vessels, the Glas Dowr, and to improve its stretched credit protection measures.

Bluewater announced on May 30, 2003, that it expected an additional cost overrun of about $25 million on the commissioning of the Glas Dowr, as well as slightly lower EBITDA than forecast for first-quarter 2003, negative operating cash flow and a $30 million increase in debt, S&P noted.

The Glas Dowr is now on schedule to achieve first oil in August instead of June 2003, generating revenues under a 10-year contract (minimum duration of three years) on the Sabre field in South Africa.

S&P said it expects Bluewater to be able to improve key credit protection measures to levels consistent with the current rating, including EBITDA to total interest (including capitalized interest and the non-cash interest payment on a subordinated shareholder loan) above 3x.

Moody's rates Dayton Superior notes B3

Moody's Investors Service assigned a B3 rating to Dayton Superior Corp.'s proposed new $150 million senior second secured notes and confirmed its existing ratings including its senior secured bank credit facility at B2 and senior subordinated notes at Caa2. The outlook is negative.

Moody's said Dayton Superior's ratings reflect its heavy debt leverage, negative book and tangible net worth, weakened debt protection measures, event risk and integration risk associated with its acquisition growth strategy, and the possibility that future transactions will add to the debt burden.

At the same time, the ratings consider Dayton Superior's leading market share position in its three core product lines (concrete accessories, concrete forming systems, and paving products), considerable product breadth, low cost structure and national distribution system, significant purchasing power as the leader in the markets it serves, and its 78-year history.

The negative ratings outlook reflects Moody's expectations that commercial construction markets will remain weak into 2004 and that institutional and infrastructure construction markets are not likely to provide significant lift to the company's operations in 2003.

Pro forma for the issuance of $150 million of senior second secured notes and repayment of $143 million of the $153 million of bank debt currently outstanding, total debt/EBITDA for the 12 month period ended March 31, 2003 would have been 5.4x, Moody's said. Given the current expectations for reduced EBITDA for the balance of 2003, total debt/EBITDA could reach nearly 6x by year-end before trending down in subsequent years.

Moody's rates United Components notes B3, loan B1

Moody's Investors Service assigned a B3 rating to United Components, Inc.'s planned $255 million guaranteed senior subordinated unsecured notes maturing 2013 and a B1 rating to its proposed $50 million guaranteed senior secured bank term loan A due 2009 and $275 million guaranteed senior secured bank term loan B due 2010. The outlook is stable.

Moody's said United Components' ratings reflect its high pro forma leverage, together with Moody's concerns regarding whether United Components' current revenue base and margins will be sustainable and additionally whether the company's working capital investment can be contained.

The rating agency notes the highly fragmented and competitive markets in which United Components operates; the still-prevalent trend toward consolidation of aftermarket retailers, which tends to shrink market-wide inventory requirements and heighten price compression; initiatives by several retailers to also become installers in an effort to broaden their traditional customer bases and drive further consolidation of aftermarket channels; and the concentration of United Components' overall revenues with AutoZone. No other customers account for more than 5% of United Components' revenue base.

United Components' financial plan assumes modest improvements in operating margins as a result of capital investments in progress within the filtration products business line, planned back office consolidation of the six business segments and implementation of lean manufacturing techniques under the pending new ownership by The Carlyle Group. However, there is no assurance today that these margin improvements will actually be realized, Moody's said.

While the proposed $65 million revolving credit facility will be undrawn at closing and fully available to United Components, Moody's said it believes that this facility provides only marginal liquidity protection in light of the company's more than $900 million revenue base and significant working capital requirements.

The rating assignments and stable outlook more favorably reflect that United Components is one of North America's largest "pure-play" automotive aftermarket suppliers, with number 1 market positions for approximately 66% of overall revenues and leading market positions for the balance of its product lines and geographic markets. The breadth of United Components' product line and the geographic diversity of the company additionally serve as effective barriers to entry, Moody's said.

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