S&P ups GTech outlook to positive

Standard & Poor's revised the rating outlook on GTech Holdings Corp. to positive from stable and confirmed its ratings, following steady operating results over the last several quarters, resulting in a strengthening of credit measures.

S&P said it expects credit measures will remain good for the rating intermediately, given a strong market position and revenue visibility, despite several recent acquisitions and the initiation of a dividend.

In addition, the solid balance sheet provides some cushion for growth opportunities.

Based on current operating trends, operating lease-adjusted total debt to EBITDA is expected to be around 1x and EBITDA coverage of interest expense around 20x for the fiscal year ended February 2004.

At May 31, GTech had $131 million of cash and short-term investments. In addition, it has a $300 million revolver maturing June 2006 under which there is currently full availability.

Liquidity should continue to be adequate in the near term due to significant expected free cash flow generation, meaningful availability under its revolving credit facility and light maturities.

However, debt levels are not likely to decrease significantly as the company expects to use a majority of free cash flow for dividends, growth opportunities and share repurchases.

Moody's puts Barnes & Noble on review for possible downgrade

Moody's Investors Service placed the ratings of Barnes & Noble Inc. on review for possible downgrade, including its 5.25% convertible at Ba3, following its plans to acquire the portion of Barnes & Noble.com now owned by Bertelsmann AG for $164 million in cash and notes.

Moody's does not anticipate that the acquisition will significantly change debt metrics or overall enterprise value but senior debt will rise to finance the acquisition.

Barnes & Noble recently used excess cash balances to finance the purchase of Sterling Publishing, but expects its bank revolver will maintain sufficient unused capacity to finance operating needs.

The review will focus on consolidated and deconsolidated financial positions, particularly as an increased portion of the consolidated financial performance will be derived from businesses in which Barnes & Noble will not have full ownership.

This is particularly important to the rating of the convertible notes, as they are issued by the holding company without guarantees of operating subsidiaries or majority-owned businesses.

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