S&P rates new Doane Pet notes B-, still on watch

Standard & Poor's assigned a B- rating to Doane Pet Care Co.'s planned $200 million senior unsecured notes due 2008 and said the remaining ratings remain on CreditWatch with negative implications including its senior secured bank loan at B+ and subordinated debt at B-.

However once the proposed note deal is completed S&P expects to remove Doane Pet from watch and confirm the existing ratings.

The proposed note issue is expected to reduce the company's annual debt amortization requirements and provide relief under tight bank covenants, S&P said.

S&P said Doane Pet is on watch because its credit protection measures have fallen below the rating agency's expectations and the company has limited cushion under its bank loan financial covenants.

S&P says no change to Advantica

Standard & Poor's said Advantica Restaurant Group Inc.'s ratings and outlook are unchanged following the company's announcement it sold its subsidiary FRD Acquisition Co. for $32.5 million. S&P gives Advantica a corporate credit rating of B- on CreditWatch with developing implications.

S&P said the divestiture is positive because it improves the company's liquidity position but Advantica still needs to refinance its revolving credit facility due Jan. 7, 2003.

S&P keeps most US Airways ratings on watch developing

Standard & Poor's said US Airways Inc.'s ratings remain on CreditWatch with developing implications except those on which it has defaulted.

The announcement follows condition approval from the Air Transportation Stabilization Board for a $900 million loan guaranty on a planned $1 billion credit facility.

ATSB approval is conditioned on successful conclusion of concessionary contracts with labor groups (tentative agreements have been reached with the pilots and flight attendants), cost savings from selected aircraft lease and debt restructurings (which are in the process of negotiations), and providing more compensation (e.g., warrants) to the U.S. government for providing the guaranty, S&P noted.

Ratings on CreditWatch will be raised if these conditions are met and the loan guaranty granted, S&P said.

Ratings will be lowered (and US Airways will very likely file for bankruptcy) if the conditions are not met and the loan guaranty application rejected, S&P added.

Moody's puts Amerco on review

Moody's Investors Service put Amerco on review for possible downgrade. The action affects $800 million of debt including Amerco's senior unsecured notes and medium-term notes at Ba1.

Moody's said it began the review because of concerns over the weakened financial performance of the company's Republic Western insurance subsidiary, and the need for Amerco to file for an extension to complete the audit of its financial statements and release consolidated financial results.

Moody's also noted that Amerco recently closed a new $205 million bank credit facility, which is reduced in size from the company's previous facility, and that the company intends to make greater use of capital markets transactions as part of its funding strategy.

Moody's said its review will look at the business and financial prospects at Republic Western going forward; the adequacy of regulatory capital at the insurance subsidiary and the implications for Amerco of any potential actions to support its subsidiary.

The review will also assess the outlook for Amerco's core truck rental business as well as the financial impact of any adjustments following the full consolidation of the operations of Storage Acquisition Corp., an affiliated company which holds certain real estate used in Amerco storage operations.

S&P may change Westar outlook

Standard & Poor's said it may change its negative outlook on Westar Energy Inc. (formerly Western Resources) to stable or even positive once debt is pared down. The corporate credit rating for Westar is BB+.

S&P made its comments after Westar received approval from the Kansas Corporation Commission to sell its $971 million (45%) investment in ONEOK Inc., providing that net proceeds are used to reduce debt.

S&P said that although the sale would result in substantial tax payments available proceeds of the nearly $740 million to repay debt would restore balance to Westar's liberally leveraged capital structure.

Disposal of the ONEOK stock would reduce the level of steady dividends, but S&P said the deleveraging is a more critical near-term goal in supporting the company's creditworthiness.

S&P lowers Poindexter

Standard & Poor's downgraded J.B. Poindexter & Co. Inc. including cutting its $100 million 12.5% senior notes due 2004 to B- from B. The outlook is negative.

S&P said the action is in response to financial performance well below the rating agency's previous expectations.

Cash generation continues to weaken, with EBITDA declining more than 66% to $2.3 million in the first quarter of 2002, compared with $6.8 million in the first quarter of 2001, S&P noted.

Those figures result in total debt to EBITDA of 5.4 times, versus S&P's previous expectations of total debt to EBITDA in the 3x to 4x range.

Financial leverage is not expected to improve in the near term because many of Poindexter's markets are soft, S&P said.

Additionally, Poindexter faces significant refinancing risk during the next 24 months as its $85 million senior unsecured notes and $40 million bank credit facility mature.

S&P rates Katun, Parts Now! bank loan B+

Standard & Poor's assigned a B+ bank loan and corporate credit rating to Katun Corp. and Parts Now! LLC. The outlook is positive.

S&P said the ratings reflect Katun's and Parts Now!'s good positions in niche office-equipment-parts distribution markets, a relatively small revenue and earnings base, and leveraged financial profile.

On July 5, Katun, a distributor of copier parts and supplies, was acquired by the owner of Parts Now!, a distributor of replacement parts to the laser printer industry, in a leveraged, privately sponsored transaction, S&P said.

Katun and Parts Now! will be managed separately but affiliated under a single holding company. Pro forma combined revenues for the 12 months ended April 2002 revenues were $440 million.

The combined company has a leading position within the fragmented and highly competitive niche of the non-original equipment manufacturer office-parts distribution industry, S&P said. The combined company should benefit from growth in the installed base of office copiers and laser printers, a diverse customer base, and Katun's broad geographic presence.

Both Katun and Parts Now! have had consistent records of profitability and positive free operating cash flow. S&P said it expects pro forma EBITDA interest coverage to exceed 2 times. Pro forma total debt (including capitalized operating leases) to EBITDA for the 12 months ended April 2002 is about 4x.

S&P added that it expects free cash flow to be used to reduce leverage. Adequate financial flexibility is provided by a $28 million revolving credit facility.

S&P rates Swift & Co.'s loan BB; notes B+

Standard & Poor's rated Swift & Co.'s proposed $550 million senior secured credit facilities at BB, $400 million senior unsecured notes due 2009 at B+ and corporate credit rating at BB. The outlook is stable.

The credit facilities will consist of a $350 million revolver due 2007 and a $200 million term loan B due in 2008. Security is the stock of all borrowers and all stock and assets of borrowers and their wholly-owned domestic subsidiaries. Proceeds from the term B and the notes will be used to help fund the $1.2 billion acquisition of ConAgra Foods Inc.'s meat processing business.

Ratings reflect relatively high debt levels offset by the company's number 3 position in both the U.S. beef and pork processing industries, a diverse customer base and high barriers to entry, S&P said.

Pro forma for the acquisition, lease adjusted total debt to EBIDTA will be about 2.9 times and EBIDTA coverage of interest expense is expected at around 3.0 times.

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