S&P cuts HealthSouth, still on watch

Standard & Poor's downgraded HealthSouth Corp. and kept it on CreditWatch with negative implications. Ratings lowered include HealthSouth's $1 billion 7.625% notes due 2012, $1.25 billion senior unsecured revolving credit facility due 2007, $200 million 7.375% senior notes due 2006, $250 million 6.875% senior notes due 2005, $250 million 7% senior notes due 2008, $375 million 8.5% senior unsecured notes due 2008 and $400 million 8.375% senior notes due 2011, cut to BB- from BB, and $350 million senior subordinated notes due 2008 and $568 million 3.25% convertible subordinated debentures due 2003, cut to B from B+.

S&P said the downgrade reflects HealthSouth's weaker-than-expected operating results and the announcement of significant charges taken in the fourth quarter of 2002.

The continuing CreditWatch reflects the company's uncertain liquidity position as it seeks an amendment on its bank facility.

Before taking further rating action, S&P said it will monitor HealthSouth's progress in attaining a bank amendment to determine its liquidity as well as its progress in the completion of a necessary note refinancing. The terms of a possible bank facility amendment sought by the company will be an important factor in assessing its liquidity.

A key component of the company's decline in operating performance was a 25% decrease in revenues in its outpatient rehabilitation business in the fourth quarter, the rating agency noted. This decrease was driven by the company's required adoption in 2002 of Medicare's billing methodology for the reimbursement of outpatient therapy. There has also been a significant decline in patient volume. The overall adverse effect on the business was more severe than originally anticipated.

In addition, the company took $630 million in total charges in the fourth quarter. Of this, $175 million relates to accounts receivables and bad debt reserves, indicating a measure of overstatement in historical earnings, S&P said. A large portion of the remaining charges ($256 million) is for restructuring - part of the company's response to changes in outpatient therapy reimbursement.

S&P puts Neenah Foundry on watch

Standard & Poor's put Neenah Foundry Co. on CreditWatch with negative implications including its $125 million term B loan due 2005 and $20 million term A loan due 2003 at B- and $150 million 11.125% senior subordinated notes series B due 2007, $45 million 11.125% senior subordinated notes series D due 2007 and $87 million 11.125% senior subordinated notes series F due 2007 at CCC.

S&P said the watch placement is because it is concerned that Neenah Foundry's limited liquidity, significant debt obligations, and near-term refinancing risk could lead to a restructuring of the company's debt or a potential default.

Neenah Foundry faces approximately $40 million of debt maturities in the near term, as the company's $29.6 million revolving credit facility (which had approximately $28.5 million drawn as of Dec. 31, 2002) matures in September 2003, and the company has about $12 million in debt amortization payments associated with various term loans, S&P noted. In addition, interest payments associated with the company's subordinated notes total more than $30 million annually (payments are due on May 1, and Nov. 1).

It appears that without a significant improvement in operating performance or an equity infusion, the company will likely not be able to meet its debt obligations, S&P added. As of Dec. 31, 2002, Neenah Foundry had about $26 million in cash on the balance sheet. However, that balance was expected to decline due to normal working capital usage in the firm's second quarter.

S&P puts Azteca on watch

Standard & Poor's put Azteca Holdings SA de CV on CreditWatch with negative implications including its $128.97 million 12.5% notes due 2005 and $150 million 10.5% notes due 2003 at B-. S&P also confirmed TV Azteca SA de CV including its corporate credit rating at B+ with a stable outlook.

S&P said the watch placement is in response to the announcement that Azteca Holdings has begun an offer to exchange its outstanding 10½% senior secured notes due 2003 for new 10¾% senior secured amortizing notes due 2008.

S&P said it will meet with management to discuss the terms of the exchange offer and the potential alternatives to pay the bondholders that do not agree to the exchange, given the prevailing difficult conditions in the international capital markets and the proximity of the maturity of the 10½% bonds.

S&P rates Overseas Shipholding notes BB+

Standard & Poor's assigned a BB+ rating to Overseas Shipholding Group Inc.'s new 10-year $200 million note offering and confirmed its existing ratings including its senior unsecured debt at BB+. The outlook is stable.

Proceeds from the notes will repay $70 million of notes maturing in December 2003 and a portion of the outstanding bank revolver balance.

This transaction extends the near-term maturity of the debt structure and frees up borrowing capacity on the bank revolver, S&P noted.

Overseas Shipholding's ratings reflect the company's participation in the volatile, highly fragmented, and fixed capital-intensive bulk ocean shipping industry, S&P added. The company's position as a major operator of tankers, a relatively solid balance sheet, and good access to liquidity are positives in the credit profile.

Tanker rates increased dramatically in the fourth quarter of 2002, reversing declines during the second half of 2001 and most of 2002, and have remained high, reflecting a cold winter, war premiums associated with a potential conflict with Iraq, and an extension of transit time to supply North America due to the oil company strike in Venezuela, S&P said. Although rates may moderate from the current high levels, industry fundamentals over the near to intermediate term are expected to remain favorable. Additional rate increases and long-term charter contracts for quality modern tankers are possible due to environmental concerns after the November 2002 sinking of the tanker Prestige off the coast of Spain.

Overseas Shipholding's operating margin after depreciation and amortization for 2002 was 17%. At Dec. 31, 2002, lease-adjusted debt to capital was 58%, with lease-adjusted debt to EBITDA of 9.7x and pretax interest coverage of only 0.6x, S&P said. These numbers reflect the poor tanker market for most of 2002. For 2003, these figures are expected to improve to levels similar to those recorded in 2000 and 2001 (2001 operating margin of 53%, lease-adjusted debt to EBITDA of 3.4x and pretax interest coverage of over 3x) when the tanker rate environment was quite robust.

S&P cuts Fiat to junk

Standard & Poor's downgraded Fiat SpA to junk, cutting its short-term rating to B from A-3 and assigning a BB+ long-term corporate credit rating. The ratings were removed from CreditWatch with negative implications and assigned a negative outlook.

S&P said the long-term rating on Fiat reflects its participation in industry segments that are cyclical and in the midst of rapid consolidation, as well as the group's weak cash flow generation prospects and its aggressive financial leverage.

The downgrade follows Fiat's announcements that it will sell two relatively well performing businesses. Through the imminent sale of these businesses, Fiat will reduce its ongoing earnings and cash flow generating ability. Moreover, the planned conversion to equity of €3 billion ($3.3 billion) of intragroup loans to its problem-plagued auto unit, Fiat Auto Holding BV, puts in further doubt Fiat's ultimate ability to receive value for its investment in Fiat Auto, S&P said.

S&P added that it does not believe Fiat's credit measures will return to levels appropriate for an investment-grade rating in the foreseeable future.

The negative outlook reflects the possibility of a further downgrade should the negative free operating cash flow at Fiat Auto exceed its impending capital infusion, or should Fiat's performance otherwise lag management's publicly stated targets, S&P said.

S&P confirms CNH

Standard & Poor's confirmed CNH Global NV including Case Credit Corp.'s senior unsecured debt at BB. The outlook is stable.

S&P said the confirmation follows its downgrade of to CNH's 85.3% equity owner Fiat SpA to junk including cutting Fiat's short-term corporate credit rating to B from A-3 and the assignment of a BB+ long-term corporate credit rating.

CNH's ratings reflect the firm's average business profile as one of the world's two leading agricultural equipment producers and third-largest manufacturer of construction equipment, offset by weak credit measures that are expected to improve only gradually over the intermediate term, S&P said.

Ratings also factor in Fiat's strong liquidity support, in the form of intracompany loans and loan guarantees, and large equity investment. As a stand-alone entity, ratings on CNH would likely be significantly lower, S&P added.

Although CNH has made significant progress on its multiyear cost-reduction program, operating performance remains weak, reflecting very challenging industry conditions, S&P said. For 2002 CNH lost $101 million, before the cumulative effect of an accounting change, a reduction from the 2001 $242 million loss, excluding 2001 goodwill amortization charges.

CNH's operations could become profitable (before restructuring charges) in 2003, based on new lower-cost, higher-margin product introductions, and additional cost-reduction benefits, S&P said. Moreover, CNH will benefit from an eventual market recovery.

S&P says AES unchanged

Standard & Poor's said AES Corp. is unchanged including its corporate credit rating at B+ with a negative outlook in response to recent developments in Brazil.

AES has disclosed that certain bankruptcy events at "material subsidiaries" will cross-default to AES' unsecured notes, S&P said.

AES has indicated that neither AES ELPA nor AES Transgas is a material subsidiary for purposes of bankruptcy-related events of default contained in AES' parent company indebtedness documentation.

Therefore, neither default, foreclosure, nor bankruptcy of ELPA or Transgas, or the foreclosure of BNDES on AES' equity interests would constitute an event of default under any of AES' parent level indebtedness, S&P said.

However, Eletropaulo is a material subsidiary for purposes of bankruptcy-related events of default contained in AES' indenture for its unsecured notes (not in its recently issued senior secured bank facility or senior secured exchange notes). Therefore, a bankruptcy-type proceeding at Eletropaulo would be an event of default for the unsecured notes, S&P added.

Moody's raises Select Medical

Moody's Investors Service upgraded Select Medical Corp. including raising its $175 million 9.5% senior subordinated notes due 2009 to B2 from B3. The outlook is stable.

Moody's said the upgrade reflects Select Medical's ongoing improvements in operating trends, which have led to a strengthening in the company's credit profile. Leverage (Debt/EBITDA) has declined to 2.0 times at Dec. 31, 2002 from 3.2 times pro forma for the 12 months to March 31, 2001.

In addition, the upgrade reflects the resolution of certain issues that were of concern to Moody's when the ratings were originally assigned, specifically the greater clarity surrounding the previously uncertain impact that the transition to the new prospective payment system for LTACHs may have had on the company's performance.

The stable outlook anticipates a continuation of favorable overall operating trends, with growth in revenues and EBITDA in the mid-teens range along with relatively stable margins, Moody's added. The rating agency said it expects a portion of cash flow will be used for de novo expansion and acquisition activity going forward but also anticipates that the company will continue to reduce debt.

Moody's puts Jupiters on upgrade review

Moody's Investors Service put Jupiters Ltd. on review for possible upgrade including its $135 million senior unsecured notes due 2006.

Moody's said it began the review after Jupiters and Tabcorp Holdings Ltd. said they propose to merge and have agreed to an exclusivity period for negotiations.

S&P rates GXS notes B+, upgrades loan

Standard & Poor's assigned a B+ rating to GXS Corp.'s planned $175 million floating-rate notes due 2008 and upgraded its $40 million revolving credit facility due 2007 to BB+ from BB-. The outlook is negative.

Proceeds from the proposed notes issue will be used to repay GXS' existing $175 million senior secured term bank loan.

S&P said the upgrade to the loan reflects significantly improved recovery prospects following repayment of the term loan.

The $175 million senior secured notes are rated one notch below GXS' corporate credit rating, reflecting the amount of bank debt with first priority liens in the capital structure. The notes have second-priority liens on the same assets.

The ratings reflect a narrow business profile and limited financial flexibility, offset by a good competitive position and recurring revenue streams, S&P said.

EBITDA margins have recovered to the high 20% area, following the completion of cost-reduction actions implemented over the past two years, S&P added. Pro forma debt to EBITDA is below 4x, and EBITDA interest coverage is expected to fall slightly below 3x. Lower capital expenditures levels, about $40 million annually, should help sustain modest levels of free cash flow.

The negative outlook reflects GXS' limited track record of both operating as an independent company and sustaining profitability improvements following its recent cost restructuring actions, S&P said.

Moody's puts Provident on review

Moody's Investors Service put Provident Financial Group Inc and subsidiaries on review for possible downgrade including its senior debt at Baa3 and preferred stock at B1.

Moody's said the review is in response to Provident's announcement that it restated operating results for years 1997 through 2002. During those years, net income was overstated by a total of $70.3 million.

Moody's said the review will examine the adequacy of Provident's restated core earnings in providing protection to creditors when related to Provident's current risk profile. The review will also focus on Provident's systems and procedures, an area that Moody's had perceived to have improved in recent years.

Moody's rates Moore notes B1, loan Ba2

Moody's Investors Service assigned a B1 rating to Moore North America Finance Inc.'s proposed $400 million of senior unsecured notes due 2013 and a Ba2 rating was assigned to Moore North America, Inc.'s proposed $850 million senior secured credit facility made up of a $350 million senior secured revolving credit facility due 2008 and a $500 million senior secured term loan B due 2010. Moody's also confirmed Moore Corp. Ltd.'s existing ratings including its $125 million senior secured revolver due 2007, $75 million senior secured term loan A due 2007 and $200 million senior secured term loan B due 2007 at Ba2. The outlook is stable.

The action a review for possible downgrade begun on Jan. 17 following the announcement of a definitive merger agreement between Moore and Wallace Computer Services, Inc.

The ratings reflect the competitive, technological, and pricing pressures that are likely to continue to impact Moore's business, combined with the risks involved in successfully integrating an acquisition as large as Wallace, Moody's said. In addition, the ratings recognize the acquisitive nature of Moore and the potential for additional acquisitions in the intermediate-term afforded by availability under its proposed bank revolver.

The ratings are supported by the merged entity's increased scale, free cash flow, moderate leverage and long-standing reputation in the forms and labels, outsourcing, integrated graphics, and commercial printing businesses, Moody's added.

Both Moore and Wallace experienced a general decline in sales during 2002 compared to 2001, in part from exiting non-core lines of business, although some niche businesses experienced improved results, Moody's said. This decline in sales was also reflective of increasing commoditization, overcapacity, electronic substitution, and a prolonged economic downturn. Both companies have reacted to these industry pressures by reducing operating expenses through plant rationalizations and headcount reductions.

Since the beginning of 2001, Moore's focus on leveraging its purchasing synergies, reducing its operating expenses (staff reductions of 4,000), managing discretionary spending and attaining manufacturing efficiencies, has resulted in significant EBITDA improvement. Moore's management team believes that it can obtain pro-forma cost savings of approximately $50 million through the achievement of synergies at Moore Wallace.

The rating recognizes the increase in Moore's leverage profile, which Moody's estimate will grow to approximately 2.6 times at closing (estimated for 2Q03) from one times at the end of 2002. Moody's expects that Moore Wallace will use its free cash flow to bring leverage back down to current levels by 2006.

The stable outlook incorporates Moody's expectation of a continuation of the positive free cash flow results and manageable sales erosion presently recorded by both companies.

S&P rates Playboy notes B

Standard & Poor's assigned a B rating to the planned $110 million senior secured notes due 2010 of PEI Holdings, a subsidiary of Playboy Enterprises, Inc. The outlook is stable.

The ratings on Playboy reflect the company's significant presence in the non-cyclical adult entertainment industry, strong brand recognition, and good direct-to-home satellite TV coverage, S&P said. These factors are balanced by the proliferation of free adult materials online, declining newsstand sales of the magazine, weak cable TV distribution due to the narrow audience for paid adult content, and high financial risk.

Even though Playboy's TV networks are not as widely available as broader interest pay TV networks, Playboy's original content enables the company to enjoy an above-average PPV revenue split in the adult category, S&P said. Through a recent restructuring, Playboy gained full ownership of most of the international TV networks, but integration and building international cash flow will be near-term challenges.

Despite a secular decline in newsstand sales and fewer ad pages, Playboy magazine remains the best-selling men's monthly magazine. The company's online group consists of Playboy and Spice branded websites, which generate revenues mainly through subscriptions, product sales, and advertising.

Although sales are generated from several revenue streams, the company exhibits significant cash flow concentration. Playboy's pay TV networks contribute more than 40% of consolidated revenue and more importantly, the vast majority of company's free cash flow. Print publications generate a similar percentage of overall revenue but their cash flow contribution is minimal, reflecting both a high cost structure and the general competitiveness of the print industry, S&P added. Playboy's online group was in investment mode during the past several years. Since the fourth quarter of 2002, the online group has become profitable and cash flow positive due to a combination of rate increases and subscriber growth.

For the 12 months ended Dec. 31, 2002, pro forma EBITDA coverage of interest expense was adequate for the rating at about 1.8x compared to 0.5x for fiscal 2001, S&P said. Over the same period, the EBITDA margin increased to 8.5% from 2.4%, reflecting significant revenue improvement at the online group and ongoing cost-reduction efforts.

S&P rates Pinnacle Entertainment loan B+

Standard & Poor's assigned a B+ rating to Pinnacle Entertainment Inc.'s proposed $225 million senior secured bank facility and confirmed its B corporate credit rating. The outlook is stable.

Proceeds from the proposed bank facility will be used to help provide funding for several of the company's planned capital investments, including the Lake Charles development project, the Belterra expansion, and general corporate purposes, S&P said.

The ratings reflect the company's high debt levels, the expected increase in near-term capital spending, and construction risks associated with its Lake Charles development project. These factors are somewhat offset by steadily improving operating results, minimal near-term maturities, and adequate current liquidity, S&P added.

The company's future growth opportunities include the construction of a $325 million dockside gaming facility in Lake Charles, La. This market currently consists of two dockside casinos; a nearby Native American facility and a renovated racetrack with slot machines (racino). While the market has steadily grown, the Pinnacle project will increase capacity significantly, S&P said. The facility is likely to be the nicest in the Lake Charles area, however, being the last entrant, a ramping up period is likely in order to create customer loyalty and growth in the market.

EBITDA for the year ended Dec. 31, 2002, improved to $86.7 million, a 35% increase over the prior-year on improved performance at Belterra and Bossier City, in conjunction with lower corporate expenses, S&P said. Based on current operating trends and expected borrowings associated with planned capital spending, EBITDA coverage of interest expense and total debt to EBITDA are expected to be more than 1.5x and more than 6x, respectively, for 2003.

Moody's cuts Global eXchange, rates notes B1

Moody's Investors Service assigned a B1 rating to Global eXchange Services' planned $175 million senior secured floating rate notes due 2008 and lowered its existing ratings including cutting its $235 million VAR guaranteed senior subordinated notes due 2009 to B3 from B2. The existing $35 million guaranteed senior secured revolving credit facility and $175 million guaranteed senior secured term loan B due 2008 remain at Ba3 pending the refinancing; the term loan B rating will be withdrawn once the refinancing is complete. The outlook remains stable.

Moody's said the downgrade is in response to the continued decline in Global eXchange's OTMS business segment, partially offset by further growth in its EDI segment.

The OTMS deterioration has affected the company's financial performance, which is no longer consistent with a Ba3 rating, Moody's said. Further significant deterioration is possible, particularly in the face of continued weakness in information technology spending.

The ratings also incorporate the company's relatively high leverage as measured by debt/book cap, which stood at 94.6% at the third quarter of 2002. Given the company's debt levels, the performance of the relatively volatile OTMS segment is critical to the company's ability to meet its financial obligations, Moody's said.

These factors are partially offset by continued growth in the company's electronic data interchange business, which expanded 4.7% over the nine months ended Sept. 30, 2002 in a difficult business environment, Moody's said.

The stable outlook reflects Moody's belief that revenues and earnings from the OTMS segment are likely to stabilize.

Moody's rates Playboy notes B2

Moody's Investors Service assigned a B2 rating to the planned $110 million senior secured notes of PEI Holdings, Inc., a subsidiary of Playboy. The outlook is stable.

Moody's said The ratings reflect Playboy's cash flow profile driven by the marginal profitability of the company's core publishing entity coupled with the significant investments, which the company has made in recent years in its online and pay television businesses including sizable investments in programming (about $40 million annually).

Supporting the company's brand awareness through publishing is an expensive but potentially necessary business expense inhibiting margin expansion. Playboy's publishing segment has modest growth prospects and is costly to operate at management's desired level of quality. However, the quality of the

Playboy magazine is critical to the company's overall marketing strategy, Moody's said.

In addition, Playboy is highly levered with thin coverage of interest and capital expenditures. During Playboy's recent operating history, there has been little free cash flow given the difficult publishing climate and the start up nature of the company's online businesses, Moody's added.

However, the company's significant brand value, sizable market share and opportunities for growth, particularly regarding its pay television business offset Playboy's financial risk, Moody's said. Further, Playboy owns additional assets of value including an art collection, the "Playboy Mansion" and a video library. Importantly, Playboy has moved away from its reliance on the publishing assets and is now focused on its pay television and online businesses for future growth.

The stable outlook reflects the assumption that the restructuring at publishing and increasing the online subscriber base will improve profitability, Moody's said.

Playboy's leverage is high with (total debt + preferred stock)/adjusted EBITDA of 6.5 times and cash flow coverage is modest with (adjusted EBITDA-CapEx)/(interest + dividends) of 1.4 times at Dec. 31, 2002, pro forma for the refinancing, Moody's said.

S&P cuts Provident Financial

Standard & Poor's downgraded Provident Financial Group Inc. including cutting its $75 million 8.375% notes due 2032 to BB+ from BBB- and $75 million floating-rate subordinated notes due 2005 to BB- from BB+, Provident Bank's deposit notes to BBB- from BBB and $100 million 6.375% subordinated notes due 2004, $150 million subordinated bank notes due 2009 and $75 million 7.125% bank notes due 2003 to BB+ from BBB-, PFGI Capital Corp.'s $150 million REIT preferred stock to BB- from BB+, and its trust preferreds to B+ from BB. The outlook remains negative.

S&P said the downgrade reflects a greater degree of uncertainty regarding Provident's ability to generate earnings of reasonably consistent quality following the recent announcement that the company has had to restate its earnings for the past six years. The need to restate earnings was attributed to errors in the accounting for nine auto lease financing transactions originated between 1997 and 1999.

The restatement has resulted in a reduction of reported earnings for each of these years, with

a significant impact especially in years 2002 and 2001.

S&P said the restatement occurs at a time when it has concerns about several of the company's credit risk exposures in the current economic environment.

Consequently, it is not as clear what the company core earnings capacity is at a time when the need to generate a predictable stream of income to absorb potential asset quality problems is critical, S&P said.

S&P rates iStar notes BB+

Standard & Poor's assigned a BB+ rating to iStar Financial Inc.'s planned $150 million notes due 2008.

S&P keeps Sweetheart on developing watch

Standard & Poor's said Sweetheart Holdings Inc. remains on CreditWatch with developing implications including its subordinated debt at CCC- and Fonda Group Inc.'s subordinated debt at CCC-.

S&P said its continuing watch follows Sweetheart's announcement that the accelerated maturity date of its primary bank credit facility has been extended to July 1, 2003.

Bank borrowings under this $235 million line (about $180 million was outstanding as of Dec. 31, 2002) will be due on July 1, 2003, if the company has not exchanged or refinanced its $110 million senior subordinated notes due in September 2003 by then.

Sweetheart has offered to exchange its $110 million senior subordinated notes due in September 2003 for the same amount of senior notes with similar terms and conditions due in July 2004. If the exchange is executed under the proposed terms, S&P said it will deem it a distressed exchange and will lower the corporate credit rating to SD (selective default) and the rating on the Sweetheart notes to D.

Following a successful completion of the exchange offer, the corporate credit rating could be revised from SD to as high as B- to reflect the easing of refinancing pressures, S&P said.

The new senior notes would be rated two notches below the corporate credit rating, reflecting the significant amount of secured debt and operating leases ranking ahead of them in the capital structure.

S&P confirms Dole, rates notes B+, loan BB+

Standard & Poor's confirmed Dole Food Co. Inc., removed it from CreditWatch with negative implications and assigned a B+ rating to its planned $375 million senior unsecured notes due 2011 and a BB+ rating to its new $250 million senior secured term A loan due 2008, $300 million senior secured revolving credit facility due 2008 and $600 million senior secured term B loan due 2008. Ratings confirmed include Dole's $175 million 7.875% debentures due 2013 and $400 million 7.25% notes due 2009 at B+ and $300 million 6.375% notes due 2005 and $300 million 7% senior notes due 2003 at BBB-.

S&P noted it downgrade Dole to its current level following the company's announcement that it had signed a definitive merger agreement with David Murdock to acquire the approximately 76% of Dole's outstanding common stock that he or his affiliates do not currently own for $33.50 per share.

The ratings for the company's $300 million, 7% senior notes due in 2003 and $300 million, 6.375% senior notes due in 2005 were confirmed at BBB- as cash is available to redeem the issues at closing of the LBO.

The new senior notes are rated two notches below the corporate credit rating, reflecting their junior position to the large amount of secured debt in the capital structure pro forma for the leveraged buyout, S&P said.

Dole's new credit facility is rated one notch higher than the corporate credit rating. The facility will be secured by a first priority perfected security interest in substantially all tangible and intangible assets except certain excluded collateral. Based on S&P's discrete asset evaluation, which incorporates distressed asset values, the proceeds from the liquidation of the collateral are expected to be sufficient to cover the entire loan.

The ratings on Dole are supported by its leadership in the production, marketing, and distribution of fresh fruit and vegetables, S&P said. These factors are partially offset by the significant increase in financial risk related to the leveraged buyout and the high level of risk associated with the global fresh produce industry.

Furthermore, operating performance can be affected by uncontrollable factors such as global supply, political risk, currency swings, weather, and disease. These industry risks are somewhat mitigated by the company's geographic and product diversity in the fresh produce industry.

Pro forma total debt to operating EBITDA will be at the high end of the 4.0x range for fiscal 2003 and gradually improve as partial proceeds from divestitures and land sales, along with operating cash flow, are used to repay debt, S&P said. Pro forma operating EBITDA coverage for fiscal 2003 will be in the low 2.0x range.

Moody's confirms Ventas

Moody's Investors Service confirmed Ventas Realty LP's senior unsecured debt at Ba3. The outlook is stable. The confirmation concludes a review begun in October 2002 in response to the potential adverse impact on Ventas' performance of heightened uncertainty surrounding the operational and financial challenges facing the REIT's primary tenant, Kindred Healthcare, and the proposed financing structure of Ventas' portfolio acquisition given the firm's constrained credit profile.

The confirmation reflects Ventas' successful efforts to de-lever its balance sheet by raising $100 million in common equity and to diversify its tenant base through its $120 million THI portfolio acquisition, Moody's said. Moody's also views Ventas' efforts to deepen its management team and asset management platform as an important step in mitigating execution risk relating to the implementation of its long-term growth strategy.

The ratings continue to be constrained by the firm's exposure to a single tenant, Kindred Healthcare, and its highly leveraged capital structure and modest fixed charge coverage (1.9x) ratio relative to many of its peers, Moody's said.

But the rating agency added that the firm's high portfolio EBITDAR/rent coverage provides a healthy cash flow cushion, somewhat offsetting concerns surrounding the firm's low fixed charge ratios.

Moody's said it believes that Ventas' overall leverage profile has improved. Debt to EBITDA declined to around 4.0x at the end of 2002, compared to 5.2x at the first quarter of 2002.

S&P cuts Rogers Communications outlook

Standard & Poor's lowered its outlook on Rogers Communications Inc. to negative from stable and confirmed its ratings including its corporate credit rating at BB+.

S&P said the outlook change reflects its concerns about Rogers Communications' financial profile, particularly its leverage, which is high for the rating. Lease-adjusted total debt to EBITDA has increased to 5.9x in 2002 from 5.3x in 2001, largely due to negative free cash flows as the company completes its cable system upgrades.

Although capital spending for Rogers Communications' cable subsidiary is projected to decrease by about 20% in 2003 to approximately C$520 million, it is not expected to generate positive free cash flows until 2004 or 2005, S&P said.

As a result, debt levels are expected to increase in the medium term, albeit mitigated by continued EBITDA expansion.

S&P rates Moore notes BB-, loan BB+

Standard & Poor's assigned a BB- rating to Moore North America Finance Inc.'s planned $400 million senior notes due 2011 and a BB+ rating to its new $350 million senior secured revolving credit facility due 2008 and $500 million senior secured term B loan due 2010. Moore's ratings continue to be on CreditWatch with positive implications.

S&P said that if the acquisition of Wallace Computer is completed as planned it expects to confirm Moore's ratings with a positive outlook.

Based on its simulated default scenario, S&P said a distressed enterprise value is likely to provide a meaningful (in excess of 50%) recovery of fully drawn facilities for the bank lenders.

The BB- rating on Moore North America Finance is two notches below that of Moore Corp.'s long-term corporate credit rating, reflecting material priority indebtedness for the consolidated entity.

Moody's cuts PMA Capital to junk

Moody's Investors Service downgraded PMA Capital Corp.'s long-term debt to Ba1 from Baa3 and the insurance financial strength rating of PMA Capital Insurance Co. to Baa1 from A3, ending a review begun on Feb. 10. The outlook is negative.

Moody's put PMA on review for possible downgrade following its release of fourth quarter earnings due to concerns related to unexpectedly poor operating performance at PMA Capital Insurance, which included a $45 million pre-tax charge for adverse loss development on excess liability and professional liability lines for accident years 1998-2000, as well as liquidity concerns related to a rating trigger in the company's fully-drawn $65 million bank credit facility that becomes effective upon a one-notch downgrade of PMA Capital's senior debt rating maintained by another rating agency.

Under such a scenario, the maturity of PMA Capital's obligations under the credit facility could be accelerated.

While PMA Capital has meaningful dividend capacity from its operating subsidiaries in 2003, the potential for an acceleration of the bank debt, combined with other cash needs at the holding company, would create substantial stress on the holding company's liquidity, Modoy's said.

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