Moody's changes FertiNitro outlook to developing

Moody's Investors Service changed its outlook on FertiNitro Finance Inc. to developing from negative and maintained the rating on its $250 million secured bonds at Caa2.

Moody's said the outlook change reflects amendments to Fertinitro's bank debt agreements that will give the project more flexibility after being weakened by numerous difficulties with the start-up and operation of the facilities, and by the national strike in Venezuela.

It also reflects signs of improvement in the operations of the plant as those difficulties are addressed.

Under the amendments, 2003 principal repayment obligations have been deferred until 2004-2007, $10 million of sponsor equity has been contributed for capital expenditures, the Second Reliability Test deadline has been extended until at least Nov. 30, 2005, $50 million of additional sponsor equity has been committed for the payment of debt service, and restricted payments are not allowed until parameters surrounding the new Second Reliability Test date are met, Moody's noted.

Ammonia and urea production restarted on Train 2 with the resumption of significant gas supplies from PDVSA following the strike. The Train 2 waste heat boiler is now undergoing replacement while Train 1 operates with a new waste heat boiler recently installed.

Prices have recovered dramatically from the fall of 2002, backed by strong U.S. natural gas prices and a return to favorable conditions in its target U.S. markets, Moody's said.

Moody's cuts Bertucci's senior implied

Moody's Investors Service downgraded Bertucci's Corp.'s senior implied rating to B3 from B2 and confirmed its $85.3 million 10.75% senior unsecured notes due 2008 at B3. The outlook is stable.

Moody's said the action was prompted by the risky nature of the strategy in which the company intends to become free cash flow positive from profitably growing store count before the company exhausts its cash and other liquidity resources.

Given the good performance at most existing and new stores, the ratings and the stable outlook reflects Moody's belief that the company will generate enough operating cash flow to support its business plan for at least the next 12 months.

Moody's added that the ratings reflect Bertucci's limited liquidity resources beyond cash on hand and operating cash flow, the high-risk/high-return nature of the company's strategy of substantially increasing store count, and its highly leveraged financial condition.

Also impacting Moody's view of the challenges facing Bertucci's is the intensely competitive environment within the casual dining segment of the restaurant industry, exposure to the economic fortunes of a limited geographic region (New England), and exposure to price fluctuations for key commodities even though Moody's notes that the company has demphasized menu items that require cheese as an input.

However, strong operating performance (as measured by 10 of 11 consecutive quarters of positive comparable store sales and industry leading restaurant margins) and a relatively updated store base support the company.

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