S&P upgrades L-3

Standard & Poor's upgraded L-3 Communications Corp. The outlook is stable. Ratings affected include L-3's $225 million 10.375% senior subordinated notes due 2007, $180 million 8.5% senior subordinated notes due 2008 and $200 million 8% senior subordinated notes due 2008, all raised to BB- from B+, and L-3 Communications Holdings Inc.'s $300 million 5.25% convertible senior subordinated notes due 2009 and $350 million 4% senior subordinated convertible contingent debt securities due 2011, both raised to BB- from B+.

S&P said the action follows L-3's sale of 14 million shares of common stock.

The estimated $880 million net proceeds from the sale (including the likely exercise of a 15% overallotment option) plus a concurrent private placement of $750 million in subordinated notes are expected to be used to refinance and pay down debt related to the company's recent $1.1 billion purchase of Raytheon Corp.'s Aircraft Integration Services division, improving the company's financial profile, S&P said.

L-3 Communications' total debt to equity will decline to under 50% after the securities sale and debt repayment from over 65% at March 31, 2002, S&P noted.

Ratings on L-3 Communications reflect a slightly below-average business risk profile and somewhat elevated debt levels, but credit quality benefits from an increasingly diverse program base and efficient operations, S&P said. Acquisitions are very important for revenue growth, and the balance sheet has periodically become highly leveraged because of debt-financed transactions. However, management has a good record of restoring financial flexibility by issuing equity.

Moody's upgrades Alfa Laval, rates new loan Ba1

Moody's Investors Service upgraded Alfa Laval International AB including raising its €220 million 12.125% senior notes due 2010 to Ba2 from B1 and assigned a Ba1 rating to its new €575 million senior credit facilities due 2007. The outlook is stable.

Moody's said it raised Alfa Laval following completion of the company's initial public offering and refinancing of its senior secured credit facilities with a new package of senior facilities.

The transactions result in "significant improvements" to Alfa Laval's overall capital structure and expected cash flows, Moody's said.

The IPO generated SEK 3.0 billion (€325.0 million) in gross proceeds, used to repay a €200 million subordinated loan from Tetra Laval Finance Ltd. and to fund the 35.0% equity clawback on the senior notes at 112.125% of par value.

The new credit facilities and reduction in notes outstanding should yield significant improvements in cash flows going forward, both through a lower interest burden (including improved pricing on the credit facilities compared to the previous facilities, in addition to the overall lower debt amount), as well as through the bullet payment structure on the €425 million term loan in 2007, Moody's said. EBITDA/net interest over the next 12 months is expected to improve to above 5.0x, compared to approximately 1.9x (including non-cash PIK interest at 12.0% on the subordinated loan note) at year-end 2001.

Fitch raises Mandalay outlook, rates loan BB+

Fitch Ratings raised its outlook on Mandalay Resort Group to stable from negative and confirmed the company's senior debt at BB+ and senior subordinated debt at BB-. Fitch also assigned a BB+ rating to Mandalay's $1.1 billion senior unsecured bank credit facility.

Fitch said the revised outlook reflects the improving operating fundamentals on the Las Vegas Strip, where Mandalay derives approximately two-thirds of its EBITDA, and continued solid performances at the company's gaming properties in Chicago (in spite of the expected increase in tax rates) and Detroit.

Las Vegas visitor volumes, airline passenger traffic, gaming revenues and occupancy and room rates have all shown meaningful improvement since the fourth quarter of 2001, Fitch said. While Mandalay's operating results during the first quarter remained below the comparable period last year, they have improved significantly since the events of Sept. 11.

S&P says SpeedFam-IPEC ratings unchanged

Standard & Poor's said its rating on SpeedFam-IPEC Inc. are unchanged after the announcement of a sale and leaseback of its corporate headquarters. S&P gives SpeedFam-IPEC a corporate credit rating of CCC+ with a negative outlook.

S&P said the sale and leaseback will provide about $23 million in external liquidity.

But the rating agency said: "While the proceeds will bolster cash balances, the company faces a severe and protracted slump in its semiconductor capital equipment market."

S&P said it expects negative operating cash flow will be a continued drain on cash balances over the near term.

Fitch rates Community Health's loan BB

Fitch Ratings assigned a BB rating to CHS/Community Health Systems Inc.'s new $1.25 billion senior secured bank facility. Furthermore, Fitch rates the company's convertible subordinated notes due 2008 at B+. The outlook is stable.

The loan consists of a $450 million six-year revolver and an $800 million eight-year term loan B. Proceeds from the term loan will be used to refinance existing debt and fund 2002 acquisitions. Security is a perfected first priority interest in the capital stock of CHS/Community Health Systems Inc. and all wholly owned subsidiaries.

"The rating reflects the validity of the company's business model and its leading market presence, experienced management and positive industry dynamics offset by modestly high leverage and acquisition-associated risks," Fitch said. "The rating further reflects the company's improved capital structure and rebalanced maturity schedule."

For the 12 months ending March 31, EBIDTA/interest was 3.9 times and total debt to EBIDTA was 3.4 times. At March 31, total debt was about $1 billion and lease adjusted debt to adjusted capital was about 56%, Fitch said.

S&P lowers some US Airways ratings

Standard & Poor's downgrade some ratings of US Airways Group Inc. and US Airways Inc. Ratings lowered include the corporate credit rating for both companies, cut to SD (selective default) from CCC+ and removed from CreditWatch with negative implications. S&P also lowered US Airways Inc.'s equipment trust certificates to B- from B and changed the CreditWatch to developing from negative. The companies' enhanced equipment trust certificates also had their CreditWatch changed to developing.

S&P said the action follows US Airways' announcement it had deferred various payments, mostly to selected aircraft lessors and lenders.

Resolution of the CreditWatch depends on the success of the company's application for a federal loan guaranty and related measures to stem its losses, S&P said.

US Airways said it is implementing a "strategic initiative involving deferrals of selected payments" as part of an attempted "consensual restructuring outside of Chapter 11 reorganization," S&P noted. No public debt is affected.

The company acknowledged that the affected lessors and lenders could issue notices of default, which would eventually lead to cross defaults with other lessors, vendors, and creditors and, potentially, acceleration of those obligations, S&P said.

S&P upgrades Regal Cinemas

Standard & Poor's upgraded Regal Cinemas Inc. including raising its $100 million senior secured credit facility due 2007 and $270 million term B bank loan due 2008 to BB- from B+ and its $350 million 9.375% senior subordinated notes due 2012 to B from B-. The outlook is stable.

The new parent, Regal Entertainment Group, was assigned a BB- corporate credit rating. Regal Entertainment includes Regal Cinemas Inc., United Artists Theatres Co. and Edwards Theatres Inc.

S&P said it upgraded Regal Cinemas' debt to reflect the improved credit profile of the consolidated entity.

Regal Entertainment is the largest movie theater operator in the U.S. with 5,886 screens in 561 theaters located in 36 states, S&P noted. The Knoxville, Tenn.-based company currently has approximately $732 million in debt outstanding.

The integration of the three circuits has been very quick and should accelerate the realization of cash flow benefits resulting from reducing corporate overhead, consolidating vendor contracts for concessions and other economies of scale, S&P said.

In addition, the financial profile of the combined entity has improved as a result of a net reduction in debt of $280 million and preferred stock of $70 million with proceeds from the company's initial public equity offering and excess cash balances, S&P added.

The group's discretionary cash flow is expected to improve significantly after 2002, when it must make payments to general unsecured creditors associated with the bankruptcy reorganizations, S&P said. EBITDAR coverage of interest expenses plus rent is expected to be more than 2 times while lease-adjusted debt to EBITDAR is expected to improve to approximately 3.5x.

S&P puts Horizon PCS on watch

Standard & Poor's put Horizon PCS Inc. on CreditWatch with negative implications. Ratings affected include Horizon PCS' $125 million 14% senior discount notes due 2010 and $750 million 13.75% senior unsecured notes due 2011 at CCC and its $225 million senior secured credit facility due 2008 at B-.

S&P said it put Horizon PCS on watch because it is concerned about the outcome of Horizon's negotiation with its bank creditors over covenant amendments.

The company has until June 28 to resolve a waiver from its lending group for failing to comply with the EBITDA covenant for the first quarter of 2002, S&P said.

Horizon said the covenant violation was due to the company incurring greater expenses due to higher than anticipated subscriber additions, S&P added.

S&P rates Focal Communications loan CCC

Standard & Poor's assigned a CCC rating to Focal Communications Corp.'s $225 million senior secured credit facility due 2007, a CC to its senior unsecured debt and a CCC corporate credit rating.

Focal's rating reflects the very high business risk profile of the competitive local exchange carrier (CLEC) industry and the company's weak financial position, S&P said.

In addition, ISPs represent about 40% of the company's revenue mix. Although this percent has declined over the past few quarters, the company has experienced a significant amount of line churn because a good degree of ISPs continue to have financial difficulties, S&P added.

At March 31, total debt outstanding was about $477 million, including $103 million of convertible notes. In the first quarter of 2002, total revenues grew by about 2% compared to the fourth quarter of 2001, while EBIDTA remained negative.

S&P raises AMC

Standard & Poor's upgraded AMC Entertainment Inc., removed it from CreditWatch with positive implications and assigned a positive outlook. Ratings affected include AMC's $200 million 9.5% senior subordinated notes due 2009, $297.9 million 9.5% notes due 2011 and $175 million 9.875% senior subordinated notes due 2012, all moved to CCC+ from CCC.

S&P said the upgrade was in response to positive financial policy developments at the company.

AMC continues to take steps to improve its financial profile, S&P said. The company's capital structure has improved as a result of its recent equity offering, which raised $100 million in net proceeds, and its use of equity to partially fund its purchase of GC Cos., Inc. - the owner of General Cinemas.

In addition, the company has substantially slowed its pace of theater construction which should permit positive discretionary cash flow compared with approximately break-even discretionary cash flow in the fiscal year ended March 2002, S&P added.

Key credit measures, pro forma for the two acquisitions, remain modest due to the company's heavy reliance on expensive lease financing, S&P said. EBITDAR coverage of interest plus rent is weak at approximately 1.3 times to 1.4x and lease-adjusted debt to EBITDAR is about 5.7x.

Moody's rates Yum! loan Baa3

Moody's Investors Service assigned a a Baa3 rating to Yum! Brands, Inc. new $1.4 billion senior unsecured guaranteed three-year revolving credit facility and confirmed Yum!'s existing ratings including its senior unsecured notes at B1.

Moody's said the ratings reflect Yum!'s brand equity, positive operating results and its adequate debt protection measures.

The bank agreement ratings incorporate the benefit of the guarantees from Yum!'s domestic operating subsidiaries relative to the unsecured public notes that are not guaranteed, Moody's added.

S&P rates LBI notes B-, loan B+

Standard & Poor's assigned a B- rating to LBI Media Inc.'s proposed $200 million senior subordinated notes and a B+ to its $125 million senior secured credit facility. The outlook is stable.

Proceeds from the notes will be used for debt repayment and to finance almost $33 million in radio station purchases.

LBI Media's low cost emphasis, local market focus and Hispanic population growth have fueled rapid growth and high margins, S&P said.

However, the company's significant cash flow concentration and small size relative to competitors are areas of concern, S&P added.

LBI is also likely to continue its station acquisition activity, which could limit financial profile improvement, depending on debt use and startup losses, S&P noted.

LBI's acquired stations may or may not be broadcasting in Spanish at the time of purchase. The company has successfully grown cash flow at its stations with an emphasis on locally-targeted programming and local advertising, which accounts for almost 90% of total revenue. With this focus, LBI avoided some of the weakness in national advertising in 2001 and enjoyed revenue and cash flow growth, while much of the broadcasting industry contracted, S&P said.

S&P cuts Magellan

Standard & Poor's downgraded Magellan Health Services, Inc. and put the company on CreditWatch with negative implications.

Ratings lowered include Magellan's $150 million revolving credit facility due 2004, $183.3 million senior secured tranche A term loan due 2004, $183.3 million senior secured tranche B term loan due 2005, $183.3 million senior secured tranche C term loan due 2006 and $250 million 9.375% notes due 2007, all cut to B from B+, and its $625 million 9% senior subordinated notes due 2008, cut to CCC+ from B-.

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