S&P cuts Delco Remy, rates loan B+

Standard & Poor's downgraded Delco Remy International, Inc. and assigned a B+ rating to its new $250 million revolving credit facility due 2006. Ratings lowered include Delco Remy's $140 million 10.625% senior subordinated notes due 2006 and $165 million 11% senior subordinated notes due 2009, both cut to CCC+ from B, and its $145 million 8.625% senior notes due 2007, cut to B- from B+. The outlook is negative.

S&P said it cut Delco Remy because of the company's weaker-than-expected financial performance, which has resulted in a deterioration of credit protection measures. S&P expects financial performance will remain weak over the near term.

Key credit measures are weak with total debt to EBITDA of around 6.4 times and EBITDA interest coverage of about 1.4x as of March 31, 2002, S&P noted.

S&P said it had expected total debt to EBITDA of between 3x-4x and EBITDA interest coverage of between 2x-3x.

Flexibility is limited, though somewhat improved as the company recently installed a new bank credit facility, which provides the company with some additional liquidity, S&P said. The company is expected to have around $60 million in availability under its new credit facility.

Market conditions are expected to remain challenging and could offset some of the benefits. In the intermediate term, credit measures are not expected to improve materially, with total debt to EBITDA expected to average in the 5x-6x range and EBITDA interest coverage averaging around 2x, S&P added.

S&P says Sealy unchanged

Standard & Poor's said Sealy Corp.'s rating and outlook are unchanged by the company's write-offs of some assets related to its retail affiliates disclosed in Sealy's recent 10-Q filing. S&P gives Sealy a B+ corporate credit rating with a stable outlook.

Sealy wrote off $5.8 million in goodwill and other assets related to a mattress retailer that ceased operations in May 2002, S&P noted. Sealy also took a $19.5 million charge for bad debt expense related to accounts receivable to other affiliated mattress retailers.

S&P said Sealy's strong market position and stable cash flow should allow the company to maintain its credit profile.

Moody's rates NCI Building's loan Ba3; notes B2

Moody's Investors Service rated NCI Building Systems Inc.'s $100 million secured revolver due 2007 at Ba3, $125 million secured term loan B due 2008 at Ba3, $125 million 9.25% senior subordinated notes due 2009 at B2 and $50 million add-on to 9.25% senior subordinated notes due 2009 at B2. The company's issuer rating of B1 and senior implied rating of Ba3 were confirmed. The outlook is stable.

Proceeds from the credit facility will be used to refinance outstanding debt. Security for the loan is all domestic accounts receivable, inventory and equipment.

Negative factors influencing the ratings include competitiveness of the sector, continuing weakness in non-residential construction, cyclical nature of the sector, reliance on steel whose prices have been volatile, negative tangible worth and an active acquisition strategy, Moody's said.

Positive factors influencing the ratings include strong free cash flow generation, prudent management of its balance sheet, leading industry position, geographic and product diversity, non-union employee base and mix of new construction, repair, retrofit and other end markets, Moody's said.

For the fiscal year ended Oct. 31, 2001, sales declined 6.2%, to $955 million, net income before a $2.8 million restructuring charge decreased 58.8%, to $18.3 million, and EBITDA fell 29.2%, to $104.2 million. Total debt/capitalization improved by 500 basis points, to 52.7%, debt/EBITDA rose to 3.5 times, from 2.8 times and EBITDA interest coverage was 3.1 times, vs. 3.8 times in the prior year.

Moody's rates Kaufman & Broad notes B1

Moody's Investors Service assigned a B1 rating to Kaufman & Broad SA's planned €125 million senior notes due 2009. The outlook is stable.

Moody's said the ratings reflect Kaufman & Broad's long track record, strong brand name and position as a leading developer within the French home-building market.

They also reflect the group's recent record of profitable growth and its strategy for expanding and diversifying its presence beyond the Ile-de-France region.

The group's risk control procedures, which mean that the company does not enter into speculative land purchase or commercial development and limit the amount of speculative development undertaken, are also factored into the ratings, Moody's said.

Certain characteristics of the French house-building market, as well as the legal framework, also help moderate risk, the rating agency added.

However the company is affected by the cyclical nature of the home-building industry, as well as by the competitive and fragmented nature of the French market, Moody's said. Kaufman & Broad's geographical concentration risk and the rising trend in development risk taken on by the company are also reflected in the ratings.

Finally the ratings take account of the substantial increase in group borrowings in recent years, and the decline in debt protection measurements, reflecting in part its active acquisition policy, Moody's said.

Moody's rates Gerresheimer notes B3, loan B1

Moody's Investors Service assigned a B3 rating to Gerresheimer Holdings GmbH & Co. KG 's planned €150 million of senior subordinated notes due 2011 and a B1 rating to its €280 million senior secured credit facilities.

Moody's said the rating reflects Gerresheimer's highly leveraged capital structure, with limited expected free cash flow generation over the next few years, continued execution risk relating to the recent re-positioning of the business on higher-growth pharmaceutical end-markets (which are expected to largely drive top-line performance going forward), and the need for Gerresheimer to extract margin improvements from its ongoing cost rationalization program, expected to yield substantial margin benefits in 2H02, the challenges faced by Gerresheimer in gaining market share in a highly concentrated market, and residual integration risk associated with the company's highly acquisitive history.

Positives include the general non-cyclical nature of Gerresheimer's business, characterized by a lengthy product development process in conjunction with customers, minimal historical pricing pressure, and approximately 74.0% revenue exposure (in 2001) to the pharmaceutical industry, the company's advantageous market positioning, including strong management focus on high-growth niche market areas and a technologically advanced asset base, established long-term customer relationships with high switching costs (due in part to regulatory requirements on drug manufacturers), low customer concentration, and high barriers to entry, management's significant tenure with the business and success in re-positioning the company from a food and beverage focused business to a value-added specialty packaging company for the pharmaceutical industry.

Moody's noted that some expected year-end 2002 credit ratios look relatively favorably, such as the 3.8x net debt/EBITDA and 3.0x EBITDA/Cash Interest but added that it expects substantial capital expenditure requirements will likely hinder free cash flow generation in the early years.

As a result, Moody's said it anticipates (EBITDA - Capex)/Cash Interest to be approximately 1.0x for the full-year 2002.

However, by the end of 2002 the company is expected to have completed a major furnace repair cycle and will benefit from substantially reduced furnace age and significantly lower furnace capex over the following years, Moody's said.

S&P rates NCI notes B, loan BB-

Standard & Poor's assigned a B rating to NCI Building Systems Inc.'s planned $50 million add-on to its $125 million 9.25% subordinated notes due 2009 and a BB- rating to its new $225 million senior secured credit facility. Existing ratings were confirmed. The outlook is stable.

Proceeds from the bank facility and new notes are expected to be used to repay NCI's existing bank facility, which matures in July 2003. Total debt outstanding at the end of May was about $330 million, S&P noted.

S&P said NCI's ratings reflect its leading market shares and competitive cost position, offset by cyclical demand for the company's products, volatile raw material costs, and an aggressive financial risk profile.

With annual sales of almost $1 billion, NCI is a leading U.S. manufacturer of metal products used in nonresidential construction, S&P said.

While the metal construction industry overall has favorable long-term prospects, commercial construction activity remains lackluster due to the weak economy, S&P added. Nonetheless, the company has a strong competitive position in metal building components, which is less cyclical than building systems.

In addition, market share gains have allowed NCI to fare somewhat better than competitors in this challenging environment, S&P said.

However, the company's operating margins (before depreciation and amortization) have fallen somewhat from the mid-teens percentage area, primarily due to lower volumes and intense price competition in components, the rating agency said.

Although NCI has reduced debt by $100 million over the past year, its capital structure remains aggressive, with debt to EBITDA of 3.4 times, S&P noted.

The company's focus on cost reductions and modest capital spending needs, along with working capital improvements, should enable it to continue to generate discretionary cash flow for debt reduction. As a result, debt to EBITDA and funds from operations to debt should range between 3x and 3.5x and 15% to 20%, respectively over the intermediate term, S&P said.

Moody's raises Ferrellgas senior implied, rates new notes B2

Moody's Investors Service upgraded Ferrellgas Partners, LP's senior implied rating to Ba3 from

B1, confirmed its senior secured notes at B1 and senior unsecured issuer rating at B2, and assigned a B2 rating to its proposed $170 million senior unsecured notes. The outlook is stable.

Moody's said it upgraded Ferrellgas' senior implied rating in response to "some strengthening" the company's financial measures.

The other changes are due to a recalibration of ratings to better reflect extensive structural subordination to subsidiary debt and potential effective subordination to secured subsidiary debt, not a deterioration in credit quality, Moody's said.

The improvement in Ferrellgas' senior implied rating is a result of its leading business position as the second-largest U.S. propane retailer, geographic diversity which mitigates its exposure to the economic cycles and weather of a single market, an agreement that can help to supplement any shortfall on its distribution requirement and its track record in maintaining competitive unit costs.

However Ferrellgas also suffers from a high degree of cash flow variability which is seasonal and dependent on weather, a heavy debt load which is not likely to be significantly reduced, structural subordination of the MLP debt to a substantial amount of debt at the OLP level and a high distribution rate that limits cash otherwise available for unexpected needs and debt reduction.

Moody's raises CKE outlook

Moody's Investors Service raised its outlook on CKE Restaurants, Inc. to stable from negative and confirmed the company's ratings including its $200 million senior subordinated notes due 2009 at Caa1 and its $148.1 million convertible subordinated notes due 2004 at Caa2.

Moody's said the stable outlook reflects its expectation that the company will continue improving operations (using measurements such as comparable store sales and segment margins) and reducing leverage.

Moody's added that it expects cash flow from operations will cover capital expenditures, including the Hardee's store remodel program, and debt service obligations.

Over the medium term, ratings could move upward as the company improves free cash flow, the 2004 convertible notes are successfully refinanced, and the system profitably expands, Moody's said.

However, ratings may be negatively impacted if the recent performance improvements at Hardee's were to reverse, the company's liquidity resources proved insufficient, or a significant proportion of franchisees experienced financial difficulties, Moody's added.

S&P cuts Penton

Standard & Poor's downgraded Penton Media Inc. and assigned a negative outlook. Ratings lowered include Penton's $185 million 10.375% notes due 2011, cut to CCC- from CCC, and its $157.5 million 11.875% senior secured notes due 2007, cut to CCC+ from B-.

S&P said the action follows Penton's announcement that it expects its revenue and earnings for 2002 to be materially lower than previously projected.

Penton's revenue and earnings outlook continues to deteriorate due to the considerable and ongoing problems of its key Internet and broadband end markets, S&P said. This is especially damaging to Penton because this sector has traditionally represented the company's largest concentration.

The revised guidance represents a 30% to 50% EBITDA decline from the company's previous estimate from May 1, 2002, S&P noted. It is uncertain when the company's earnings prospects might begin to improve meaningfully. As a result, Penton is taking additional restructuring actions to try to bring its cost structure in line with its reduced revenue expectations.

The company's revised EBITDA forecast of between $25 million to $35 million will push interest coverage below 1 time and begin to erode the company's liquidity, S&P said.

Nonetheless, the company's capital structure continues to provide it with reasonable access to cash in the near term, S&P added. The company currently has no financial covenants or near term debt maturities and does not expect to need to draw on its unused $40 million asset-based revolving line of credit for the remainder of 2002.

Fitch puts Midland Cogeneration on watch

Fitch Ratings put Midland Cogeneration Venture LP's $567 million subordinate lease obligation bonds on Rating Watch Negative.

The action follows the recent downgrade of the senior unsecured debt of Consumers Energy Co., MCV's principal offtaker, to BB+ from BBB; Consumers remains on Rating Watch Negative, Fitch said.

Absent counterparty credit concerns, Fitch said it views the credit quality of the subordinate lease obligations to be of low investment grade quality once Midland Cogeneration Venture's senior bonds have matured.

The credit quality of Midland Cogeneration Venture is significantly enhanced by the amount of cash reserved at the project, Fitch said.

Due to terms of the project financing documents, distributions to Midland Cogeneration Venture partners are severely restricted and all residual cash flow to date has been retained at the project, with the exception of a $9.5 million partner tax distribution made in 1991, Fitch continued. Fitch said it expects a significant portion of future residual cash flow to be retained and for cash reserves to build and eventually exceed the amount of outstanding debt.

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