S&P ups EES Coke's notes to BBB-

Standard & Poor's said it raised EES Coke Battery LLC's series B $75 million senior secured notes due 2007 to BBB- from BB following an upgrade of EES Coke's primary offtaker, Mittal Steel USA Inc., to BBB from BB. The Mittal Steel USA rating action followed the merger between that entity and Ispat Inland Inc., with Mittal Steel USA as the surviving entity.

The outlook on EES Coke's notes is stable, while the outlook on Mittal Steel USA is negative. S&P said the differential reflects the significant portion of the group's long-term debt and postretirement liabilities carried by this subsidiary and the lower cash flows it generates compared with other Mittal subsidiaries.

Nevertheless, Mittal Steel USA is expected to enjoy significant parental support due to its status as the group's largest asset and its location in the strategically important U.S. market, the agency predicted. EES Coke has an agreement with Mittal Steel USA for 100% of production from 2006 to 2015.

As a result of improved pricing and declining debt service requirements, debt service coverage has improved dramatically from 0.9x in 2003 and was over 3x for the 12 months ended Sept. 30. S&P said strong coverage should continue through the term of the debt, if operations go as planned.

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