S&P puts Jostens on watch

Standard & Poor's put Jostens Inc. on CreditWatch with negative implications including its $150 million revolving credit facility due 2006, $95 million term loan A due 2006 and $330 million term C loan due 2009 at BB- and $225 million 12.75% notes due 2010 at B.

S&P said the watch placement follows Jostens' statement that it has engaged investment banking advisers to assist in the possible sale or recapitalization of the company.

S&P said it believes that the company will likely continue to be highly leveraged and that a potential sale or recapitalization transaction could result in a weaker financial profile for the company.

S&P cuts MSX

Standard & Poor's downgraded MSX International Inc. including lowering its $100 million credit facility due 2004 to B+ from BB- and $130 million senior subordinated notes due 2008 to B- from B. The outlook is negative.

S&P said the actions reflect credit protection measures that continue to be weak for the rating category as a result of depressed end market conditions for the past two years.

S&P added that it does not see favorable prospects for significantly improved credit measures over the near term, given expected soft demand in the markets combined with the company's high leverage. The outlook is negative.

MSX's ratings reflect its aggressive financial profile and exposure to cyclical and competitive markets. Longer term, outsourcing of technical business services and staffing functions by automotive original equipment manufacturers is expected to continue, and the company generated modest free cash flow, despite weak earnings performance, in 2002, S&P noted.

MSX had debt to EBITDA (adjusted for operating lease obligations) for 2002 exceeding 5.0x, and funds from operations to debt below 10%, S&P said. Total debt (adjusted to include operating lease obligations) at Dec. 29, 2002, was $304 million.

S&P says El Paso refinancing positive

Standard & Poor's said it views El Paso Corp.'s announcement that it has entered into a new $3 billion revolving credit facility due in June 2005 as supportive of the firm's credit quality. S&P rates El Paso's corporate credit at B+ with a negative outlook.

The company's liquidity position has improved recently as a result of the extension of the maturity date of the facility by one year, restructuring a minority interest structure into a $1.2 billion term loan, and debt issuances at ANR Pipeline Co. and Southern Natural Gas Co., S&P added.

The negative outlook on the company will continue to reflect significant hurdles El Paso has regarding regaining access to capital markets at the holding company level, halting the continued decline in cash flow, and receiving final approval of its Western states settlement, S&P said. Successful execution in these matters could ultimately lead to ratings stability and upward credit momentum.

S&P upgrades Orbital Sciences

Standard & Poor's upgraded Orbital Sciences Corp. including raising its $135 million 12% second priority secured notes due 2006 to B+ from B. The outlook is stable.

S&P said the upgrade reflects the company's improved financial profile and the settlement agreement with bankrupt subsidiary Orbimage. The Orbimage settlement requires a $2.5 million payment by Orbital to Orbimage upon the launch of the OrbView-3 satellite. In addition, daily penalties up to a total of $5 million will apply if the satellite is not launched by April 30, 2003, or checked out by Aug. 1, 2003.

S&P said Orbital's ratings reflect its modest size and somewhat high debt leverage, offset by leading positions in market niches and increased military spending, especially for National Missile Defense.

Orbital's near-term liquidity has improved due to successful refinancing of its $100 million subordinated notes in August 2002, and now has no significant debt maturities until 2006, S&P noted. Orbital remains somewhat highly leveraged, with total debt to capital around 55%.

Profitability improved significantly in 2002, reversing net losses the past two years, due to the turnaround in the company's satellite operations and the elimination of the exposure to bankrupt subsidiary Orbimage.

Operating margins were over 11% in 2002. Cash generation also improved in 2002, with funds from operations to debt a respectable 27%. However, free cash flow was negative, due largely to the payment of around $50 million in vendor financing, as well as modest capital expenditures. Further increases in profitability and positive free cash flow are expected in 2003, S&P said.

Fitch rates MGM Mirage senior secured debt BB+

Fitch Ratings assigned a BB+ rating to the senior secured notes and senior secured bank credit facilities of MGM Mirage and a BB- rating to the company's subordinated notes. The outlook is positive.

Fitch said the proposed ratings reflect MGM Mirage's market-leading assets, significant discretionary free cash flow, demonstrated commitment to debt reduction, and steady improvement of credit measures during a period of very weak conditions.

The ratings also incorporate the value of the scheduled opening this summer of the company's Borgata joint-venture in Atlantic City.

Offsetting these factors is the continuing challenging operating environment, (including geopolitical concerns, terrorist reprisals and SARS), heavy exposure to Las Vegas (70% of EBITDA) and a greater dependence on air travel than many of its peers, Fitch said.

The positive outlook reflects MGM Mirage's progress to date, and capacity to reduce leverage to investment-grade levels over the intermediate term, Fitch said. In the event that MGM Mirage de-emphasizes its financial policy of focused debt reduction, and/or diverts cash flow to a large-scale acquisition, heavily expanded capex program or aggressive share repurchases (on a trend with the last several quarters), Fitch would revisit the outlook.

S&P says Freeport unchanged

Standard & Poor's said Freeport McMoRan Copper & Gold Inc.'s ratings are unchanged including its corporate credit rating at B with a stable outlook after the company announced first quarter earnings.

Although the company's credit measures and free cash flow generation are quite strong owing to its low cost position, the ratings on Freeport are limited by the sovereign credit rating on the Republic of Indonesia, as the operating risks in Indonesia remain considerable, S&P said. Freeport posted net income of $49 million for the quarter, a substantial increase from a net loss of $4.2 million a year earlier due to higher-grade ore and higher gold prices.

S&P says Russell unchanged

Standard & Poor's said Russell Corp.'s ratings are unchanged including its corporate credit at BB+ with a stable outlook on the company's announcement that it intends to acquire the brand names, inventory and contracts of Spalding Sports Worldwide Inc.'s sporting goods business.

The agreement for the $65 million acquisition covers ownership of the Spalding and Dudley names for all products, but does not include Spalding's golf business, S&P noted.

The acquisition is in line with Russell's strategy to expand its position as an athletic company, S&P said, adding that it expects Russell to continue its solid cash flow generation and maintain credit measures appropriate for the current rating.

S&P says Georgia-Pacific unchanged

Standard & Poor's said Georgia-Pacific Corp.'s are unchanged including its corporate credit at BB+ with a negative outlook following the company's first quarter earnings release.

Earnings were broadly in line with expectations, negatively affected by general economic weakness; costs associated with production downtime; competitive tissue market conditions; and higher energy and fiber costs. Administrative cost reductions are helping to offset rising pension and medical costs.

Net debt rose by $336 million during the quarter due to an increase in working capital (partly attributable to higher tissue inventories in advance of a machine start-up and national product roll-out), comparatively low receivables, and high payables balances at year end.

Liquidity pressures have eased with a recent $1.5 billion debt issue, $200 million in additional receivables financing, and the recent amendment of bank loan covenants, S&P noted.

New asbestos claims filed during the quarter exceeded management's expectations by 10% (the excess is due to higher unimpaired claims), which could increase settlement costs later this year. However, the balance of claims outstanding declined slightly during the quarter as the number of settlements exceeded the number of new claims filed.

Credit measures remain weak for the ratings, but results are expected to improve when markets turn, and management has reiterated its commitment to debt reduction, S&P said.

S&P rates Chiquita notes B-

Standard & Poor's assigned a B- rating to Chiquita Brands International's $250 million senior unsecured notes due 2009. The outlook is positive.

S&P said the rating reflects Chiquita's product concentration in bananas, a mature industry that faces such uncontrollable factors as global supply risk, political risk, and risks from weather and disease.

Mitigating these factors are Chiquita's strong market share in bananas, the good geographical diversification of its sales, and the company's improving cost and capital structure following its emergence from bankruptcy.

The senior unsecured notes are rated one notch below the corporate credit rating, reflecting their junior position to the large amount of secured debt and priority debt at the operating subsidiaries.

On March 19, 2002, Chiquita Brands International Inc. completed its financial restructuring when its prearranged plan of reorganization under Chapter 11 bankruptcy became effective.

The company's high cost structure has been a major issue for Chiquita during the past several years. To improve margins, Chiquita is shifting its mix from company-owned farm production to third-party providers, S&P said. In addition, Chiquita is implementing an overall corporate reorganization to streamline operations and achieve about $70 million in cost savings during the next couple of years.

At the same time, the company is divesting non-core assets and is expected to use proceeds to repay debt. S&P said it expects that these cost savings efforts could result in improved operating margins in the intermediate term.

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