Fitch rates Williams Production RMT loan BB+

Fitch Ratings assigned a BB+ rating to Williams Production RMT Co.'s proposed $400 million senior secured term loan facility due May 2007. The outlook is stable.

Proceeds from the term loan along with funds provided by The Williams Companies Inc. will be used to refinance an existing $1.167 billion secured credit facility.

Security is a perfected first priority interest in all of the company's existing and future oil and gas properties, except those currently under sales agreements or being offered for sale.

"The rating reflects the underlying collateral package that will secure RMT's term loan, the quality of its reserves, its stable stand alone credit profile and low production and finding & development costs. Factors limiting RMT's rating are its large inventory of proven undeveloped reserves and WMB's ongoing reliance on RMT cash flows to support parent company level debt," Fitch said.

Pro forma to reflect the benefits of receiving gains from hedges, its recent asset sales and the proposed refinancing, 2002 EBITDA interest coverage would exceed 7.0 times and debt/EBITDA would be near 2.0 times. Pro forma debt-to-total capital would be in the low 20% range and debt per mcfe would be below $0.40.

S&P rates Impress notes B-

Standard & Poor's assigned a B- rating to Impress Group BV's new €150 million 9.5% notes due 2007 to be guaranteed by Impress Holdings BV.

S&P said the new notes are rated one notch above the existing subordinated notes reflecting their upstream guarantees, placing them ahead of the existing unsecured notes but behind the group's pro forma €230 million of secured bank debt.

The new bonds will be more expensive than the bank debt they replace but the overall effect will neutral because the group has already renegotiated the financial covenant package that has been constraining its liquidity and financial flexibility in recent years, subject to the proposed bond being launched, S&P said.

Impress Holdings' credit protection measures should remain adequate for the ratings if the proposed transaction takes place and the group continues to generate sufficient cash flow to fund working capital and debt amortization, S&P added.

S&P sees merged Riverwood, Graphic Packaging at B+

Standard & Poor's said it expects to assign a B+ corporate credit rating to the company that will be created through the merger of Riverwood International Corp. with Graphic Packaging Corp. The outlook is expected to be positive.

At present Riverwood remains on CreditWatch positive including its senior secured bank loan at B, senior unsecured debt at CCC+ and subordinated debt at CCC+. Graphic Packaging Corp. remains on CreditWatch negative including its senior secured bank loan at BB and subordinated debt at B+.

The post-merger rating would reflect the new company's favorable cost position in oversupplied and highly competitive paperboard and packaging markets, limited product diversity, a value-added product mix, the risk of substitution from competing substrates, relatively stable earnings and cash flows, and a very aggressive capital structure, S&P said.

The positive outlook would reflect expectations that, over time, the new company could reduce debt with internally generated cash flow and achieve a slightly higher credit rating.

S&P said it believes the merger would be a good strategic combination that should provide forward integration opportunities, a broader product line, the potential to accelerate revenue growth for new consumer packaging applications, and a reduction in customer concentration.

In addition, the potential realization of $52 million of synergies identified by the companies, the expected tax benefit of a significant portion of Riverwood's $1.2 billion of net operating losses, and lower interest expense following debt refinancing should boost free cash flow generation above the current capabilities of the individual companies.

Nonetheless, the new company faces integration challenges and will be highly leveraged, with pro forma debt to EBITDA of 5.5x, excluding synergies, S&P said.

S&P cuts Enersis notes to junk

Standard & Poor's downgraded Enersis SA's notes to junk including cutting its $150 million 6.6% notes due 2026, $300 million 6.9% notes due 2006 and $350 million 7.4% notes due 2016 to BB+ from BBB-.

S&P confirmed the corporate credit rating at BBB- and revised the outlook to stable from negative.

S&P said the downgrade to the notes reflects the structural subordination created by the new financing facility.

The actions follow Enersis' and Endesa Chile's announcement that they have closed the refinancing of their bank debt maturities that were due during 2003 and 2004. The $1.588 billion senior secured term loan for Enersis and a $743 million senior guaranteed term loan for Endesa Chile will amortize in six equal semiannual installments of $265 million and $124 million, respectively, from November 2005. Enersis' loan will accrue interest at Libor plus 350 and Endesa Chile's at Libor plus 300 bps.

The one notch downgrade for Enersis' senior unsecured debt reflects structural subordination created by the collateral package securing the new $1.588 billion bank loan, which includes a lien on the shares and intercompany loans of Chilean electric distributor Chilectra SA, Enersis' largest cash contributor. In the case of Endesa Chile, as the company concentrates a large percentage of consolidated debt and has its own operations, the structural subordination would not result in a differentiation of the unsecured debt from the corporate credit rating.

The closing of these facilities significantly improves the companies' liquidity position and reduces refinancing risk, S&P said. After closing these bank loans, Enersis and Endesa Chile will not face any meaningful capital maturity until 2005 except for the repayment of $551 million in bond maturities, which are already provided for.

Moody's rates Norampac notes Ba2, loan Ba1

Moody's Investors Service assigned a Ba2 rating to Norampac's proposed $250 million note offering and a Ba1 rating to the planned C$350 million senior secured credit facility and confirmed its existing ratings including its senior secured bank debt at Ba1 and senior unsecured notes at Ba2. The outlook is stable.

Moody's said the ratings reflect the continued improvement in Norampac's cost position and debt protection measurement and its expectation that debt protection measurements will continue their improvement over time.

Norampac's debt ratings are based on the company's high concentration in containerboard and corrugated products, the resulting long term volatility in earnings and cash flow, the risk of Norampac making significant distributions to its owners, and the risk of potential debt-financed acquisitions, Moody's said.

Norampac is about 60%-integrated and may benefit from additional converting capacity. However, the ratings also reflect Norampac's position as the leading containerboard producer in Canada, its success at lowering the relative cost position of its facilities, and the potential benefit derived from its owners, Domtar (Baa3) and Cascades (Ba1), which are each larger and more diversified than Norampac.

Moody's noted Norampac continues to be focused on a single product, with limited geographic diversification, which can exhibit significant fluctuations in pricing over time. Raw material prices (mainly old corrugated containers - OCC) have been increasingly volatile, and producers have experienced difficulty in passing through their pricing.

S&P puts Collins & Aikman on watch

Standard & Poor's put Collins & Aikman Corp. on CreditWatch Negative including Collins & Aikman Products Co.'s $125 million term A loan due 2005, $175 million revolving credit facility due 2005 and $275 million term B loan due 2005 at BB- and $400 million 11.5% senior subordinated notes due 2006 and $500 million 10.75% senior notes due 2011 at B.

S&P said the action reflects Collins & Aikman's poor operating performance and reduced earnings and cash flow expectations.

Very weak operating results during the first quarter of 2003 were caused by the poor performance of 12 of the company's 85 manufacturing plants, S&P said.

Collins & Aikman attributes its poor results to a broad range of operating failures, such as excessive scrap, premium freight, and labor inefficiencies; failure to achieve material cost savings and commercial recoveries; launch inefficiencies and start-up costs; price declines; and higher material costs. The 12 problem facilities generated negative EBITDA of $18 million on only $117 million of sales. The company's total first-quarter EBITDA (adjusted for charges) declined by 25% from the first quarter of 2002, despite a 13% increase in sales and higher industry production during the period.

Collins & Aikman has taken steps to improve its operating performance, with the benefits expected to accrue throughout the year. Nevertheless, the company expects its full-year EBITDA to be 30% below its previous expectations, S&P said.

Moody's rates Leslie's Poolmart new notes B2

Moody's Investors Service assigned a B2 rating to the up to $70 million senior unsecured 10.375% series B senior unsecured notes due 2008 of Leslie's Poolmart , Inc., and confirmed the existing ratings including the senior unsecured 10.375% series A notes due 2004 at B2. The outlook remains stable.

Moody's said the senior notes are being issued as part of an exchange offer for the existing series A senior notes.

The ratings reflect Leslie's ability to achieve what Moody's believes are sustainable improvements to operating margins and cash flow. Leslie's has reduced the average amount of bank debt outstanding and is now in a position to finance seasonal needs largely from operating cash flow. Return on assets reached a 5-year high of 14.6% in the fiscal year ended September 2002, versus 3.8% in the fiscal year ended September 2000.

The ratings also reflect Leslie's success at maintaining its market position and product margins due to its breadth of product, despite competition from discounters and home stores during its critical season; the chain's increasing geographic diversity due to store growth in markets where the company had catalog sales; and the advantages of private label product, which promote customer loyalty and increase product margins, Moody's said.

The exchange offer benefits Leslie's by extending debt maturities and allowing the company to reduce debt through repayment of the stub amount of the series A notes maturing in 2004, Moody's said. Moody's expects that Leslie's will be able to pay off these notes primarily through cash balances and operating cash flow.

S&P rates Williams RMT loan BB, on watch

Standard & Poor's assigned a BB rating to Williams Production RMT Co. and put it on CreditWatch negative.

S&P said the CreditWatch listing reflects the similar listing on The Williams Cos. Inc. (B+/Watch Neg).

However on funding of the term loan, completion of a high-yield bond offering by Williams and repayment of a $1.167 billion secured term loan (including principal, accrued interest, and deferred fees) at Williams RMT, the ratings on both Williams RMT and Williams will be removed from CreditWatch and the outlook will be assigned in accordance with Williams' ability to refinance or repay $1.4 billion of unsecured debt maturing in March 2004.

The ratings reflect that Williams RMT is not bankruptcy-remote from Williams and in S&P's opinion shares the same default risk. As a result, Williams and RMT have been assigned the same corporate credit rating.

The RMT term loan has strong recovery prospects in the event of default because of the amount and quality of the collateral and thus is rated two notches higher than the corporate credit rating. Using a $2.75 average realized natural gas price over the life of the transaction, S&P estimates that the term loan is overcollateralized by about 2.0x on the value of total reserves and about 1.5x based on the value of proved developed producing reserves. Based on year-end 2002 prices, the term loan was covered 5.0x on the value of total proved reserves.

While lower asset values are possible should natural gas prices fall to depressed levels on a sustained basis, the fundamentals for North American natural gas prices over the medium term are strong due to growing demand for natural gas, rapid depletion rates for new gas wells, and rising industrywide finding and development costs, S&P said.

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