S&P cuts American Tower, still on watch, rates notes CCC

Standard & Poor's downgraded American Tower Corp. and kept it on CreditWatch with negative implications. Ratings lowered include American Tower's senior unsecured debt, cut to CCC from B-, and senior secured debt, cut to B from BB-. S&P also assigned a CCC rating to operating company American Towers Inc.'s new $400 million senior subordinated discount notes due 2008.

S&P said it cut American Tower because of concerns that weak tower industry fundamentals will make it challenging for the company to reduce its heavy debt burden in the next several years.

The company used substantial debt in the past several years to acquire and build towers with the anticipation that steep growth in cash flows resulting from strong carrier demand for towers would help to quickly deleverage, S&P noted.

With wireless carriers projected to limit tower-related spending at least through 2004 due to capital constraint, flattening demand for wireless services, and availability of additional spectrum capacity resulting from recent network upgrades, the expectation that American Tower would be able to achieve substantial debt reduction through increased cash flows has become unrealistic, S&P said.

Based on assumptions of low-single-digit revenue growth, moderate expansion in EBITDA margin, less than $80 million in annual capital expenditures, and about $200 million in annual cash interest expense, S&P said it projects that the company will not be able to generate substantial free cash flows relative to its high debt level for at least the next two to three years.

As of Sept. 30, 2002, debt-to-annualized EBITDA leverage was about 11x, S&P noted. Without significant improvement in industry fundamentals or further reduction in overhead, American Tower could find it difficult to materially lower leverage below the 9x area.

The continuing CreditWatch is due to near-term liquidity concerns, S&P said.

Without completing the new notes offering and amending its bank credit agreement, American Tower faces two liquidity issues in the near term. The company currently has estimated cash of about $100 million and $490 million in availability under its bank revolver. First, the company will not have the cash to satisfy an approximate $200 million put on a convertible note in October 2003 since availability under the bank revolver could not be used to satisfy the put. Second, the company's annualized operating cash flow to pro forma debt service bank covenant does not leave much headroom against execution missteps.

A successful completion of the new notes offering would enable American Tower to meet the put, reduce pro forma debt service as to enable more headroom under this covenant, and not to have a liquidity issue for the next two to three years, S&P said.

Moody's rates American Tower notes B3, lowers outlook

Moody's Investors Service assigned a B3 rating to the new $400 million senior subordinated discount notes of American Tower Escrow Corp., a wholly owned subsidiary of American Tower Corp., confirmed American Tower's existing ratings and changed the outlook to negative from stable. The action affects $4.3 billion of debt including American Tower Corp.'s speculative-grade liquidity rating of SGL-4; $1.0 billion 9.375% senior notes due 2009, $209.2 million 2.25% convertible notes due 2009, $212.7 million 6.25% convertible notes due 2009 and $450 million 5.0% convertible notes due 2010 at Caa1; and American Tower, LP and American Towers, Inc.'s $650 million reducing revolving credit facility maturing 2007, $850 million term loan A maturing 2007 and $500 million term loan B maturing 2007 at B2.

Moody's said the rating on the new notes reflects their structural superiority to the four rated debt issues at the ultimate parent holding company, American Tower Corp., as well as their subordination to the senior secured claims of the lenders providing the $2.0 billion credit facility to the main operating subsidiaries of the company.

Moody's said the lower outlook indicates its concern that the company is issuing an expensive, and accreting piece of debt that ultimately increases the total amount of debt outstanding, and puts additional pressure on the company to increase cash generation over the intermediate term.

In addition, the issuance of these new discount notes puts stress on the ratings of the unsecured debt at American Tower Corp.

The put option in American Tower Corp.'s 2.25% convertible notes permits the holders of those notes to require that American Tower repurchase those securities on Oct. 22, 2003, Moody's noted.

American Tower has the option of repurchasing those notes with cash or common shares, or some combination of the two. Restrictions in the company's credit agreement prohibit American Tower from utilizing undrawn amounts to fund the repurchase of those notes. Absent the proposed debt offering American Tower has little ability to repurchase those notes with cash, as the company's cash balance at the end of the third quarter of 2002 was $64.9 million, Moody's said. While the company still has the option to satisfy the put with shares and thus reduce the amount of debt outstanding, instead American Tower is issuing more debt that will ultimately accrete to over a $700 million obligation at maturity in exchange for retiring $417 million of debt.

The use of additional debt to solve an upcoming liquidity event, while it is immediately debt neutral, ultimately increases the financial risk of the company, Moody's said.

Moody's lowers Lyondell, Equistar outlook

Moody's Investors Service lowered its outlook on Lyondell Chemical Co. and Equistar Chemicals LP to negative from stable. The change affects $6 billion of debt including Lyondell's secured credit facility and senior secured debt at Ba3, senior subordinated debt at B2 and Equistar's secured credit facility at Ba2 and senior unsecured notes and debentures at B1.

Moody's said the change is because of concern over the financial performance of its majority owned joint venture Lyondell-Citgo Refining LP, combined with continuing weak financial performance at Lyondell and its other majority owned joint venture Equistar.

Lyondell-Citgo Refining has been a steady generator of cash for Lyondell over the past several years enabling Lyondell to remain roughly cash flow break-even despite a continuing trough in propylene oxide and its other petrochemical operations, Moody's said.

The lack of certainty regarding Lyondell-Citgo Refining's ability to generate enough free cash flow cash to provide a dividend stream to Lyondell, combined with weak operating performance at Lyondell could cause Lyondell's net debt to increase in 2003, Moody's added.

Furthermore, if Lyondell-Citgo Refining is unable to dividend cash to Lyondell during the first half of 2003 and Lyondell's financial performance is worse than currently expected, Lyondell may have to seek an amendment to the financial covenants in its bank agreement.

For Equistar, Moody's noted the venture has been structured to generate cash for its owners and Lyondell is the managing partner and majority owner. Hence, Moody's said it believes that Equistar's credit profile is limited by the financial strength of Lyondell.

Moody's added that it believes that Lyondell has effective control of Equistar due to its partner's desire to exit the venture.

Moody's cuts Broadwing

Moody's Investors Service downgraded Broadwing, Inc. including cutting its $765 million reducing revolving credit facility, $569 million reducing term loan A, $339 million term loan B, $152 million term loan C and $50 million senior secured notes to B1 from Ba3, its $400 million convertible subordinated debt to B3 from B2 and $155 million 6.75% series B perpetual convertible preferred stock to

Caa1 from B3, Broadwing Communications Inc.'s $46 million 9% senior subordinated debt due 2008 and $395 million 12.5% junior exchangeable preferred stock due 2009 to Caa3 from B3 and Cincinnati Bell Telephone Co.'s $150 million senior unsecured debentures and $140 million guaranteed medium-term notes to Ba2 from Ba1. The outlook is negative.

Moody's said the downgrade reflects its concern about Broadwing's tightening liquidity position, which is exacerbated by debt amortization requirements and the funding needs of its broadband operations.

Broadwing's liquidity is pressured by the amortization of the reducing bank facilities established in connection with its 1999 acquisition of IXC Communications (subsequently renamed Broadwing Communications Inc.) and to fund the costs of Broadwing Communications' network expansion, Moody's said. Since acquiring Broadwing Communications, Broadwing has been unable to rebalance this mismatched funding book. As a result, the company's funding is subject to the sentiment of the syndicated bank debt market.

This vulnerability is presently underscored by a critical need to extend scheduled maturities through an amendment of its $1.825 billion bank facility. Without this amendment, Moody's estimates that Broadwing would deplete its liquid resources by the end of 2003.

Although Broadwing has recently attained positive free cash flow results, this has largely been achieved through spending cuts, especially at Broadwing Communications.

S&P puts Hollywood Casino Shreveport on negative watch

Standard & Poor's revised its CreditWatch on Hollywood Casino Shreveport to negative from positive. Ratings affected include Hollywood Casino Shreveport's $150 million 13% notes due 2006 and $39 million 13% senior secured notes due 2006 at B-.

S&P said the watch change is due to a significant shortfall in cash flow at the property during 2002 that will be well below S&P's previous expectations and below the level needed to meet the company's cash interest expense.

The lower-than-expected cash flow is the result of slow market growth and ongoing competitive market conditions primarily due to the soft economic environment in the Dallas area, the major feeder market to Shreveport, S&P said.

Due to Hollywood Casino Shreveport's weak performance, the expectation that the market will remain intensely competitive in the future, and the significant bridge to the company's fixed obligations, ratings downside exists, despite the potential for support from Penn National Gaming, Inc., which is acquiring Hollywood Casino Shreveport and its parent, Hollywood Casino Corp., S&P said.

Moody's upgrades LIN TV, rates loan Ba2

Moody's Investors Service upgraded LIN Television Corp. and LIN Holdings and assigned a Ba2 rating to its new $175 million term loan B. The outlook is stable. Ratings raised include LIN TV's $192 million senior secured revolver, upgraded to Ba2 from Ba3, $210 million senior notes, upgraded to B1 from B2, and $300 million senior subordinated notes, upgraded to B2 from B3, and LIN Holdings' $425 million senior discount notes, upgraded to B3 from Caa1. The speculative-grade liquidity rating was confirmed at SGL-1.

Moody's said the upgrade reflects the meaningful improvement in LIN's balance sheet and the expectation that LIN will maintain a more conservative capital structure going forward than it had historically.

Given the company's IPO last year, Moody's said it expects acquisitions are more likely to be financed with a combination of debt and equity.

While event risk is likely to remain high, LIN management is expected to maintain leverage at under 6 times total debt-to-EBITDA, the rating agency added.

As of Sept. 30, 2002, LIN's debt to EBITDA was adequate at approximately 6.3 times (through the holding company) and interest coverage was thin at 1.2 times after capital expenditures, Moody's said.

S&P puts AMR on watch

Standard & Poor's put AMR Corp. and American Airlines Inc. on CreditWatch with negative implications. Ratings affected include AMR's senior unsecured debt at B and senior secured debt at BB- and American Airlines' senior secured debt at BB-, equipment trust certificates at BB+, passthrough certificate series 1999-1A at AA, passthrough certificate series 1999-1B at A-, passthrough certificate series 1999-1C at BBB, passthrough certificate series 2001-1A1 at A, passthrough certificate series 2001-1A2 at A+, passthrough certificate series 2001-1B at BBB, passthrough certificate series 2001-1C at BB, passthrough certificate series 2001-1D at BB-, passthrough certificate series 2001-2A at AA, passthrough certificate series 2001-2B at A+, passthrough certificate series 2001-2C at A- and passthrough certificate series 2002-1C at BBB+.

S&P said the watch placement is because of continuing heavy losses and diminishing sources of backup liquidity as available collateral is used for borrowings.

AMR reported a net loss of $529 million in the fourth quarter of 2002, a decline from the $734 million net loss, before special items, in the prior-year period, and a full-year 2002 net loss of $3.5 billion ($2.0 billion before special items), an increase from the $1.4 billion net loss, before special items, in 2001.

While near-term cash liquidity remains adequate, American Airlines faces the potential acceleration of over $800 million of bank debt due to likely covenant violations by June 30, 2003, and has used up most of its readily financeable collateral borrowing to cover cash losses, S&P said.

American is in talks with its unions about contract revisions to reduce labor costs, and hopes to accelerate those negotiations in view of the company's financial situation, S&P noted.

Any war between the U.S. and Iraq, a prospect that has already raised airline fuel prices, would likely cause a further erosion of revenues, widening the company's losses, S&P said.

S&P rates Star Gas notes B

Standard & Poor's assigned a B rating to Star Gas Partners LP's proposed $200 million unsecured notes due 2013. The outlook is stable.

Proceeds from the note offering will be used mainly to refinance about $151 million of existing debt, with the remaining proceeds of about $40 million available for future debt amortization and acquisitions.

The ratings reflect the company's high leverage and weak financial profile, coupled with the mature, highly fragmented, weak growth environment in which it operates, likely necessitating acquisitions to sustain growth, S&P said

These risks are partially offset by the company's relatively stable and predictable cash flow due to the nondiscretionary nature of heating oil and propane usage and the company's margin-based business, which helps mitigate against commodity risk and allows the company to pass costs through its customer base.

As a master limited partnership, Star Gas will grow mainly by acquiring assets, S&P said. Distributions have historically been based on sustainable levels of free cash flow, minus maintenance capital expenditures and debt service. Star Gas is expected to fund future acquisitions in a balanced manner to not only preserve its existing financial profile, but to also offset equity erosion, which is typical of MLPs due to their distribution policy.

S&P said it considers Star Gas' position as the seventh-largest heating oil and propane distributor in the U.S. to be a credit strength. In addition, Star Gas has substantially mitigated its largest business risk factor by purchasing weather insurance, which should limit the downside exposure to warmer-than-expected winters and provide cash flow stability. This insurance should enhance the company's ability to maintain sufficient cash flow to meet its distributions, maintenance capital expenditures, and debt service needs.

S&P expects management to continue to reduce operating costs, to successfully integrate acquisitions, and to fund future acquisitions with a balanced mix of debt and equity to maintain interest coverage ratios and leverage at levels appropriate for the ratings.

Over the intermediate term, S&P added that it expects Star Gas to be able to expand mainly through acquisitions, while maintaining a total debt-to-total capital ratio of about 60% to 65%; total debt to EBITDA of about 4x and EBITDA interest coverage of about 2.5x to 3x, which is appropriate for current ratings.

S&P rates Freeport notes B-

Standard & Poor's assigned a B- rating to Freeport-McMoRan Copper & Gold Inc.'s $250 million of senior unsecured notes and confirmed its existing ratings including its senior secured debt at B, senior unsecured debt at B- and preferred stock at CCC.

Proceeds from the offering will be used to repay borrowings under its bank credit facilities, which would then allow Freeport-McMoRan to use amounts under its facilities along with cash to redeem the Series I gold-denominated preferred stock, which is mandatorily redeemable in August 2003. Freeport-McMoRan would have been restricted under its bank credit facility from paying dividends or redeeming any of its preferred stock if it did not extended the maturity on 80% of the Series I gold-denominated preferred stocks beyond 2005. This deal will relieve it of that restriction.

S&P said Freeport McMoRan's ratings reflect the risks of operating in the Republic of Indonesia, its low production costs, and very aggressive debt leverage. Freeport-McMoRan is one of the largest copper and gold producers in the world, with copper and gold production of 1.5 billion pounds and 2.3 million ounces, respectively in 2002.

Freeport-McMoRan ranks as the world's lowest-cost copper producer, due to the high gold content in its copper ore, low labor costs, and favorable geological conditions. Cash production costs averaged a very low 8 cents per pound for 2002. With copper and gold reserves totaling 53 billion pounds and 63 million ounces, respectively, the Grasberg mining district of Indonesia is the largest copper and gold-based deposit in the world ensuring Freeport-McMoRan will have significant long-term, low-cost production.

Nevertheless, the risks of operating in Indonesia remain considerable, S&P said. The company still faces risks concerning separatist movement issues in West Papua as well as uncertainties as to whether the provincial government might seek an increased stake and influence in the Grasberg mine. Indonesia faces political and economic uncertainties, including political instability, separatist movement issues, heavy public indebtedness, and a fragile law and order system.

Nonetheless, the government appears to be committed to overcoming these problems, S&P commented. Efforts are underway to restore the country's economy and increase foreign investor confidence. Specifically, the Indonesian authorities increased security of important national projects, which include the mining operations of Freeport-McMoRan and continues to honor the "Contracts of Work" allowing Freeport to mine. However, these issues remain risks.

Moody's raises KPN outlook

Moody's Investors Service raised its outlook on Koninklijke KPN NV to positive from stable, affecting its senior unsecured long-term debt at Baa3 rating and subordinated long-term debt at Ba1.

Moody's said the change is due to continued progress in deleveraging as well as improving operating cash flow generation.

Until recently Moody's said it expected KPN to reduce its net debt to around €14 billion for the year to Dec. 31, 2002.

Whilst continually monitoring the company during 2002, Moody's has found that KPN has been highly successful in implementing the sale of non-core assets while implementing a number of cost initiatives that has created stronger operational cash flow generation.

Given, the improvements in cash flow generation, and the near completion of KPN's non-core asset disposal program, Moody's expects that KPN will have reduced its net debt to below €13 billion for year-end 2002.

Furthermore, KPN expects to receive cash proceeds from the sale of its directories business (€500 million in the first quarter of 2003) and via a form of agreement for compensation relating to the termination of Mobilcom's roaming agreement with E-Plus (expected proceeds €110 million in the first quarter of 2003 ).

Given KPN's rapidly improving credit metrics, and the management teams strong commitment to further debt reduction, Moody's said it may well be in a position to consider an upgrade in KPN's current ratings during 2003.

S&P cuts Atlas Air

Standard & Poor's downgraded Atlas Air Worldwide Holdings Inc. and its subsidiary Atlas Air, Inc. and kept them on CreditWatch with negative implications. Ratings lowered include Atlas' $150 million 10.75% senior notes due 2005 and $150 million 9.375% senior notes due 2006, cut to CC from CCC, passthrough certificates series 1998-1 class A cut to BB from BBB, passthrough certificates series 1998-1 class B cut to B- from BB-, passthrough certificates series 1998-1 class C cut to CCC+ from B+, passthrough certificates series 1999-1 class A-1 cut to BB from BBB, passthrough certificates series 1999-1 class A-2 cut to BB from BBB, passthrough certificates series 1999-1 class B cut to B+ from BB+, passthrough certificates series 1999-1 class C cut to CCC+ from B+, passthrough certificates series 2000-1 class A cut to BB+ from BBB+, passthrough certificates series 2000-1 class B cut to B+ from BB+ and passthrough certificates series 2000-1 class C cut to B- from BB-.

S&P said the action follows Atlas' announcement that it has failed to make a lease payment on one of its 747-200 series aircraft.

S&P rates Bina-Istra notes BB+

Standard & Poor's assigned a BB+ rating to Bina-Istra, dd's planned €210 million bonds due 2022. The outlook is stable.

Bina-Istra will finance, design, construct and operate Phase 1B of the Istrian Motorway Project, a 145 km tolled motorway on the Istrian peninsula in Croatia.

S&P said Bina-Istra's rating incorporates a number of risks, including concerns that government support and financial contributions could be subject to pressure in times of national budget constraints or policy changes.

The project also has an aggressive financial structure with a highly back-ended amortization schedule and a short tail, resulting in limited time between the last scheduled amortization and the end of the concession, S&P added.

In addition, there is a very limited track record of enforcement of security interests in Croatia.

Positives are the reliance of the project's economics on a relatively straightforward and tested financial contribution mechanism in the form of annual payments from the Republic of Croatia. There is also a contractual framework that has been favorably amended, minimizing traffic and foreign exchange risks and resulting in increased government commitment.

The liquidity cushion is adequate and sponsors and project management are strong, as the completion on time and within budget of the first phase of the project (1A) showed. The maintenance of political support under different administrations and the fulfillment of financial commitments are also positive factors.

Finally, the project is important to the development of the Istrian Region, which accounts for about 20% of Croatia's GDP, S&P said.

S&P says Packaged Ice unchanged

Standard & Poor's said Packaged Ice Inc.'s ratings remain unchanged including its corporate credit rating of B- with a negative outlook on news that the company appointed Credit Suisse First Boston for aid in evaluating financial and strategic alternatives.

Packaged Ice will be exploring a number of options, though no definitive plans or direction for future ownership, capital or organizational structure has been announced.

Operating performance improved in the first nine months of 2002, and management plans to continue using free cash flow to repay debt, S&P noted.

However, S&P said it remains concerned about the high level of refinancing risk during the outlook period. Packaged Ice's $50 million term loan matures in 2004. In addition, the company's senior unsecured notes mature in February 2005, while the mandatory redemption of its preferred stock also occurs the same year. Together, these two obligations totaled about $300 million at Sept. 30, 2002.

Inability to reduce leverage and maintain credit measures appropriate for the rating category could lead to a lower rating during the outlook period, S&P said.

S&P upgrades Global Imaging

Standard & Poor's upgraded Global Imaging Systems Inc. including raising its $100 million 10.75% senior subordinated notes due 2007 to B from B-. The outlook is stable.

S&P said the upgrade reflects Global Imaging's consistent performance, despite highly competitive conditions, in the office equipment distribution market. The company has also shown improved cash flow and debt protection measures.

Consistent earnings and operating performance, as well as reduced leverage, have improved Global's financial profile. EBITDA was fairly stable for the 12 months ended Dec. 31, 2002, at about $23 million per quarter, S&P said. The company is expected to maintain operating margins in the mid-teens as a percent of sales.

Debt protection measures have improved. EBITDA interest coverage increased to more than 4x in the December 2002 quarter from 3.4x in the December 2001 quarter, S&P noted. Total debt to EBITDA improved to about 2.6x from 3.5x in the same period, reflecting a debt reduction to approximately $243 million in December 2002 from $296 million in December 2001.

The company is expected to use its decentralized business model to modestly expand its geographic and customer base through acquisitions, S&P said. Acquisitions are expected to continue to be funded largely with debt.

S&P puts Smithfield on watch

Standard & Poor's put Smithfield Foods Inc. on CreditWatch with negative implications including its senior secured notes a BBB-, senior unsecured notes at BB+ and subordinated notes at BB+.

S&P said the watch placement follows Smithfield Foods' announcement that it expects earnings for the third quarter of fiscal 2003 to be below previous guidance and S&P's expectations.

The drop in earnings reflects the impact of lower hog prices and weak fresh meat prices, a decline driven by the excess supply of all proteins in the marketplace, S&P said. Furthermore, due to weak operating results, Smithfield has amended the leverage coverage covenants in its secured revolving credit facility and certain senior secured note loan agreements for the four quarters beginning with the Jan. 26, 2003 quarter.

Although hog prices have improved somewhat in the last several weeks, they are still below break-even levels for hog producers, S&P noted.

In addition, S&P said it is concerned that the firm's vertically integrated operations have not reduced the degree of volatility in Smithfield's operations as originally expected.

Moody's raises International Game to investment grade

Moody's Investors Service upgraded International Game Technology to investment grade. The action affects $980 million of debt, including the senior unsecured debt, raised to Baa3 from Ba1. The outlook is stable.

Moody's said the upgrade reflects International Game's leading market position in casino gaming products in the U.S., which has grown in recent years and has resulted in strong and improving cash flow from operations, the prospect of increasing demand for slot machines over the next few years, and Moody's expectation that debt levels will remain moderate.

International Game's market share has grown from 50% to nearly 70% of the North American installed base of slot machines over the last 10 years as a result of organic growth and acquisitions, Moody's noted. An extensive portfolio of trademarks, as well as strong technological and manufacturing capabilities, underpin International Game's market position and healthy profitability.

International Game's cash flow from operations reached $504 million in fiscal 2002, up from $129 million in fiscal 2000, driven by an expansion of gaming that increased demand for new slot machines, replacement demand, and an increase in the installed base of machines under recurring revenue contracts, as well as the acquisition of Anchor Gaming in 2001, Moody's noted.

As a result, credit statistics have improved; for example, cash flow from operations to total adjusted debt has increased from about 13% in fiscal 2000 to 48% in fiscal 2002 while total coverage (EBIT+1/3 rent to interest plus 1/3 rent) has improved from 3.1x to 4.9x over the same time period.

Moody's raises Iasis outlook, rates loan B1

Moody's Investors Service raised the outlook on Iasis Healthcare Corp. to stable from negative and assigned a B1 rating to its planned $125 million five year senior secured revolver and $350 million six-year senior secured term loan B. The existing ratings including its $230 million 13% senior subordinated notes due 2009 at B3, were confirmed.

Moody's said the outlook changed follows recent improvements in operating trends and the resultant strengthening of the company's credit profile.

The stable outlook anticipates that recent revenue enhancements and cost reduction initiatives, which have supported a rebound in performance, will continue to drive positive revenue and EBITDAR growth and a stabilization in margins, Moody's said. However, the ratings are limited by the company's high leverage and Moody's expectation of minimal deleveraging in the near term.

While Iasis has shown improving performance in recent quarters, Moody's said the ratings also take into consideration its high leverage, its short operating history and the high level of competition and managed care penetration in its markets.

Moreover, the ratings recognize industry-wide challenges including escalating costs for liability insurance, which rose by $9.3 million (over 100%) in 2002 for Iasis, a tight nursing market, the rising costs for medical supplies and potential reimbursement pressures returning over the intermediate term, Moody's said.

The current favorable reimbursement and pricing market may weaken, given the budget deficits at all levels of government and employees and employers pushback against rising healthcare costs, the rating agency added. Moody's also noted that Health Choice, the company's Medicaid managed health plan in Phoenix, relies heavily on a single contract with the Arizona Health Care Cost Containment System. This contract is scheduled to expire on September 2003 and the loss of it may impact the company's performance.

Fitch rates Premcor notes BB-

Fitch Ratings assigned a BB- rating to Premcor Refining Group's planned $400 million of senior notes. The outlook is positive.

Premcor Inc. is also in the process of completing an offering of 11.5 million shares of common stock with an over-allotment option of up to 1,725,000 additional shares. Premcor's two principal shareholders, the Blackstone Group and Occidental Petroleum Corp., will each participate in the equity offering. Proceeds from the debt and equity offerings will be used to finance the acquisition of the Memphis refinery and to refinance existing debt.

On Nov. 26, 2002, Premcor Inc. announced that it has entered into an agreement with the Williams Companies (Williams) to acquire the 170,000 barrel per day (bpd) Memphis refinery from Williams for $315 million plus the value of inventory. The agreement also includes potential earn-out payments for Williams of up to $75 million if industry margins exceed certain levels during the next seven years. The transaction is expected to close in the first quarter of 2003.

S&P cuts Salta Hydrocarbon

Standard & Poor's downgraded Salta Hydrocarbon Royalty Trust's $234 million targeted amortization notes due 2015 to CCC- from CCC+ and removed them from CreditWatch with negative implications.

S&P said the downgrade was triggered by the issuer's inadequate cash flow that was needed for the last interest payment on Dec. 28, 2002.

Although the issuer made this payment in full, it paid investors with funds in its reserve account. If collections do not improve, there is a concern that by Sept. 28, 2003, the reserve fund will be depleted and the issuer will be unable to fully meet its debt payments on that date, S&P said.

The next due payment for the Salta Trust bonds is March 28, 2003, for $6.75 million. As of Jan. 21, 2003, collections for the first quarter of 2003 amounted to $2.2 million, S&P said. Therefore, the ability of the transaction to make the next scheduled payment will depend, among other factors, on the sustainability of high crude oil prices in the international market, and on the performance of both natural gas production and prices.

Although it is expected that the transaction will continue receiving collections from the underlying assets, total cash flows might be severely affected by the local economic environment.

Moody's upgrades Central Garden, rates notes B2

Moody's Investors Service assigned a B2 rating to Central Garden & Pet Co.'s planned $150 million senior subordinated notes and upgraded its existing ratings including its senior implied rating to Ba3 from B1 and its senior unsecured ratings to B1 from B2. The outlook is stable.

Moody's said the upgrade reflects the regularization of Central Garden's capital structure and liquidity profile as a result of the above described financings.

The actions address the upcoming maturity of $115 million convertible subordinated notes and Pennington's $95 million revolver and frictional access to cash flows due to dividend restrictions contained in various subsidiary credit agreements.

The positive change to the ratings also reflects management's further progress in shifting the company's core business from third-party product distribution to manufacturing, marketing and distributing of in-house branded products, Moody's added.

Since losing the distribution contract with Scotts Co. in 1999, Central has rapidly and successfully transformed itself to a branded consumer products company through acquisitions and organic growth, with in-house brands now representing around 75% of sales, versus 40% in 1999, Moody's said. The company's transformation has also allowed for meaningful working capital reductions ($40 million since the beginning of fiscal 2000) which Central has used along with core cash flows to reduce debt from $221 million to $213, while funding $53 million in acquisitions and a $22 million stock repurchase.

Central maintains leading market positions in almost all of its niche pet categories and is a strong value-brand in many of its lawn and garden categories, Moody's added.

Fitch rates Bank NISP bonds B-

Fitch Ratings assigned a B- rating to Bank NISP's proposed $25 million subordinated bonds due 2013 and confirmed NISP's ratings including its long-term senior foreign currency rating of B. NISP's senior rating and its subordinated bonds rating is constrained by that of Indonesia, also B.

Fitch said NISP was one of the few major banks in Indonesia to survive the country's 1997 economic crisis without a government bailout. This was due to NISP's historically prudent management and its focus on small companies with relatively low levels of debt. Indeed, NISP was a recipient of flight to quality funds during the crisis, enabling it to substantially grow its asset base - initially in the area of central bank paper, but over more recent periods through a resumption of lending to small companies as well as consumers and the country's remaining, better-quality larger corporates.

At the same time capital constraints have been avoided through earnings retention and equity issuance - the most recent of which was in mid-2002, raising the capital adequacy ratio from 9.0% to 13.9% (all Tier I). The proposed subordinated debt issue will further raise the CAR to close to 16.0%.

S&P withdraws Crown Central ratings

Standard & Poor's said it withdrew its ratings on Crown Central Petroleum Corp. including its $125 million 10.875% senior notes due 2005 previously at B on CreditWatch with developing implications.

S&P said the CreditWatch was pending the sale of the company's two refineries. Crown Central has recently announced that it is pursuing the disposition of substantially all its assets.

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