S&P cuts IMC Global

Standard & Poor's downgraded IMC Global Inc. including cutting its senior secured bank loan rating to BB- from BB+ and senior unsecured debt to B- from B+, IMC Global Operations Inc.'s senior unsecured debt to B- from B+ and Phosphate Resource Partners LP's senior unsecured notes to B- from B+. The outlook is stable.

S&P said the downgrade follows IMC's pre-earnings announcement and reflects unexpected weakness in the company's operating results for the important second quarter and concerns that weaker-than-expected results for fiscal 2003 will make it more difficult for the company to meaningfully reduce debt and strengthen credit protection measures in the near term.

Profitability and cash flow in 2003 are being negatively affected by high ammonia and natural gas costs, as well as lower-than-expected phosphate and potash volumes, S&P said. The company's inability to compensate for higher ammonia and natural gas costs, despite generally improved agricultural market conditions, highlights the credit risk of volatile input costs on the company's cost structure and operating efficiency.

Consequently, the expected improvement in IMC's financial profile will likely be pushed back at least another year and remains subject to an increasingly volatile price environment for natural gas in North America.

In addition, the company's poor financial performance raises refinancing concerns somewhat because of a provision in the bank facilities that accelerates its maturity date to Oct. 15, 2004, in the event that $450 million in notes due in 2005 are not refinanced prior to Oct. 15, 2004, S&P said. Nevertheless, the ratings incorporate the expectation that the refinancing effort will be successful.

Funds from operations to total debt has fallen into the single-digit percentage area; EBITDA interest coverage is near 2.0x; and debt to EBITDA is nearing 6.5x, S&P said.

S&P rates Dayton Superior notes B+

Standard & Poor's assigned a B+ rating to Dayton Superior Corp.'s proposed $150 million senior secured notes due 2008 and confirmed its existing ratings and confirmed its senior secured bank loan rating at B+ and subordinated debt at B-. S&P added that if the note issue is successful and the bank loan amended as planned it will upgrade the $50 million senior secured revolving credit facility to BB-.

S&P said net proceeds of $143 million from the notes offering are expected to be used to repay existing bank debt, including a portion of the amount outstanding under the company's revolving credit facility and the full amounts borrowed under its acquisition facility and both its term A and term B loans.

This refinancing is expected to improve liquidity, relieve financial covenant pressure, and eliminate growing debt amortization requirements, S&P said. Nonetheless, Dayton Superior remains highly leveraged with debt of $330 million at March 31, 2003.

The rating on the amended bank facility, based on preliminary terms and conditions, will be one notch higher than the corporate credit rating. S&P said that in a default scenario the simulated enterprise value was more than sufficient to repay 100% of the $50 million revolving credit facility, even assuming it is fully drawn.

Despite difficult industry conditions, debt at the end of March 2003 was only modestly higher than a year ago, S&P said. Still, the capital structure remains very aggressive - debt to EBITDA of 5.6x currently - which is keeping cash flow protection measures weak. EBITDA interest coverage is currently 1.7x, with funds from operations to debt below 5%, subpar for the ratings. In addition, debt will rise somewhat following completion of the proposed refinancing and the company's pending acquisition of Safway Formwork System LLC, a manufacturer of concrete forming and shoring systems. However, Dayton Superior's equity sponsor, Odyssey Investment Partners Fund LP, is expected to contribute some equity to finance this transaction.

S&P rates Cooperative Computing notes B+

Standard & Poor's assigned a B+ rating to Cooperative Computing Inc.'s proposed $175 million senior unsecured notes and confirmed its senior secured bank loan at BB- and subordinated debt at B-. The outlook is stable.

S&P said Cooperative Computing's ratings reflect its improved, but still relatively high, financial leverage and limited diversity, partially offset by a solid niche position in providing software and services to the automobile parts aftermarket and retail hardlines and lumber industries.

Cooperative Computing is beginning to extend its reach beyond its traditional focus on the auto-parts and hardlines segments, where S&P believes that growth prospects are limited. The current fairly narrow focus makes Cooperative Computing dependent on the health of those segments.

Cooperative Computing's profitability has improved as a result of a three-year effort to rationalize its product lines and improve operating efficiencies. EBITDA for the 12 months ended March 31, 2003, was $57 million, compared with $49 million in the fiscal year ended Sept. 30, 2002, and $36 million in fiscal 2001, S&P noted. Revenue, however, remains relatively flat, with only 4% growth in fiscal 2002. Further improvements in profitability will eventually require growth in the top line, as cost-reduction opportunities become fewer. Debt protection metrics, while improved in recent years, still reflect a levered financial profile. Total debt to EBITDA was 3.2x for the year ended March 31, 2003, down from 4.1x as of Sept. 30, 2002. Pro forma total debt to EBITDA will rise modestly because of the buyout of certain equity holders contemplated as part of the refinancing.

Moody's rates Esterline notes B1

Moody's Investors Service assigned a B1 rating to Esterline Technologies Corp.'s proposed $150 million senior subordinated notes due 2013 and a Ba2 to its $50 million senior secured credit revolving credit facility due 2008. The outlook is stable.

Moody's said the ratings reflect moderate and manageable post-transaction debt levels, the relatively strong cash flow that the company's businesses generate and a diverse customer base representing sole-source status as supplier to a number of aircraft platforms, in particular military aircraft.

Ratings also consider the relatively small, albeit growing revenue base, investment and integration risk associated with the company's high level of acquisition activity and exposure to the commercial aerospace market.

The outlook is stable as Moody's expects Esterline to ably manage its growth through acquisitions and maintain its profit margins across its business segments.

After the proposed acquisition and re-financing, Esterline's pro forma debt will be $257 million, or about 40% of total cap (45% adjusted for operating leases).

After the Weston transaction and taking into account full year operations of the company's 2002 acquisitions, pro forma debt/EBITDA for the 12 months to January 2003 will increase to about 3.3x, from about 2.1x in 2002, while EBIT/interest coverage decreases from 4.9x in 2002 to pro forma 2.8x. Moody's notes positively, however, the company's improved liquidity position.

S&P raises Inamed outlook

Standard & Poor's raised its outlook on Inamed Corp. to positive from stable including its senior secured debt at BB-.

S&P said the revision is because of Inamed's extension of favorable operating performance, aided by new products and continued financial discipline.

Inamed is one of only two remaining U.S. manufacturers of breast implants, holding about a 50% market share in the U.S. and about 45% internationally, S&P noted. Regulatory requirements for implants in the U.S. and the European Community, as well as Inamed's dedicated sales force, which is the largest in its market, provide significant barriers to competitive entry. Inamed is also a leading provider of facial implants. The recent U.S. approval of both CosmoDerm and CosmoPlast, Inamed's human collagen products, provides opportunities to expand the company's facial product franchise. Other promising products include the Lap Band weight-loss system and silicone gel breast implants.

Still, Inamed's narrowly focused market position and its dependence on a single-product platform for more than 50% of revenues make it vulnerable to technological and market changes. In addition, changes in economic conditions, especially in the U.S., could influence the company's operating performance, as cosmetic procedures are usually elective procedures and generally not reimbursable by a third party.

Both EBITDA coverage of interest and funds from operations to lease-adjusted debt are strong for the rating at 5.1x and 54%, respectively, S&P said. Moreover, Inamed retired $36 million of debt during 2002.

Moody's cuts Tower senior unsecured debt, rates notes B1, loan Ba3

Moody's Investors Service assigned a B1 rating to R.J. Tower Corp.'s proposed $250 million of senior unsecured notes due 2013 and a Ba3 rating to its proposed $240 million senior secured term loan due July 2006 and downgraded Tower Automotive, Inc. and its R.J. Tower subsidiary including cutting R.J. Tower's €150 million 9.25% guaranteed senior unsecured eurobonds due 2010 to B1 from Ba3 and confirmed Tower Automotive's $200 million of 5% convertible subordinated notes due 2004 and $258.75 million of 6.75% trust convertible preferred securities due June 2018 at B3. The outlook remains negative.

Moody's said the actions were taken in conjunction with the company's announcement that it intends to launch an offering of approximately $250 million of senior unsecured notes for the purpose of refinancing certain existing debt obligations with upcoming principal maturities. A corresponding amendment to the senior credit agreement will be required which will entail material changes to existing terms.

The effect of the proposed transactions has primarily liquidity and notching implications, as opposed to operational implications, Moody's said. The enhanced security position of a portion of R.J. Tower's existing senior credit agreement obligations has effectively subordinated the company's remaining senior unsecured obligations under both the credit agreement and the existing and proposed senior unsecured notes indentures.

Moody's said it remains concerned regarding the potentially negative impact that a decline of North American light vehicle production volumes below 16 million units could have on Tower's near-term cash flow generation capabilities and access to liquidity. In addition, Moody's notes that throughout the uncertain economic environment for 2003 Tower faces heavy launch expenses approximating $40 million, along with associated program-specific capital expenditures. However, these expenditures will support meaningful diversified new business roll-outs consisting of primarily value-added body structures contracts. Given the company's high proportion of fixed operating expenses, combined with its very substantial requirements to invest in growth, a meaningful decline in unit volumes would likely cause Tower to realize negative 2003 free operating cash flow.

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