S&P raises Koppers outlook

Standard & Poor's raised its outlook on Koppers Inc. to stable from negative and confirmed its ratings including its senior unsecured debt and subordinated debt at B-.

S&P said the outlook revision reflects increased availability under a new credit agreement and a more favorable debt maturity schedule.

The firm's liquidity position has improved with the establishment of a new four-year secured bank credit facility, consisting of a $100 million revolving credit facility (subject to a borrowing base calculation) and a $75 million term loan. The company should be able to satisfy less restrictive financial covenants and maintain satisfactory borrowing availability, S&P said.

Koppers' ratings continue to reflect the company's below-average business position and its very aggressive financial profile, S&P added.

Koppers is highly leveraged, with total debt (adjusted for the capitalization of operating leases) to EBITDA about 4.0x, S&P said. Cash generation generally should exceed relatively low capital spending needs ($23 million estimated for 2003), allowing for limited debt reduction. Still, given the probability of additional dividend payments, the financial profile is expected to remain very aggressive.

Fitch puts Desc on watch

Fitch Ratings put Desc SA de CV on Rating Watch Negative including its senior unsecured foreign and local currency ratings at BB.

The rating action reflects the challenges faced by Desc's automobile parts and chemical businesses, which continue to suffer from an extended period of weak economic activity, pricing pressures and lower cost absorption, Fitch said. These challenges have affected cash flows and profitability, hampering Desc's progress on debt reduction and the improvement of credit protection measures.

Prolonged economic weakness in Mexico and the U.S. and continued pressures on cash flows and credit protection measures may result in further rating actions, S&P said.

Moody's confirms Mikohn

Moody's Investors Service confirmed Mikohn Gaming Corp. including its $105 million 11.875% senior secured notes due 2008 at B3, completing a review. The outlook is stable.

Moody's said the confirmation is based on Mikohn's stabilized operating performance, improved cost structure and strategic relationship developments, much of which can be attributed to efforts initiated by the company's new management team.

In January 2003, Mikohn and Aristocrat Technologies expanded their strategic partnership which will allow Mikohn to outsource its entire servicing, maintenance and refurbishing needs and focus solely on game development, conceptualization, art and software program design.

In February 2003, Mikohn entered into joint development agreement with Bally Gaming and Systems Corp. to develop new wide-area progressive games.

Moody's said it expects that these achievements will result in improved business volume and operating margins as well as greater amounts of free cash flow and financial flexibility.

The ratings continue to acknowledge Mikohn's significant debt relative to its current free cash flow generating ability, Moody's added. For the 12-month period ended Mar. 31, 2003, total debt outstanding was about $103 million compared to a cash flow deficit after interest, taxes, working capital and capital expenditures of about $0.4 million. Additionally, Mikohn's narrow product line will continue to make the company vulnerable to product delays and customer demand.

The stable ratings outlook reflects Moody's overall favorable outlook for gaming supply as well as Mikohn's current liquidity profile. The company has about $16 million of cash available on its balance sheet, slightly above the company's estimated annual cash interest burden of about $13 million. Additionally, there are no long-term debt maturities until 2008.

S&P rates Esterline notes B+

Standard & Poor's assigned a B+ rating to Esterline Technologies Corp.'s planned $150 million senior subordinated notes due 2013. The outlook is stable.

S&P said Esterline's ratings reflect its exposure to the weak commercial aerospace market and its active acquisition program, offset somewhat by a diversified revenue base and moderate debt leverage.

Esterline plans to use a portion of the proceeds from the subordinated notes issue to purchase the Weston Group from British conglomerate Roxboro Group plc for $88 million, as well as pay off outstanding bank debt and for general corporate purposes.

Revenues from continuing operations increased modestly in 2002 due to acquisitions, S&P said. Operating margins (before depreciation) remained respectable at around 16%. Pretax and EBITDA coverage of interest have been solid at 5x and 7x, respectively, in 2002, due to good profitability and modest debt levels.

However, these measures will deteriorate somewhat with the increased debt from the Weston acquisition, S&P noted. Although acquisitive, Esterline has historically maintained modest leverage, with total debt to capital of around 35% at the end of fiscal 2002 (ending Oct. 31, 2002). Pro forma for the Weston acquisition, debt to capital will likely increase to almost 45%. Expected modest free cash generation could be used to reduce debt or for further acquisitions.

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