Moody's rates Omnova Solutions notes B2, loan B1

Moody's Investors Service assigned a B2 rating to Omnova Solutions Inc.'s proposed $165 million of senior secured notes due 2010 and a B1 rating to the company's new $100 million senior secured revolving credit facility due 2006. The outlook is stable.

Moody's said the ratings reflect Omnova's high pro forma leverage; weak coverage of interest expense; thin operating margins; raw material cost pressures; the deteriorated, albeit trough level, performance of its Decorative & Building Products business; and uncertainty over the timing of a recovery in its commercial and industrial end-markets.

The ratings are supported by the diversity of the company's end-markets and customer base; its leading market share within its niche markets; its conservative history of acquisitions; and significant reductions in debt in fiscal 2002.

The stable outlook reflects Moody's expectation that Omnova will sustain the current volume of business and that raw material costs will continue to pressure operating margins.

Omnova's last 12 months revenues decreased to $678 million from $728 million the same period last year, reflecting weakness in the D&BP business. Last 12 months EBITA margins decreased to 2.1% from 4.8% over the same period. Omnova's pro forma debt stood at $207 million as of Feb. 28, 2003. Based on last 12 months EBITDA of $37 million in fiscal 2002, debt to EBITDA was 5.6 times. EBITA coverage of pro forma interest expense was only 0.8 times (1.7 times EBITDA coverage) over the same period. Pro forma debt to capitalization stood at 60%.

Moody's rates Evergreen notes B3, loan B1

Moody's Investors Service assigned a B1 rating to Evergreen International Aviation Inc.'s $100 million senior secured revolving credit facilities due 2008 and a B3 rating to its new $215 million senior second secured notes due 2010. The outlook is stable.

Moody's said the ratings reflect Evergreen's inconsistent albeit improving record of earnings and cash flow, the cyclical air cargo and services industry in which the company operates, heavy current reliance of a large portion its revenue base on certain sources of business (particularly the US Air Mobility Command and US Postal Service), relatively weak asset coverage implied by an older aircraft fleet, as well as the small size of the revolver.

However, the ratings are supported by strong near-term operating cash flows, positive contributions from increases in Air Mobility Command contracts, supplemental enterprise value provided by the company's Eagle subsidiary, and the long history the company has in the air cargo, ground services, and other related services.

The stable outlook is based on Moody's expectations that Evergreen's operating profits continue at current levels, adequate to repay significant amounts of debt.

Despite modest debt levels post-transaction, Moody's said it is concerned about the effects that high capital expenditures levels or variability in operating results may have on debt service. The purpose of the new credit facilities and notes is to refinance approximately $268 million in existing term loans and revolving credit facilities due in May 2003. With new five and seven year facilities in place, Evergreen will have succeeded in improving liquidity by extending debt maturities.

Total debt will make up approximately 60% of total capital, representing a multiple of 1.8x fiscal 2003 ending February 2003 EBITDA, with rent-adjusted debt estimated at 3.1x fiscal 2003 EBITDAR, Moody's said. Pro forma 2003 free cash flow represents about 13% of refinanced debt. Considering the relatively high maintenance capital expenditures levels owing to the age of Evergreen's aircraft, coverage levels are somewhat strained.

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