S&P rates Turning Stone notes B+

Standard & Poor's assigned a B+ rating to Turning Stone Casino Resort Enterprise's proposed $25 million add-on senior unsecured notes due 2010 and confirmed its existing rating including its senior unsecured debt at B+. The outlook is stable.

S&P said similar to Turning Stone's original note offering in late 2002, the proposed notes are rated one notch below the corporate credit rating due to the size of the company's secured bank facility and the expectation that this facility will continue to be drawn upon to help fund construction of the ongoing expansion.

The ratings reflect Turning Stone's narrow business focus, construction risks associated with the planned expansion, challenges faced in managing a larger facility, and the potential for increased competition in the future, S&P said. These factors are somewhat offset by the solid operating performance of the company's existing facility, the favorable demographics, the current limited competitive situation in its surrounding market, and the potential for EBITDA growth post-construction.

Turning Stone Casino's strong performance and continued solid demand characteristics are driving the over $300 million ongoing expansion project, which is currently on schedule and within budget, S&P noted. The additional gaming space came on-line in early 2003. The remainder, which includes 400 additional hotel rooms, an event center, various other amenities, and a parking garage, will openly completely in March 2005.

EBITDA for 12 months ended March 31, 2003, was approximately $84 million compared to $86.3 million for the fiscal year ended Sept. 30, 2002, S&P said. The slight decrease was due to adverse weather conditions, construction disruption associated with the ongoing expansion, and higher marketing and administrative costs, which were partially offset by higher gaming volumes. Still, EBITDA margins remained above 40%, which is very good relative to peers and the industry, as a result of a low cost structure and a favorable compact structure with the state of New York. Based on current operating trends and assuming peak borrowings expected to be needed to complete the ongoing expansion, EBITDA coverage of interest expense is just under 5x and total debt to EBITDA under 3x.

S&P rates Alon USA notes B

Standard & Poor's assigned a B rating to Alon USA Inc.'s proposed $150 million senior unsecured notes due 2011. The outlook is stable.

S&P said Alon's ratings reflect the challenges the company faces as a small independent petroleum refiner and marketer with high book leverage, participating in a competitive, erratically profitable industry that is burdened by excess capacity and high fixed-cost requirements for refinery equipment and regulation compliance. These weaknesses are partially offset by the company's significant advantage as a local refiner in physically remote markets and relatively modest spending requirements necessary to meet upcoming clean fuels requirements.

In the near to intermediate term, the company's market position could be threatened by the expected completion of the Longhorn pipeline and other projects that could bring refined products from more efficient Gulf coast refineries into the four Corners region, S&P said.

Somewhat mitigating the risk of increased competition are Alon's cost-effective operations, which should provide a buffer against a potential tide of new-low cost product into the company's core retail operating areas, S&P added. Alon has an added measure of protection against margin erosion given its strong asphalt and jet fuel market positions in the Southwest, as well as the typically countercyclical benefit of owning both refining and marketing operations.

Alon is highly leveraged, reflecting its initial capitalization. Earnings have somewhat helped reduce leverage; however, the company's debt to capitalization ratio will remain high at around 65%. Cash flow measures are expected to be adequate for the rating with EBITDA interest coverage averaging around 3.5x and funds from operations to total debt averaging about 15% to 20% over the intermediate term, S&P said. Profitability is relatively stable as a result of the integrated nature of Alon's operations and the protected nature of its market, with EBIT interest coverage averaging around 2.5x over the intermediate term.

Moody's rates Universal Compression notes B1

Moody's Investors Service assigned a B1 rating to Universal Compression, Inc.'s new $175 million seven year senior unsecured notes and confirmed its existing ratings including the $450 million BRL Universal Equipment 2001 senior secured notes at Ba3 and its $230 million 9.875% senior unsecured discount notes at B1. The outlook is stable.

Moody's said the ratings reflect high leverage; expected flat near-term cash flow on still flat domestic natural gas compressor fleet utilization and after flat results in the four quarters ended March 31,

2003; a highly capital intensive business model; and rising international political risk exposure as Universal Compression targets higher margin foreign markets.

These risks are tempered by a strong business position, inherent relatively durable compression demand in the near-term, greater capital spending discipline, expected demand response later in 2003 in delayed response to rising drilling activity, and expected balance sheet firming on free fiscal 2004 cash flow.

Pro-forma for the new notes and tender for the old notes, debt would be $908 million, Moody's said. Pro forma debt/EBITDA, on $201 million of fiscal 2003 EBITDA, would approximate 4.5x. Pro forma EBITDA/interest, on fiscal 2003 EBITDA, would approximate 2.7x.

Moody's rates Turning Stone notes B1

Moody's Investors Service assigned a B1 rating to Turning Stone Casino Resort Enterprise's new $25 million senior unsecured notes due 2010 and confirmed the existing ratings including its $135 million 9.125% senior unsecured notes due 2010 at B1. The outlook is stable.

Moody's said the ratings consider Turning Stone's small cash flow base, dependence on a single market, construction and expansion risks and the ability to make substantial distributions.

The ratings also acknowledge the likely difficulty that senior unsecured bondholders would face in recovering their investment in a liquidation scenario.

Currently, there is also uncertainty regarding whether an Indian Tribe can be a debtor under U.S. bankruptcy law and whether a creditor would be protected under that same law.

Positive ratings consideration is given to the required $120 million equity contribution that will be used to fund a portion of the Enterprise's $330 million expansion project. Also considered are positive historical performance trends and Moody's expectation that a significant portion of the expanded capacity from the expansion project will be easily absorbed.

The stable ratings outlook reflects Moody's expectation that debt/EBITDA will remain within 3.0x during the construction period, and that although the Enterprise has the ability to incur additional debt, it will not borrow a material amount of additional debt through the construction period.

Moody's rates Alon USA notes B3

Moody's Investors Service assigned a B3 rating to USA, Inc.'s planned$150 million of eight-year senior unsecured notes. The outlook is stable.

Moody's said ratings positives for Alon are its longstanding Southwest business position; partial integration with refining, pipeline (product and crude oil), and retail assets; adequate current liquidity; management's long experience in the sector and region; and the capital and crude oil cost advantages of its high capacity to run medium sour crude oil and large asphalt business.

Negatives include high leverage; small single refinery status; high capital spending and working capital needs (especially at high oil prices); pari passu deferred payment obligations to former shareholders; and inherent extremely volatile regional and cyclical refining margins.

The outlook or ratings may be pressured in future years if Alon made material dividends or loans to shareholders that were not supported in the ratings context by cash flow and leverage trends at the time and/or if Alon's letter of intent to buy Farmland's Coffeyville, Kan. refinery led to a purchase of that unit with no immediate ratings downgrade but future years' Coffeyville capital spending and overall performance strained leverage. The indenture prohibits Alon from buying Coffeyville if such action would cause an immediate downgrade or negative outlook. This does not eliminate the risk that Alon's ratings could be strained in later years, depending on performance and capital needs.

Alon's March 31, 2003 total debt/total capital was 69%. Before LIFO inventory adjustments, Alon generated: $12.9 million in first quarter 2003 EBITDA; $39.5 million during a weak 2002 market; $58 million in 2001 on very strong first half 2001 margins; $56 million in 2000 on very strong sector margins; $38 million in 1999 on sector weakness; $24 million in 1998 on soft sector margins and a refinery turnaround, and $51 million of pro-forma 1997 EBITDA, S&P said.

Moody's cuts Quezon Power

Moody's Investors Service downgraded Quezon Power (Philippines) Ltd. Co.'s debt to B3 from B2. The outlook remains negative.

Moody's said the action was prompted by increasing concern about the liquidity profile of Meralco, which is Quezon Power's offtaker.

Based on Meralco's 2002 audited results, Meralco is burdened with PHP12 billion of short-term debt due this year, Moody's sai. Without debt refinancing and/or substantial tariff increase, Moody's expects that Meralco would have difficulty to meet its debt payments this year. Exacerbating the problem is the uncertainty concerning the timing for the refund of PHP28 billion due to industrial and commercial customers. In addition, Meralco has agreed to pay PHP20 billion to National Power Corporation over 5 years as settlement of a power supply contract dispute.

Moody's is concerned that the liquidity problem faced by Meralco may affect its willingness to meet its power offtake obligations with Quezon Power.

Mitigating this, Quezon Power's own liquidity position remains adequate with sufficient resources to meet its debt obligations in the next 12 months, the rating agency added. Further supporting the B3 rating is the contractual electricity payments from Meralco which remain current.

Moody's puts Tranz Rail on upgrade review

Moody's Investors Service put Tranz Rail Ltd. in review for upgrade including Tranz Rail Finance Ltd.'s passthrough certificates series 1996 at Caa1.

Moody's said the review follows the announcement that RailAmerica Inc. (Ba3, positive outlook) will commence a tender offer for 100% of Tranz Rail's equity securities.

RailAmerica announced that it intends to offer NZ$0.75 cash for each ordinary share of Tranz Rail at a total consideration of $90 million (NZ$157.5 million) and will assume or refinance around $135 million (NZ$236 million) of Tranz Rail's existing lease obligations and outstanding debt as at Dec. 31, 2002, Moody's said.

If the acquisition materializes, the review will focus on the improvement in the liquidity position of Tranz Rail; the degree of financial support to be provided by RailAmerica to Tranz Rail; and the future strategy of RailAmerica on the operating and financial profile of Tranz Rail, Moody's said.

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