Moody's puts NUI on review, direction uncertain

Moody's Investors Service put NUI Utilities, Inc. and parent NUI Corp. under review with direction uncertain including NUI Utilities' senior unsecured debt and medium-term notes at Ba1 and NUI Corp.'s senior unsecured debt at B1.

Moody's said the review follows NUI's announcement that its board of directors has decided to pursue the sale of the company.

Moody's action reflects the uncertainty surrounding the identity and credit standing of the potential buyer or buyers, the terms of sale, the conditions that may be imposed by regulators having jurisdiction over the sale, and the continuation of support from NUI's lenders and other interested parties during the period of transition.

S&P cuts NUI, on developing watch

Standard & Poor's downgraded NUI Utilities Inc. including lowering its senior unsecured debt to BBB- from BBB and put it on CreditWatch developing.

S&P said the action is in response to parent NUI Corp.'s announcement that the firm is being actively offered for sale and that net income for the fiscal year ending Sept. 30, 2003 has been revised downward.

The CreditWatch listing with developing implications reflects the potential for the ratings to be raised, lowered, or maintained depending on the credit quality of the eventual buyer.

Declines in realized consolidated cash flow have lead to a weakened financial profile for the NUI enterprise, which has precipitated the downgrade on NUI Utilities. Furthermore, challenges exist in managing the firm's ongoing business while seeking to court buyers, S&P said.

Of additional concern is the firm's ability to meet future liquidity needs during this uncertain period, S&P noted. As of June 30, 2003, $149.6 million was drawn on bank lines of $180 million. This amount should be adequate for the firm's needs during the coming winter heating season.

Moody's rates IFCO notes B2

Moody's Investors Service assigned a provisional B2 rating to IFCO Systems NV's planned €110 million guaranteed senior secured notes due 2010. The outlook is stable.

Moody's said IFCO's ratings reflect its expectation that earnings will be volatile given the low market barriers to entry in the pallet business and the dependency of sales in the re-usable plastic container business on good harvests; the high levels of capital expenditure required in the re-usable plastic container business; the high end customer concentration of the re-usable plastic container business; a number of contingent liabilities relating to the restructuring and to IFCO's industrial containers business (which was sold in 2002) which may impact cash flow going forward; and the company's exposure to foreign exchange movements between the dollar and euro resulting from its unhedged euro borrowings.

More positively, the rating also reflects the company's leadership position in the Western European re-usable plastic container market; IFCO's well-established relationships with retailers, growers and producers; the significant decrease in financial leverage following the restructuring combined with adequate liquidity; and the success to date of the new management team in restructuring and rationalizing the company.

Whilst Moody's believes that IFCO will continue to invest in substantial capital expenditure in order to grow its business, particularly the re-usable plastic container business in the United States, the stable outlook reflects Moody's expectation that such expansion capex will be funded from free cash flow and that going forward the company will generate material free cash flow which will be used in part to de-leverage its business.

Following the restructuring, the company's credit metrics have improved significantly and while still viewed as high for a business of this nature, with pro-forma total adjusted debt/EBITDAR of approximately 4x and EBITDA/net interest expense of approximately 4x, should be sustainable going forward assuming that the company does not leverage up further through aggressive organic expansion or acquisitions, Moody's said.

S&P rates IFCO notes B-

Standard & Poor's assigned a B- rating to IFCO Systems NV's planned €110 million notes due 2010. The outlook is stable.

S&P said the ratings reflect IFCO's aggressive financial profile due to high leverage and a high business risk in the group's re-usable plastic container business.

The bond will be used to repay existing senior secured bank debt, part of the final phase of IFCO's financial restructuring.

For the first six months of 2003, IFCO's revenues increased, which might be an indication that the group has remedied past difficulties, S&P said. If this is the case, IFCO should be well positioned to reap the benefits of its position as the largest independent supplier of re-usable plastic container in Europe for the transport of fruit and vegetables, and as the leading provider of pallet services in the competitive and fragmented U.S. market.

S&P lowers Circus and Eldorado outlook

Standard & Poor's lowered its outlook on Circus and Eldorado Joint Venture to negative from stable and confirmed its ratings including its senior secured debt at B+.

S&P said the outlook revision reflects unfavorable market trends affecting the Reno market and the expectation that this trend will not reverse meaningfully over the intermediate term.

Operating results at the Silver Legacy continue to be negatively affected by the weak economy and the intensely competitive market environment in Reno, resulting in lower customer traffic and overall gaming volumes, S&P noted. As a result, the property has experienced several quarters of year-over-year EBITDA declines, and EBITDA decreased approximately 11% during the 12 months ended June 30, 2003, to $39 million.

Because a significant portion of Silver Legacy's revenues relies on drive through customer traffic from residents in northern California, the proliferation and expansion of Native American gaming, most recently the June 2003 opening of the Thunder Valley Casino, is likely to significantly affect the Reno market in the intermediate term and is expected to cause further dilution at the Silver Legacy.

Still, the affirmed ratings on Circus and Eldorado reflect adequate credit measures and the Silver Legacy's relative success since its opening in mid-1995, generating EBITDA in excess of $35 million annually for the past five years, S&P said.

Despite the unfavorable business conditions, EBITDA coverage of total interest expense was 2.4x, and total debt to EBITDA was 4.1x at June 30, 2003, S&P said.

S&P rates ASPropulsion notes B-

S&P assigned a B- rating to Avio Holding SpA's €200 million notes due 2013 to be issued by ASPropulsion Capital BV. The outlook is stable.

Avio's ratings reflect the group's exposure to the depressed civil aviation and U.S. power generation markets, relatively modest size and very aggressive financial profile, S&P said.

Avio benefits, however, from strong niche market positions, a high level of technological content in its products and its presence on less cyclical military programs.

S&P said it does not expect to see further deterioration in Avio's civil engines business from the current levels and the group's full-year 2003 credit ratios should not deteriorate from the half-year levels.

Fitch rates Jenoptik BB

Fitch Ratings assigned a BB rating to Jenoptik AG's senior unsecured debt. The outlook is stable.

Fitch said the rating is based on Jenoptik's current organizational structure and reflect the group's strong market positions, most notably in clean systems, and leading positions in niche photonics-related sectors.

Despite the group's relatively conservative financial strategy, improved transparency (as the earnings of DEWB are no longer consolidated under the group's results) and greater clarity regarding the clean systems strategy, the weakening of both its margins and financial profile is of concern, Fitch said.

However, some comfort is gained from Jenoptik's strategy in the past two to three years to reduce the clean systems division's exposure to the more volatile semiconductor market, which accounted for roughly 30% of divisional revenues in fiscal 2002 (50% in fiscal 2001) and to diversify the customer base.

Management has also sought to increase the contributions from the more profitable photonics division, due to the more bespoke nature of the products and the greater proportion of customized products in the portfolio. The photonics division also generates more stable and predictable revenues due to the long-term nature of the contracts.

With the announced refinancing plan, including the issuance of 8.14 million shares and a debt financing, management will strengthen the company's capital structure and improve its debt maturity profile, Fitch noted. The group will also seek to strengthen market positions through organic and acquisitive growth, while continuing to establish partnerships in order to reduce the group's risk exposure.

Moody's rates IMCO notes B3

Moody's Investors Service assigned a B3 rating to IMCO Recycling Inc.'s proposed $200 million of senior secured notes due 2010. The outlook is stable.

Moody's said the ratings anticipate continuing margin compression due to IMCO's low operating rates, weak aluminum market fundamentals, potentially higher natural gas costs and the challenges involved in procuring adequate volumes of aluminum and zinc scrap at acceptable prices.

However, the ratings also incorporate IMCO's significant position as a recycler of aluminum and zinc to many leading industry participants, the lower risk associated with the portion of its business subject to tolling arrangements and reasonable liquidity post refinancing.

Post refinancing, Moody's views the company's liquidity position as adequate, with approximately $20 million of cash on hand and about $62 million of availability under its bank facility after borrowing base restrictions. In addition, after the refinancing Moody's expect credit metrics to be reasonable for the proposed ratings, with debt to EBITDA of just over 4x and EBITDA to gross interest of about 2.4x on a pro forma trailing 12 months basis.

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