S&P says InSight Health unchanged

Stand said InSight Health Services Corp.'s ratings are unchanged including its corporate credit at B+ with a stable outlook on news that it will acquire 13 southern California imaging centers from Cardinal Health Inc.

The transaction is consistent with InSight's network expansion plans and can be financed from available liquidity sources without releveraging the company to levels inconsistent with the rating, S&P said.

Consolidation of existing capacity at reasonable price multiples is generally considered to be positive, particularly in light of favorable demand trends, S&P said.

S&P rates Mohegan Tribal loan BB+

Standard & Poor's assigned a BB+ rating to the Mohegan Tribal Gaming Authority's $391 million bank loan agreement, which is comprised of a $291 million revolving credit facility and a $100 million term loan facility both due March 31, 2008. The outlook is negative.

Mohegan Tribal Gaming's ratings reflect the high quality of the Mohegan Sun and related amenities, limited regional competition, and favorable demographics of the southeastern Connecticut market, S&P said. These factors are offset by a lack of geographic diversity, high debt leverage for the rating, and risks associated with gaming legislation changes in Northeast and with operating a larger casino resort.

Mohegan Sun is one of two Native American gaming casinos in southeastern Connecticut. Performance of the property has been solid since it opened in October 1996. The success of the property has been due, in large part, to the limited competition in the densely populated New England region, efficient operations, and easy access, S&P said. Mohegan Sun's largest competitor is nearby Foxwoods, owned and operated by the Mashantucket Western Pequots. Foxwoods pre-dates the Mohegan Sun, and was substantially larger prior to the Project Sunburst expansion. Both properties are expected to continue to perform well and to share in the market growth.

The competitive landscape remains a longer-term rating factor. The market could be affected by new competition in other parts of Connecticut, Massachusetts, Rhode Island, New York, and New Jersey.

S&P said it believes that anticipated near-term capacity growth in Atlantic City and the potential for casino gaming in New York are likely to have only a modest effect on cash flow in the Connecticut market, related to some overlap with New York and New Jersey visitors.

Of greater competitive concern would be a sizable expansion by Foxwoods or the realization of plans by certain Native American tribes to build casinos in Rhode Island, Massachusetts, or other parts of Connecticut. However, political hurdles exist to the expansion of gaming in these states, and these issues are not likely to be resolved quickly, S&P said.

Moody's rates Fresenius notes Ba1

Moody's Investors Service assigned a provisional Ba1 rating to Fresenius AG's proposed €300 million equivalent in senior notes and confirmed the company's existing ratings. The outlook is stable.

Moody's said the rating reflects: Fresenius' position as a vertically integrated healthcare company with strong recurring revenue and cash flow characteristics; the group's leading worldwide and European

specialized market positions, which benefit from non-cyclical cash flows; Moody's expectation of strongly improving operating and free cash flow post-restructuring and litigation; and expectation that each core business group will continue to benefit from strong demographic trends such as an ageing population combined with increasing demand for medical care support, which are expected to underpin revenue predictability.

The ratings also reflect: the group's moderately leveraged balance sheet at approximately 3.0-times net debt to EBITDA; uncertainty of timing with respect to the company's capacity to de-leverage from organic cash flow growth and integration of acquired businesses; uncertainties with respect potential changes to third-party reimbursement in the U.S. as well as continued price pressure from buying groups; the likelihood of continued acquisitive expansion, albeit on a significantly smaller scale; the risks associated with expanding the business in developing geographic regions; and heavy reliance on Fresenius's majority owned subsidiary Fresenius Medical Care as the main recovery means in a downside scenario.

S&P rates Tesoro notes BB

Standard & Poor's assigned a BB rating to Tesoro Petroleum Corp.'s new $400 million senior secured notes due 2008. The outlook is negative.

S&P said Tesoro's ratings reflect its position as a highly leveraged, independent oil refiner and marketer operating in a very competitive, erratically profitable industry burdened by high fixed costs. These weaknesses are partly offset by strong asset quality, advantaged operating locations, and a degree of retail-derived margin stability.

Tesoro embarked on a focused deleveraging plan in mid-2002 with a goal of $500 million in debt reduction by year-end 2003 through sharply reduced capital spending, permanent reductions in working capital, workforce cutbacks and cash flow from operations, S&P noted. Through refinancing existing bank facilities, Tesoro should be able to free significant cash currently trapped in working capital that is expected to be applied to debt repayment.

Expectations for significantly improved refining margins during 2003 should allow Tesoro to generate meaningful amounts of cash flow available for debt repayment.

As of year-end 2002, Tesoro's debt-to-total capital stood near 70%, an unsustainably high level given the highly cyclical, highly volatile, working capital intensive nature of refining, S&P said. Management's debt reduction plan should allow Tesoro to improve leverage to the low 60% range by year-end 2003. Assuming mid-cycle crack spreads for the year, EBITDA to interest coverage should improve to near 3.0x for 2003 with FFO to debt between 15% and 20%, levels more appropriate for the rating category than the very thin coverage measures of 2002.

S&P cuts Pliant outlook

Standard & Poor's lowered its outlook on Pliant Corp. to negative from stable and confirmed its ratings including its bank debt at B+ and subordinated debt at B-.

S&P says the lower outlook reflects a weaker than-expected trend in Pliant's operating and financial performance, and concerns regarding its liquidity position and onerous debt maturities.

S&P said it is concerned that the recent escalation in raw material prices (namely plastic resins) and sluggish volume growth could hamper profitability and cash generation, further delaying the expected improvement to the company's financial profile. Moreover, given the company's limited free cash generation in the intermediate term, its onerous debt maturities of $46 million in 2004 and $58 million in 2005 elevate credit and refinancing concerns.

The ratings reflect Pliant's below-average business position in flexible packaging segments, offset by very aggressive debt leverage and limited financial flexibility, S&P added.

The rapid escalation in prices of plastic resins since January 2003 has resulted in gross margin compression, which is expected to be gradually recouped through price increases to customers, S&P said. About 40% of the company's revenues (including the more value-added design and printed products) are under contractual arrangements with customers that allow pass-through of raw material price fluctuations, albeit with a few months time lag. For the more commodity-type and industrial film segments, operating margins are expected to remain under pressure in the near term, reflecting overcapacity, sluggish demand and intensified competition. Overall, operating margins have declined to about 15% in 2002 from 17% in the previous year.

Pliant revised its earnings guidance for 2003 with estimated EBITDA of $132 million, compared with previous estimates of $140 to $145 million, S&P noted.

The company' s financial profile was significantly weakened following a recapitalization in May 2000, and Pliant remains very aggressively leveraged with total debt (adjusted for capitalized operating leases) to EBITDA of about 6x as at Dec. 31, 2002, S&P added. Credit measures are subpar with EBITDA to interest coverage at about 1.6x, and the company has not generated free cash flows in the past three years.

Moody's puts Alfa Laval on upgrade review

Moody's Investors Service put Alfa Laval Special Finance AB on review for upgrade including its €575 million senior unsecured credit facilities due 2007 at Ba1 and €220 million 12.125% senior notes due 2010 at Ba2.

The review for upgrade reflects Alfa Laval's continued strong operating performance and cash flow generation following the last rating action in June 2002, Moody's said.

Despite a weakened operating environment and decreased revenues in fiscal 2002, the company has continued to improve its operating profitability (largely as a result of its "Beyond Expectations"

cost-cutting program, launched in 1999), and has further de-leveraged the business through strong internal cash flow generation.

In its preliminary results for the fiscal year ended Dec. 31, 2002, Alfa Laval reported net debt/EBITDA of approximately 1.67x, EBITDA/net cash interest of 3.9x (estimated at above 6.0x on a pro forma basis as if the IPO had occurred Jan. 1, 2002), retained cash flow/net debt (excluding IPO costs and M&A activity) at around 40.0%, and free cash flows (pre-M&A activity) of approximately SEK 1.1 billion (approximately €118.0 million), Moody's said.

While future free cash flow generation will most likely reflect less favorable working capital changes (fiscal 2002 saw an SEK 227.5 million improvement driven in part by lower activity levels) and higher capital expenditures (SEK 276.7 million spent in fiscal 2002 as a result of certain plant closures, likely to ramp-up to SEK 350.0 million over the medium-term), the review for upgrade reflects Moody's expectation that the company should be able to maintain its current cash flow generation trajectory, even in the context of difficult market conditions.

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