Moody's upgrades Inter Auto Italia, Rhiag

Moody's Investors Service upgraded Inter Auto Italia SpA including raising its senior unsecured rating to B3 from B2 and upgraded Rhiag SA's unsecured rating to B2 from B3. The outlook is stable.

Moody's said the upgrades reflect Rhiag's solid operational performance to date, its strong competitive position in the fragmented auto parts distribution industry and its success in reducing leverage from 5.1x at initial rating to 3.6x as of Dec. 31, 2002.

The ratings continue to reflect Rhiag's high leverage and its reliance on operating cash flow to improve credit metrics given its limited scope for debt reduction, Moody's said. In addition, the ratings reflect the exposure of Rhiag's free cash flows to working capital movements.

The ratings also incorporate Rhiag's exposure to the automotive industry though mitigated by its position in the after-sales market, the threat posed by increasing reliability and durability of new cars to the after-sales market and sustainability of positive trends in revenue growth and margin improvements in Central and Eastern Europe.

Fitch rates JFE B+

Fitch Ratings assigned a B+ senior unsecured rating to JFE Holdings, Inc. The outlook is positive.

JFE was created from the merger of Kawasaki Steel Corp. and NKK Corp., completed on April 1. Fitch withdrew its senior unsecured ratings of BB for Kawasaki Steel and B+ for NKK.

Fitch said JFE's rating reflects the unfavorable operating environment and its weakened financial status.

The market price of steel has generally been recovering but remains lower than the recent high of 1997. Further, the utilization ratio of Japanese crude steel production facilities has been around 70%, meaning that the problem of excess capacity still remains, Fitch added.

The resultant erosion in the financial status is shown in JFE Holdings' estimated net debt/EBITDA ratio of approximately 6.1x and net debt/equity ratio of approximately 3.2x as of fiscal year ending March 2003, Fitch added.

However, thanks to the post-merger aggressive reduction in the scale of production, the financial status of the new company will be on an improvement track, Fitch said. The intended scrapping of two blast furnaces by the fiscal year ending March 2006 will decrease its crude steel production capacity by 13% compared to fiscal year ending March 2003.

S&P rates Banco Votorantim notes B

Standard & Poor's assigned a B rating to Banco Votorantim SA's $200 million 6.25% bonds due 2004. The outlook is negative.

S&P said Banco Votorantim's ratings benefit from the implicit support of the Votorantim Group (foreign currency: B+/negative); the group's strong brand-name recognition; the bank's experienced management team; and efficient decision-making processes.

In addition, Banco Votorantim shows better-than-average asset quality.

The ratings also consider the potential risks associated with the bank's treasury business, with its considerable exposure to sovereign risk through its securities portfolio, a common issue for Brazilian banks; a relatively short operating track record on its consumer finance business; and the risks related to the economic environment in Brazil, S&P said.

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