S&P says Baxter charge raises questions

Standard & Poor's said there is no immediate impact to Baxter International Inc.'s outlook or ratings from the $121 million non-cash charge. S&P rates Baxter at A with a stable outlook.

But the rating agency added that although the charge has no cash impact it "does raise questions about Baxter's ability to fully realize its expected value from previous investments, and points to potential erosion in investment economics that could diminish future operating cash flow, if not offset by alternative sources of growth."

The charge was made up of a $51 million pretax writedown of in-process research and development associated with Baxter's April 2002 $157 million stock acquisition of Fusion Medical Technologies and a $70 million pretax impairment to the value of minority stakes held in two public companies.

Moody's cuts Superior TeleCom

Moody's Investors Service downgraded Superior TeleCom Inc. including cutting its $169 million senior secured revolving credit facilities due 2004, $300 million senior secured term loan A due 2004 and $403 million senior secured term loan B due 2005 to Caa2 from B2 and its convertible trust preferred stock to C from Caa1. The outlook remains negative. Superior Telecom's $200 million senior subordinated notes are not rated.

Moody's said it lowered Superior because of the company's constrained liquidity position and heightened concerns over its ability to meet its debt obligations.

The lower rating also reflects continued deteriorating industry fundamentals and an uncertain outlook for the foreseeable future, Moody's said.

Over the past two years, the difficult environment in Superior's end-markets, particularly the telecommunications industry, has resulted in sharply reduced demand for the company's wire and cable products, Moody's noted. This, coupled with its highly leveraged capital structure, has led to significant deterioration in the company's operating performance and credit protection measures.

The company generated EBITDA of about $130 million for the 12 months ending March 2002 and EBITDA of $20 million for the first quarter of 2002, Moody's said.

S&P says no change to Union Pacific

Standard & Poor's said Union Pacific Corp.'s ratings are unchanged at BBB with a positive outlook after the company reported net income of $304 million for the second quarter of 2002.

The ratings continue to be supported by the favorable risk characteristics of the U.S. freight railroad industry, Union Pacific's strong competitive position within the industry, the company's moderate financial policies and improving financial profile, S&P said.

The results compared with net income of $243 million for the same period of 2001, S&P noted. Railroad revenue increased 4% and trucking revenues increased 2%.

S&P upgrades Amgen

Standard & Poor's upgraded Amgen Inc. including raising its senior unsecured debt to A+ from A. The outlook is stable.

S&P said the action follows Amgen's $10 billion equity and cash-financed acquisition of biopharmaceutical company Immunex Corp.

The new ratings reflect the growing diversity of Amgen's pharmaceutical portfolio, as well as its strong cash flow generation, S&P said.

Amgen's portfolio continues to be led by long-time stalwart products - the anemia treatment Epogen and the white blood cell stimulant Neupogen, S&P noted. Both products continue to generate solid sales growth and account for the overwhelming bulk of the company's sales.

However, Amgen, over the past year, has released two new products that will likely contribute significantly to sales, Aranesp and Neulasta, longer lasting versions of Epogen and Neupogen respectively.

Indeed, with Aranesp, Amgen has the opportunity to self-market the product to the cancer and European markets, which were previously ceded to Johnson & Johnson under a licensing agreement, S&P said.

The acquisition of Immunex further adds several products to Amgen's product portfolio, including the rheumatoid arthritis treatment, Enbrel, which generates nearly $1 billion in annual sales, S&P added.

None of Amgen's products face any patent expirations in the intermediate term.

Financially, Amgen currently has roughly $3 billion in debt, mainly in the form of 30-year zero-coupon convertible senior notes issued early in 2002, S&P noted. Debt holders have put options on March 1 of 2005, 2007, 2012, and 2017.

Amgen has funded the acquisition of Immunex with $2.5 billion in cash, in addition to $7.5 billion of equity. Prior to the close of the transaction, Amgen had $5 billion of cash and investments; it generated nearly $1.6 billion in funds from operations in 2001.

S&P says no change on International Paper

Standard & Poor's said International Paper Co.'s ratings remain unchanged at BBB with a stable outlook after its announcement of second quarter earnings.

Continued strengthening of the company's financial profile should bring credit measures to levels appropriate for the ratings during the next two years, S&P said.

In the second quarter continued weak forest product and economic market conditions were more than offset by operating cost improvement resulting primarily from substantial capacity rationalization during the past two years, S&P noted. Consequently, the company was able to reduce net debt by a respectable $340 million during the quarter.

S&P takes DT off watch

Standard & Poor's confirmed DT Industries Inc.'s ratings and removed it from CreditWatch with negative implications. The outlook is negative. Ratings affected include DT Industries' senior secured debt at B-.

S&P said the outlook reflects DT Industries' weaker-than-expected revenues, resulting in modest liquidity and a default of certain bank financial covenants under its senior credit facility at the end of its second and third fiscal 2002 quarters.

In addition, the company's limited financial flexibility during the current challenging economic environment heightens financial risk, S&P said.

DT Industries has gained some near-term financial flexibility due to a recently completed recapitalization plan, which is designed to strengthen the company's balance sheet and that incorporates an amendment to the company's senior credit facility, S&P added. As a result of the transaction with its lenders, the maturity date of DT Industries' senior credit facility was extended to July 2, 2004 and the company repaid about $16 million of outstanding debt under the facility. The total commitment (including the term loan and revolver) under the facility was reduced to $76.3 million from $88.3 million.

In addition, the company raised $22.4 million in common equity in a private placement and reduced the outstanding amount of 7.16% convertible preferred securities of DT Capital Trust by about $50 million through an exchange, S&P added. The terms of the remaining convertible preferred securities were amended to reduce their conversion price and shorten their maturity.

The company's revenue and EBITDA (pro forma for asset sales) declined about 33% and 20%, respectively, in the nine months ended March 24, 2002, compared with the same period in fiscal 2001, S&P noted. The decline in sales and operating income was primarily due to the general economic slowdown in the U.S. economy, affecting many of the company's cyclical key end markets, which include automotive, pharmaceutical, plastic packaging, and heavy-duty truck.

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