S&P cuts Raytheon Aerospace loan

Standard & Poor's downgraded Raytheon Aerospace LLC's $146.588 million term B loan due 2007, $38 million term A loan due 2006 and $40 million revolving credit facility due 2006 to B+ from BB-. The corporate credit ratings was confirmed at B+. The outlook is stable.

S&P said it lowered Raytheon Aerospace's bank loan, which is being increased $43 million in order to repurchase outstanding preferred equity, was lowered due to reduced confidence that a distressed enterprise value would be sufficient to cover a fully drawn facility at the increased size in a simulated default scenario; however, a substantial recovery is expected.

The proposed transaction will cause Raytheon Aerospace's credit measures to deteriorate somewhat due to the increased debt, but are expected to remain appropriate for the rating, S&P said.

S&P cuts Gemstar

Standard & Poor's downgraded Gemstar-TV Guide International Inc. including cutting its $300 million 364-day revolving credit and term loan facility due 2005 and $300 million revolving credit facility due 2005 to BB- from BB. The outlook is stable.

S&P said it lowered Gemstar due to escalating business risk, potential management instability and revenue recognition policy concerns.

The rating action reflects erosion of the company's competitive profile, especially at TV Guide magazine; slow progress gaining distribution of its interactive programming guide; and S&P's insufficient confidence that previous levels of margins and cash flow generation will soon be restored.

While a more product- and customer-oriented approach could improve overall results, current revenue and cash flow levels are lower as a result of patent litigation setbacks, S&P said. Separately, a new president for the TV Guide magazine has been installed, who is undertaking important advertising and circulation initiatives. In the long term, the company will need convincing redevelopment of its editorial product.

Gemstar recently settled anti-trust charges filed by the U.S. Department of Justice, relating to the TV Guide merger, for a modest sum, S&P noted. Separately, a Nasdaq panel has determined that the company met its regulatory filing requirements and will be able to continue its listing on the stock exchange. However, the SEC's formal investigation is ongoing and remains of concern.

The EBITDA margin for the 12 months ended March 31, 2003, was 11.7%, down from 18.3% in 2002. The company's EBITDA margin has been declining, mirroring TV Guide magazine's paid circulation and SuperStar Netlink usage, S&P said. Pressure on margins is expected to continue until either circulation at the magazine stabilizes or the company's interactive programming guide gains wider distribution. For the same period, total debt to EBITDA was about 1.6x and EBITDA coverage of interest expense was at 15x.

S&P says Massey facility could be BB or BB+

Standard & Poor's said it will assign a rating to Massey Energy Co.'s proposed refinancing of its existing credit facility when details are finalized.

Massey Energy intends to replace its current $400 million credit facility prior to its expiration on Nov. 25, 2003. The current facility is rated BB+.

Considering the recent $132 million convertible bond offering, S&P said it expects the new facility to be less than the originally proposed $450 million dollar facility.

Under the proposed collateral package, a bank loan of $400 million or less would receive a BB+ while a facility greater than $400 million would receive a BB.

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