S&P rates Cummins new issues

Standard & Poor's assigned a BB+ rating to Cummins Inc.'s new three-year $385 million senior secured credit facility and new $200 million senior notes due 2010.

S&P affirmed the BB+ corporate credit rating, but said the outlook is negative.

If market conditions remain depressed beyond current expectations, further stretching the financial profile, the ratings could be lowered, S&P said.

Ratings reflect solid business positions in highly competitive and cyclical markets, combined with a somewhat aggressive financial profile.

At Sept. 30, total debt to EBITDA was around 3.3x and funds from operations to total debt was around 19%.

Cummins continues to focus on improving its cost structure by reducing excess overhead, consolidating facilities and improving its global sourcing of components. In the intermediate term, total debt to EBITDA is expected to be around 3x and fund from operations to total debt is expected to average about 20% to 25%, S&P said.

The company's new three-year bank revolver is secured by substantially all of the assets of the parent company and its domestic subsidiaries. This includes receivables, inventory and a pledge of stock in the company's domestic subsidiaries and a two-thirds pledge of stock in its foreign subsidiaries.

Financial covenants include minimum net worth, minimum fixed-charge coverage and maximum leverage.

Cummins has adequate liquidity, with full availability of the new revolver and about $101 million of cash on hand at Sept. 30.

Additional financial flexibility is provided by a small accounts receivable program and the ability to sell discrete business segments if needed.

Following the new note issue, near-term refinancing concerns should be mitigated.

Moody's confirms Royal Caribbean

Moody's Investors Service confirmed Royal Caribbean Cruise Line's Ba2 senior unsecured ratings, reflecting a better rebound in the cruise industry pricing environment, an expectation that leverage will peak in 2002 and begin to decline in 2003, as well as the termination of merger talks with P&O Princess.

The rating outlook is stable considering the improvement in cruise industry conditions that should enable Royal Caribbean to grow earnings and cash flow, and improve its debt protection measures.

Ratings reflect increased scale, a strong market position and brand equity, as well as sensitivity to consumer spending and economic downturns, Moody's said.

Royal Caribbean has taken pro-active steps to control costs and re-deploy ships to drive-in ports that have experienced greater demand.

Royal Caribbean is nearing the end of its aggressive ship building program that commenced several years ago, and Moody's expects leverage to peak in 2002 at about 6.5x and begin to decline in 2003 and beyond.

Absolute debt levels are expected to rise in 2003, but should be offset by growth in earnings, primarily from capacity expansion, resulting in improved debt protection measures.

The company has sufficient liquidity to meets capital commitments plus modest debt amortization given its $1.0 billion undraawn revolver that matures in July 2003, Moody's said.

Moody's noted that secured debt is about 24% of total debt. Asset coverage for unsecured debt remains adequate, but an increase in this level could result in the senior unsecured ratings being notched down.

S&P ups Dean Foods outlook

Standard & Poor's revised the outlook on Dean Foods Co. and Dean Holding Co. to stable from negative. The BB+ corporate credit and senior secured debt ratings, as well as the B+ convertible preferred rating, were confirmed.

The revision reflects progress Dean Foods has made in integrating the old Dean Foods operations since the completion of the Suiza acquisition in December 2001. Although there is still more to be done, the company is ahead of S&P's expectations.

The ratings reflect a strong portfolio of national, regional, and local brands and regional market positions, greater geographic diversity, stable cash flow, moderate capital expenditures, cost-saving opportunities and an experienced management team.

S&P expects Dean Foods will be acquisitive, taking advantage of consolidating trends in the food industries, with financial flexibility under its revolving credit facility.

The financial profile is highly leveraged and EBITDA to interest is expected to remain in the 3.5x to 4.0x range. EBITDA margins of about 9% are expected to improve, though, S&P said.

The convertibles somewhat increase flexibility for the continuation of Dean Foods' acquisition strategy at the current rating level.

Liquidity is sufficient with $700 million in availability under the $800 million secured revolver and about $80 million of availability under the accounts receivable securitization program at Sept. 30. Also, Dean Foods has about $49 million in cash and short-term investments.

Moody's confirms Nevada Power, Sierra Pacific Power

Moody's Investors Service confirmed Nevada Power Co. and Sierra Pacific Power Co. with a negative outlook, ending a review for possible downgrade begun on April 24, 2002. Moody's said Sierra Pacific Resources remains on review for possible downgrade.

Moody's also assigned a Ba2 rating to Nevada Power's recent $250 million offering of 10.875% general and refunding mortgage notes, series E, due 2009 and to Sierra Pacific Power's $100 million three-year senior secured credit facility.

Nevada Power and Sierra Pacific Power's senior secured ratings are Ba2. Sierra Pacific Resources' senior unsecured rating is B2.

Moody's said it confirmed Nevada Power and Sierra Pacific Power in response to their recently demonstrated ability to access capital and improve their liquidity positions.

Specifically, Nevada Power used the proceeds from its recent $250 million general and refunding bond offering to repay in full the outstanding balance under its fully-drawn $200 million secured bank credit facility. Similarly, Sierra Pacific Power used the proceeds from its recently closed $100 million three-year senior secured term loan and cash on hand to repay in full the outstanding balance under its fully-drawn $150 million secured bank credit facility.

Moody's also noted that both utilities have successfully arranged for accounts receivable financing conduits (sized at $125 million for Nevada Power and $75 million for Sierra Pacific Power) to provide for liquidity to replace their respective bank credit facilities, which both were due to expire Nov. 28, 2002.

Moody's said it currently believes that the accounts receivable conduits, together with cash balances on hand and ongoing cash flow should provide sufficient liquidity to meet the utilities' ongoing capital requirements over the near term.

The negative outlooks reflect questions including how Enron's claims will be dealt with by the courts; what future treatment by the Public Utilities Commission of Nevada will be provided in the utilities next round of deferred energy rate cases (November 2002 for Nevada Power and January 2003 for Sierra Pacific Power); what court rulings relating to appeals of the earlier deferred energy rate case decisions might be; what the outcome of the Federal Energy Regulatory Commission 206 complaint case might be; and the ability for the utilities to stay insulated from any further difficulties that their parent, Sierra Pacific Resources, might encounter.

Moody's said Sierra Pacific Resources remains on review because of ongoing concerns about its ability to address the $200 million of notes maturing on April 20, 2003.

Moody's confirms Royal Caribbean

Moody's Investors Service confirmed Royal Caribbean's Ba2 senior unsecured ratings. The outlook is stable.

Moody's said the confirmation is in response to the better-than-anticipated rebound in the cruise industry pricing environment, Moody's expectation that leverage will peak in 2002 and begin to decline in

2003, as well as the rating agency's opinion that the company is unlikely to merge with P&O Princess following Royal Caribbean's announcement that the implementation agreement with P&O Princess has been terminated, and P&O Princess has paid the company a $62.5 million break-up fee.

Royal Caribbean benefits from increased scale, a strong market position in the volume and premium segments of the cruise industry, and its brand equity - offset by the company's sensitivity to consumer spending and economic downturns, Moody's said.

The cruise industry had been negatively impacted by the events of Sept. 11, 2001, causing a weak price environment to worsen; however, the industry and Royal Caribbean have rebounded faster than expected, Moody's noted.

Net yields, which were initially expected to be down 10-15% in 2002, are likely to be down in the low single digits, thereby bringing pricing back to pre-Sept. 11 levels. Moody's noted, however, that industry pricing is still well below peak levels reached in 1999.

Additionally, Royal Caribbean has taken pro-active steps to control costs, and re-deploy ships to drive-in ports that have experienced greater demand.

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