Fitch rates International Paper converts at BBB-

Fitch Ratings initiated coverage on International Paper and assigned a BBB rating to its senior unsecured notes and bank debt, BBB- to its subordinated convertible debentures, BB+ to preferred stock and F2 to commercial paper. The outlook is stable.

International Paper has made rapid progress in debt reduction since the Shorewood and Champion acquisitions totaling $8.7 billion in cash and assumed debt in 2000. Since then, debt has been cut by an estimated $2.3 billion, largely from divestitures which will have netted $2.9 billion.

International Paper has a ways to go yet before returning to investment-grade financial metrics, about another $1.2 billion in debt repayments, but should be able to get there from operations by mid-2004 if not by the end of 2003, Fitch said.

With the proceeds from its $1.2 billion note offering last December, the maturity ladder of its debt portfolio appears manageable.

S&P puts Central Garden & Pet on positive watch

Standard & Poor's placed the ratings of Central Garden & Pet Co. on positive watch, reflecting plans to refinance a significant portion of debt as well as improved financial profile and credit measures.

The watch incorporates S&P's expectation to raise the corporate credit and senior secured bank loan ratings to BB on closing the refinancing.

Also S&P assigned a B+ rating to the company's proposed $150 million subordinated notes due 2013, the proceeds of which will be used to redeem its $115 million of 6% subordinated convertible notes due 2003 and about $15 million in term loans.

Any remaining proceeds may also be used to repay some or all amounts outstanding under its Pennington $95 million revolving credit facility. In connection with the debt offering, the company intends to increase the size of its revolving credit facility, which expires July 2004, to $175 million, and eliminate the Pennington revolving credit facility expiring September 2003.

The outlook upon completion would be stable.

Fitch puts Provident outlook at negative

Fitch Ratings assigned a negative rating outlook to the long-term ratings of Provident Financial Group Inc. but affirmed the ratings (BBB senior, BBB- subordinated and preferreds).

Fitch noted concerns regarding continued high levels of problem assets and exposures to higher risk lending areas combined with a smaller reserve for loan losses.

PFGI has been materially reducing exposures to higher-risk lending sectors but remaining exposures on the balance sheet in higher risk lending areas may result in increased credit losses and lower earnings through. But, there was improved asset quality performance indicators in fourth quarter.

Steps to reduce the risk level, along with a bolstered capital base and good earnings diversification provided by several fee income sources, support the affirmation of the ratings, Fitch said.

S&P keeps Interpublic on watch

Standard & Poor's long-term BBB- and short-term A-3 corporate credit ratings on The Interpublic Group of Cos. Inc. remain on negative watch due to intensified concerns following news of a formal SEC investigation of its previously restated earnings for January 1996-June 2002.

The disclosure could further increase refinancing risk, S&P said.

The rating outcome will depend on Interpublic's plans to address liquidity related to its 0% coupon convertible that is putable for cash on Dec. 14, 2003 at the accreted value of $587 million and the May 2003 maturity date of its $500 million revolving credit facility.

Further concerns relate to the $326 million in borrowings under uncommitted lines of credit at Sept. 30, 2002, that are repayable upon demand, S&P added.

Asset sales alone are not likely to provide sufficient liquidity for the rating to remain investment grade.

Consistently weak financial performance is hampering the company's prospects for generating meaningful discretionary cash flow to reduce debt, S&P said.

For the 12 months ended Sept. 30, EBITDA coverage of interest expense was about 6.5x. EBITDA margins were 15.3% for the period, compared with around 20% in 2000. Total debt to EBITDA was about 3.4x.

Liquidity depends on borrowing availability of about $837 million under credit facilities at Sept. 30, which include an undrawn $500 million revolver maturing in May 2003 and a $375 million credit facility due in 2005.

Key financial covenants in the credit agreements include maintaining greater than 3.5x interest coverage and less than 3.5x leverage. The term loan agreements also contain covenants related to minimum net worth, cash flow to borrowed funds and maximum levels of borrowed funds to net worth.

The 0% convertible senior notes due 2021 are convertible if the credit rating is reduced below BB+, and also are putable in December as noted above.

Interpublic is currently negotiating an amendment to its credit facility, due by Feb. 10, which is expected to restrain cash outlays on capital expenditures, acquisitions, share repurchases and dividends. Lenders may also require Interpublic to ensure other means of financing the potential put.

Because of the large seasonal working capital needs related to media advertising, borrowing capacity under committed credit facilities is critical.

Fitch rates Sanluis loan B-, notes, convertibles CCC+

Fitch Ratings assigned a B- rating to Sanluis Corporacion, SA de CV's $265 million of bank loans and a CCC+ rating to its $47.6 million of 8% senior notes due 2010 and $76.2 million of 7% mandatorily convertible debentures due 2011. The outlook is stable. The ratings were announced following completion of the company's debt restructuring in which the senior notes and convertibles were issued in exchange for defaulted debt.

The debt restructuring is positive for Sanluis as it will result in the reduction of the company's debt burden by close to 25% and the lengthening of debt maturities, Fitch said.

In addition, cash flow will improve as a portion of the company's debt will have interest that is paid-in-kind rather than paid in cash.

The resulting improvements in its debt profile are expected to help Sanluis normalize its ongoing operations and to focus on improving the profitability of its auto part business, Fitch added. Since defaulting on its debt obligations, Sanluis has sought to preserve a minimum of liquidity necessary for its ongoing operations. This objective was made difficult by more restrictive credit terms from raw material suppliers and other vendors. Since then, credit terms have gradually improved and are expected to become more normal after the debt restructuring is completed.

Sanluis will continue to face a challenging operating environment for the auto parts industry. Sanluis, which manufactures suspension and brake components primarily for export to original equipment manufacturers including Ford, DaimlerChrysler and General Motors, is exposed to the cyclicality of the United States auto industry, which remains in a downturn, Fitch said.

Sanluis' debt leverage will remain high after the debt restructuring, with EBITDA generation of $55.5 million over the 12 months ended September 30, 2002 to total pro forma debt above 8.0 times, Fitch said. EBITDA/interest during the first nine months of 2002 would have been slightly above 1.0x if Sanluis was still making interest payments on its debt as originally scheduled. After the debt restructuring, EBITDA/interest is expected to improve closer to 1.5x due to the recent stabilization of profitability margins and the estimated reduction in debt from $568 million at Sept. 30, 2002 to an estimated $427.3 million after the restructuring.

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