S&P upgrades Triad Hospitals

Standard & Poor's upgraded Triad Hospitals Inc. including raising its $250 million revolver due 2007, $195 million term loan A due 2007 and $540 million term loan B due 2007 to BB from B+, $600 million 8.75% notes due 2009 to B+ from B- and $325 million 11% senior notes due 2009 to B from B-. The outlook is positive.

S&P said the upgrade reflects the expectation that Triad Hospitals' improved operating results are sustainable and the likelihood that the company has the capacity to fund growth, including acquisitions within the constraints of the rating.

The senior unsecured debt is now rated only one notch below the corporate credit rating. Although holders of the unsecured debt are still considered disadvantaged relative to senior secured debt holders, the reduction in outstanding secured debt and increase in assets during the past two years have improved their chances of recovery, S&P said.

The senior secured bank loan is now rated one notch above the corporate credit rating. The upgrade reflects the growth in the company's assets and cash flow, and reduction in secured debt. S&P said there is a strong likelihood of full recovery of bank debt in the event of default.

Triad's ratings reflect S&P's concern about the company's aggressive growth strategies, risks associated with potentially weaker future reimbursement by the government and other third-party payors, and the challenges it faces to maintain or improve its local market position.

The company's strategy for increasing profitability centers on increasing the number of services offered, recruiting additional physicians and strengthening relationships with physicians. Additional growth is expected to be generated from an aggressive strategy that incorporates joint venture partnerships with not-for-profit hospitals, potentially large acquisitions and new construction projects, S&P said. Results support the success of this strategy to date, as funds from operations to lease adjusted debt improved to 23% in 2002 from 13% in 2001, and return on capital improved to 10.0% from 7.4% in 2001.

Still, there are many challenges for management. The future success of acquisitions and major capital initiatives is uncertain. Overall profitability will be tied to changes in reimbursement by the government and other third-party payors, which are coming under increasing pressure to contain their health care costs, S&P added. Expenses for key expense categories, such as labor, pharmaceuticals, and insurance will continue to be difficult to control.

S&P rates Range Resources notes B-

Standard & Poor's assigned a B- rating to Range Resources Corp.'s proposed $100 million senior subordinated notes due 2013. The outlook is stable.

S&P said the note transaction will improve Range's debt profile by extending maturities, lowering the average cost of the company's long-term debt and increasing the amount of availability on the secured credit facility.

S&P added that Range Resources' ratings reflect a below-average business profile and aggressive financial leverage. The ratings are based in part on the expectations that a more aggressive capital expenditure program will result in production growth and 100% reserve replacement, continued aggressive hedging will reduce exposure to volatile commodity markets and the company may begin to use excess cash flow to pursue acquisitions and reserve growth, rather than to further improving its balance sheet.

If Range's future expenditures fail to yield commensurate discoveries and extensions, the company's credit quality could deteriorate.

Range's financial weakness stems from debt incurred through disappointing 1997 and 1998 acquisitions, S&P said.

Although the company has exchanged common stock for its fixed-income securities during the past four years, total debt (including trust-preferred securities) to total capital remains at roughly 65% as of March 31, 2003. The fixed charges associated with these instruments reduced the cash flow available for capital expenditures to replace production, as evidenced by a decline in reserve life to roughly nine years in 2001 from 13 years in 1998. Though drilling success improved reserve life to close to 11 years in 2002, cash flow measures remain somewhat weak, with EBITDA interest coverage of less than 6x and total debt to EBITDA at roughly 3x, S&P said.

Moody's rates AutoNation loan Ba2

Moody's Investors Service assigned a Ba2 rating to AutoNation, Inc.'s extended 364-day $200 million revolving credit facility and confirmed its existing ratings including its senior secured bank facilities maturing through 2006 at Ba2, $450 million senior unsecured 9% notes due 2008 at Ba2 and Speculative-Grade Liquidity Rating of SGL-2.

Moody's said the ratings are constrained by expectations that non-vehicle debt will increase over the next year.

AutoNation will need to finance $350 million due to the IRS by March 2004, for which it intends to use cash on the balance sheet, new mortgage debt, and borrowings under the revolving credit facility. The company used liquidity for a one-time $400 million increase in share repurchases authorized by the Board in October 2002 and executed throughout 2003. The company may also use new borrowings to finance acquisitions.

The ratings are supported by expectations that AutoNation will sustain the level of operational improvements seen over the past two years and that the company will continue to generate positive cash flow from operations sufficient to reduce non-vehicle debt after funding its one-time obligations, Moody's added.

AutoNation's profitability and inventory turns have fallen as expected as a result of cyclical factors. Nonetheless, management's efforts have made AutoNation a leader in terms of productivity measures among rated automotive retailers, whereas the company had trailed comparables two years ago.

Fitch confirms Stewart Enterprises

Fitch Ratings confirmed Stewart Enterprises including its secured bank credit facilities at BB+ and $300 million of subordinated debt at BB-. The outlook is stable.

Fitch said the ratings reflect Stewart's significant backlog of pre-arranged funeral sales, relatively stable business and improved credit profile as a result of substantial debt reduction during the past several years.

Stewart reduced its total debt from $951 million at fiscal year-ended Oct. 31, 2000 to $517 million as of June 4, 2003 by selling all of its foreign subsidiaries. The above positive factors are partially offset by a decrease in revenue and profit margins (for continuing operations), a declining death rate and a growing trend favoring lower-priced cremations over traditional funerals, Fitch said.

Unlike cemetery sales, pre-arranged funeral services are not recorded as revenue until the time the service is performed. Therefore, performance of the funeral segment is more closely correlated to the death rate. Stewart has been able to partially offset the impact of a decreasing death rate by offering more customized funeral services for additional fees. Fitch believes that the death rate will return to historical levels over the longer-term despite the recent trend.

Fitch upgrades Jacuzzi, rates notes B

Fitch Ratings upgraded Jacuzzi Brands, Inc.'s indicative senior unsecured rating to B from B- and assigned a B rating to its $380 million 9.625% senior secured notes due 2010, a BB to its $200 million asset based credit facility maturing 2008 and a BB- to its $65 million term loan due 2008. The outlook is stable.

Fitch said the action follows the closing of the refinancing of the company's debt.

S&P rates BSN Glasspack notes B-

Standard & Poor's assigned a B- rating to the proposed €160 million senior subordinated secured notes to be issued by BSN Glasspack Obligation, a subsidiary of BSN Glasspack SAS.

S&P noted that although the proposed notes will rank ahead of the existing note holders and benefit from second security over all of the shares of each of its direct and, where legally possible, indirect subsidiaries, they will be notched twice, reflecting the large proportion of prior ranking debt.

At March 31, 2003 pro forma for the proposed transaction, BSN had total debt of €815 million. Of this, €500 million will rank ahead of the new note holders. This includes €344 million of secured bank debt and €150 million drawn under the group's securitization program. This includes an increase in senior debt to enable BSN to repurchase about €40 million of its existing €180 million bonds.

If the transaction takes place, the proceeds of the proposed bonds will be used to repay tranche A of BSN's senior bank debt, S&P noted. The repayment means that after the group's payment in June 30, 2003, BSN will have less than €10 million of debt amortization annually, apart from in December 2004, when the group will pay an additional €11 million of debt amortization.

S&P said it expects BSN to meet this reduced debt amortization from internally generated cash flows.

Nevertheless, the proposed transaction will increase the group's overall cost of finance because the new bonds will be more expensive than the bank debt they replace and will also give rise to additional financing and arrangement fees for the group, S&P said.

S&P says Peabody Energy unchanged

Standard & Poor's said Peabody Energy Corp.'s ratings are unchanged including its corporate credit at BB with a stable outlook following the company's second-quarter earnings report.

Peabody continues to demonstrate a financial performance in line with reaching its 2003 EBITDA guidance of $400 million to $415 million, S&P noted.

Unlike most of its peers, Peabody has largely been able to maintain relatively stable costs while benefiting from fixed contract prices that have kept its financial measures consistent with its current ratings.

Still, Peabody's financial leverage (including significant postretirement obligations) remains very aggressive, S&P said. Excess cash flow could be used for either a combination of strategic acquisitions, share repurchases, or debt reduction. With its refinancing completed, Peabody has the ability to repay approximately $450 million without prepayment penalties.

Moody's puts Smithfield on downgrade review

Moody's Investors Service put Smithfield Foods Inc. on review for possible downgrade including its $350 million senior unsecured notes due 2013 and $300 million 8% senior unsecured notes due 2009 at Ba2 and $200 million 7.625% senior subordinated notes due 2008 at Ba3.

Moody's said the review is in response to Smithfield's announcement that it has signed a definitive agreement to purchase substantially all the assets and acquire certain liabilities of Farmland Foods (a pork production and processing business) from Farmland Industries, Inc. for about $363.5 million in cash, subject to customary bankruptcy court approval.

The review will consider the funding mix for the acquisition, the cash flow generation and investment requirements associated with the Farmland assets, assumed contractual agreements and liabilities, and integration plans, as well as the strategic benefits to Smithfield of adding Farmland's pork operations to its business platform, Moody's said.

The rating agency added that it expects Smithfield to raise equity for a substantial portion of the cash purchase price, which would be supportive of current ratings.

Moody's rates Noveon loan B1

Moody's Investors Service assigned a B1 rating to Noveon, Inc.'s new $577 million guaranteed senior secured term loan B and confirmed Noveon $275 million 11% guaranteed senior subordinated notes at B3. The outlook is stable.

The ratings reflect Noveon's high leverage with debt to EBITDA of 4.9 times, including the holding company seller discount notes, modest interest coverage, negative tangible net worth and operating margin pressure stemming from higher raw material costs, many of which are derived from petrochemical feedstocks, Moody's said.

The ratings also consider the competitiveness of the company's markets, the cyclical nature of several of its customers' industries (such as automotive, construction, and textiles), and the likelihood of further delays in the sustainable recovery in the North American industrial market.

The ratings are supported by the company's solid market positions in a broad range of niche specialty chemical products, diversified customers and end user markets, barriers to entry including patents, significant R&D investments, and technological expertise, and a significant proportion of revenues derived from a more stable consumer end-market.

The ratings also are supported by the company's improved operating performance, its good trailing 12 months EBIT margins of 11.5% and the benefit of productivity initiatives since the LBO.

The lack of notching for Noveon's new guaranteed senior secured term loan B over the senior implied rating reflects the preponderance of senior secured debt in the capital structure, Moody's said.

S&P cuts BIL International

Standard & Poor's downgraded BIL International Ltd.'s corporate credit rating to B+ from BB and removed it from CreditWatch negative. The outlook is negative.

S&P put BIL on watch on March 7 after the company announced its plans to acquire the remaining shares in its 45.8%-owned associate Thistle Hotels plc.

S&P said the rating reflects BIL's investment portfolio concentration of 70%-80% on a single unlisted asset (Thistle), its poor financial profile and medium-term refinancing risk.

The negative outlook reflects the refinancing risk. BIL could be further lowered should the company be unable to raise proceeds to repay the debt outstanding under its revolving facility which matures in June 2005, S&P said.

But if BIL manages to liquidate any significant illiquid assets, such as Molokai Properties or Thistle, within the next two years to reduce its debt, that could have a positive impact on BIL's credit profile.

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