S&P putts Yukos, Sibneft on watch

Standard & Poor's put OAO NK Yukos and OAO Siberian Oil Co. on CreditWatch negative including Yukos' $1 billion syndicated bank loan due 2008 at BB and Sibneft's $400 million 11.5% loan participation notes due 2007 and $500 million 10.75% loan participation notes due 2009 at B+.

S&P said the actions reflect its concern that the recent freezing of the 44% stake in Yukos indirectly owned by the company's CEO, Mikhail Khodorkovsky, and several other people raises the risks for creditors by threatening the ownership rights and governance processes of both Yukos and Sibneft.

The share-freezing adds to the uncertainty caused by the ongoing legal and tax allegations against Yukos and its core shareholders, as well as by the recent arrest of Khodorkovsky.

It also raises general concerns about the poor protection of ownership rights in the Russian Federation, where the political and legal environment remains opaque and unpredictable, and where enforcement of legislation and regulations appears increasingly selective, S&P said.

S&P raises Rogers Wireless outlook

Standard & Poor's raised its outlook on Rogers Wireless Inc. to positive from stable and confirmed its ratings including its corporate credit at BB+.

S&P said the revision is based on the expectation that credit metrics will continue to improve in the near to medium term through strengthening operating performance.

Rogers Wireless' operating performance through the first nine months of 2003 has been better than expected; full year 2003 EBITDA will be materially higher than expectations earlier in the year, resulting in credit metrics which are improving more quickly than expected, S&P said.

Growth in wireless subscribers should continue through 2004, driving additional improvements in EBITDA and cash flows.

The company reduced debt in the third quarter from free cash flow, and RWI is expected to be discretionary free cash flow positive through 2004 and beyond. S&P said it expects that excess funds will be used to further reduce debt.

S&P cuts Mayne Group

Standard & Poor's downgraded Mayne Group Ltd. to junk including cutting its guaranteed debt to BB from BBB- and bank loan to BB from BBB-. The outlook is stable.

S&P said it cut Mayne because of the company's narrower business focus following the sale of its hospital businesses and the potential sale of its pharmacy services business; the risks associated with its growth strategy, which increasingly will focus on the global specialty pharmaceuticals industry given uncertain management ability in this industry; and management's poor track record, as evident in its fiscal 2003 results and most recent asset sales, which have been executed at significantly written down values.

Mayne will retain its Australian diagnostics and pathology businesses, although future growth potential in these sectors will be limited. While the sale of hospitals and the potential sale of pharmacy services will allow Mayne to focus on its new growth strategy in the global specialty pharmaceutical industry, its ability to manage growth in this competitive, consolidating sector is unproven, S&P said.

Further, the intention to return a substantial proportion of proceeds from the sale of hospitals to shareholders is regarded as shareholder friendly, and will restrict the funds available for future growth (through acquisitions in specialty pharmaceuticals and in-house R&D), as well as diminish the company's financial flexibility to weather any adversities.

S&P says Georgia Gulf unchanged

Standard & Poor's said Georgia Gulf Corp.'s ratings are unchanged including its corporate credit at BB+ with a negative outlook following the company's announcement of net income of almost $8 million for the third quarter of 2003, compared with net income of $17 million for the third quarter of 2002.

The third-quarter shortfall stems primarily from higher raw material and natural gas costs, lower sales volumes and an unexpected VCM plant outage, which offset higher sales prices.

Although earnings declined from a good quarter in 2002, the performance was within S&P's expectations.

The ratings are supported by the company's average business profile, a strong history of profitability and the company's progress toward reducing debt, S&P said. Still, the ratings incorporate recognition of the volatility in Georgia Gulf's markets and in the costs of raw materials.

Moody's lowers Intermet outlook, rates loan B1

Moody's Investors Service lowered its outlook on Intermet Corp. to negative from stable, confirmed its existing ratings including its $175 million of 9.75% guaranteed senior unsecured notes due 2009 at B2 and assigned a B1 rating to its.'s $225 million of proposed new guaranteed senior secured credit facilities consisting of a $125 million revolving credit facility due 2006 and a $100 million term loan B due 2009.

Moody's said it lowered Intermet's outlook to negative from stable because of concerns regarding Intermet's ability over the next couple of years to generate positive cash flow to reduce outstanding debt obligations.

Moody's believes that Intermet will have to make significant investments in capital over this period in order to open its Mexican plant, catch up for the very nominal capital investment made by the company during 2003, develop and commercialize new technologies that are critical to the company's future revenues and margins and expand the company's presence into other countries which offer either significant revenue generating opportunities or lower-cost production opportunities.

While Intermet's leverage remains consistent with its rating category, the company's last-12-month EBIT coverage of cash interest coverage is only marginally above 1x. Intermet's credit profile is therefore highly vulnerable to the capital-intensive nature of its business and the impact of annual customer price-downs averaging 2% p.a. or more, Moody's said.

The ratings additionally reflect Moody's concerns regarding Intermet's ability to weather any further declines in production volumes or loss of market share by the Big 3 domestic automakers, to absorb the impact of any delayed launches of new vehicles, or to manage any cost overages or other potential complications relating to opening the new Mexican plant.

For the last 12 months ended Sept. 30, 2003, Intermet's total debt/EBITDA leverage approximated 3.1x. Moody's expects this ratio to increase over the next year to almost 4.0x, as the company ramps up capital spending to support the construction of the new Mexican plant and other projects. EBIT coverage of cash interest was marginal at about 1.2x and the EBIT return on total assets was only about 4.3% for the period.

S&P upgrades Penn National

Standard & Poor's upgraded Penn National Gaming Inc. including raising its senior secured debt to BB- from B+ and subordinated debt to B from B-. The outlook is stable.

S&P said the upgrade reflects the company's continued steady operating results for the nine months ended Sept. 30, 2003, which has resulted in an improvement in credit measures that are in line with the new ratings.

In addition, the higher ratings reflect S&P's expectation that the company's good operating momentum will continue in the near term, resulting in significant discretionary cash flow generation, which could be used to further reduce debt balances and provide cushion to complete any growth opportunities that may arise.

Ratings reflect Penn National's lack of overall brand identity, a portfolio of casino properties that are not generally market leaders, competitive conditions in the markets the company serves and management's historically aggressive growth strategy, S&P added. These factors are offset by the company's relatively diverse portfolio of casino assets, niche market positions, continued steady operating results, expected significant free cash flow generation, and minimal near-term maturities.

For the nine months ended Sept. 30, 2003, EBITDA (excluding Shreveport and earnings from joint ventures) was approximately $183 million, a significant increase over the prior-year period due to the Hollywood Casino acquisition during the 2003 period. Same-store EBITDA (excluding the acquired assets in Aurora & Tunica) also increased by more than 20% during this period. Penn National experienced broad EBITDA growth across its portfolio.

As a result, consolidated total debt to EBITDA is expected to be close to 4x, and EBITDA coverage of interest expense close to 3x for 2003, both in-line with the ratings. In addition, these credit measures provide Penn National some cushion to pursue future growth opportunities, S&P said.

S&P says Primedia unchanged

Standard & Poor's said Primedia Inc.'s ratings are unchanged including its corporate credit at B with a stable outlook in response to its announcement of declining third quarter 2003 EBITDA, and reduced guidance for the fourth quarter.

EBITDA from continuing businesses declined 11% in the third quarter ended Sept. 30, 2003, largely due to a 62% decline in its business-to-business segment EBITDA. The company's current outlook for the fourth quarter 2003 is for sales to be about 2% below fourth quarter 2002, compared to about 5% sales growth that was expected in the prior forecast. Additionally, Primedia has lowered its EBITDA guidance by 10% for the fourth quarter 2003 versus the prior goal.

Nevertheless, S&P expects that company will be able to achieve its revised goal of reducing debt and preferred stock to EBITDA to roughly 9.0x at the end of 2003 versus 9.5x in 2002, due to already completed asset sales.

Moody's rates Manitowoc notes B1

Moody's Investors Service assigned a B1 rating to The Manitowoc Co., Inc.'s proposed $125 million senior unsecured notes due 2013 and confirmed its existing ratings including its $125 million senior secured revolving credit facility due 2006 and $82.3 million senior secured term loan B due 2007 at Ba2 and €175 million senior subordinated notes due 2011 and $175 million senior subordinated notes due 2012 at B2. The outlook is stable.

Moody's said Manitowoc's ratings are constrained by the cyclical volatility of its crane business and the challenging end-market conditions it is currently facing. The ratings also reflect its significant debt leverage and deteriorating financial performance in recent quarters.

Nevertheless, the ratings are supported by the company's leading market position in the global crane industry, as well as the benefit of diversification provided by its foodservice equipment and shipbuilding and ship-repair businesses that partially mitigates the cyclical fluctuations in its crane business.

The rating confirmation also takes into consideration the benefit of increased financial flexibility as a result of the refinancing transaction. Concurrent with the bond issuance, the company will seek to amend its bank covenants, which is expected to give it more leeway to deal with the current cyclical downturn, Moody's said. Repaying the term loans with the bond proceeds will also eliminate near-term amortizations and reduce secured debt in the company's capital structure, thus enhancing its liquidity position and providing alternate financing options in the future.

The stable rating outlook balances the near-term challenges in the crane market with the company's longer-term franchise strength. While recognizing potential further softness in the crane business over the near term, Moody's believes that Manitowoc's competitive strength should position it well for the eventual upside swing in the crane market. The marine business, adversely affected by a strike and customer deferrals of new vessel projects earlier this year, is expected to see improved performance in 2004. The stable outlook assumes that the company will be able to secure the amendments to the bank covenants it is currently seeking.

S&P lowers Berry Plastics outlook, rates notes B-

Standard & Poor's assigned a B- rating to Berry Plastics Corp.'s proposed $90 million 10.75% senior subordinated notes due 2012, lowered its outlook on Berry to stable from positive and confirmed its existing ratings including its senior secured bank loan at B+ and subordinated debt at B-.

S&P said the action follows the company's announced agreement to acquire Landis Plastics, Inc. for $228 million, including existing indebtedness.

While pro forma leverage is not expected to increase materially, the outlook revision reflects a lower level (than previously anticipated) of debt reduction and improvement to credit measures, therefore diminishing prospects for achieving a financial profile consistent with a higher rating in the intermediate term, S&P said.

The company likely will remain very aggressively leveraged, given the acquisition driven growth strategy and potential integration challenges related to Landis, its largest acquisition to date.

The acquisition would substantially increase Berry's scale of operations, and would provide an expanded customer base, including tier 1 food companies (particularly in the dairy and yogurt segments), cross-selling opportunities, and a broader distribution base.

Pro forma for the Landis acquisition, the company is expected to remain very aggressively leveraged, with total debt (adjusted for capitalized operating leases) to EBITDA above 5x. S&P expects earnings growth (driven by progress in integrating Landis' operations and the growing thermoformed packaging business), to support a modest deleveraging in the intermediate term, with total adjusted debt to EBITDA ranging between 4.5x to 5x, and EBITDA interest coverage of about 2.5x, benchmark levels for the rating.

S&P rates Manitowoc notes B+

Standard & Poor's assigned a B+ rating to The Manitowoc Co. Inc.'s proposed $125 million senior notes due in 2013 and confirmed its existing ratings including its senior secured bank debt at BB- and subordinated debt at B. The outlook is stable.

S&P said the rating incorporates its expectations that the company will continue to pay down its senior secured debt beyond scheduled amortizations. The refinancing eliminates concern about near-term amortization requirements.

Manitowoc's ratings reflect competitive pressures in the highly cyclical construction and industrial end-markets and an aggressive financial profile, partly offset by its position in several diverse but niche markets, well-known brands and product diversity, and low-cost and efficient global manufacturing operations.

The deterioration in the crane business has resulted from a severe decline in nonresidential construction spending of about 7% in 2003, after a decline of about 16% in 2002. The weakness in Manitowoc's crane operations has been more pronounced in the heavy-duty/high-capacity crawler crane market. Worldwide, volumes have declined for several years, and this has severely affected earnings in the crawler crane segment.

Furthermore, the marine business performance has been weaker than expected, mainly because of project deferrals and a 44-day strike at Manitowoc's marine operations, which has been settled. These two factors have caused a significant shortfall in marine services earnings. The food-service segment is still performing well.

As a result, credit measures have been weak, with total debt to EBITDA expected at about 5x by the end of 2003 and EBITDA interest coverage at about 2x (credit measures are adjusted for operating leases), S&P said. Operating performance should improve because of several cost-cutting and restructuring initiatives and a gradual improvement in demand.

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