Moody's cuts FiberMark

Moody's Investors Service downgraded FiberMark Inc. including cutting its $100 million 9.375% guaranteed senior notes due 2006 and $230 million 10.75% guaranteed global notes due 2011 to Caa1 from B2. The outlook is negative.

Moody's said the downgrade reflects FiberMark's weak financial performance, which continues to fall short of Moody's expectations, and its view that a protracted period of economic weakness, particularly in North America, will continue to negatively impact operating performance over the intermediate term.

The ratings also incorporate the company's substantial leverage, marginal coverage and relatively tenuous liquidity position.

Weak operating performance and subsequent deterioration in credit metrics is due in large part to an overall weakness in North American customer demand for the majority of FiberMark's products as the global economic downturn and competitive pressures persist, Moody's added. Also impacting performance has been the sale of its North American automotive filtration business as competitive pressures intensified, increased debt levels associated with the acquisition of DSI and higher raw material costs.

The negative outlook reflects Moody's expectation that the global economic weakness and competitive pressures will continue to negatively impact the company's operating performance over the intermediate term and liquidity will remain constrained. Moody's also believes debt levels will increase as the company's ability to generate positive free cash flow continues to be impaired.

For the 12 months ended June 30, 2003, leverage was high on a debt to EBITDA basis at over 8.5x and coverage was weak with EBITDA to interest at just over 1.0x, while the company was unable to cover interest on an EBIT to interest basis, Moody's said.

Moody's cuts DVI

Moody's Investors Service downgraded DVI Inc.'s senior unsecured debt to C from Caa3.

Moody's said the action follows DVI's disclosure that it intends to make a filing under Chapter 11 of the United States Bankruptcy Code, in addition to increased uncertainty regarding the recovery value for DVI's senior unsecured creditors.

Given the structural subordination of the rated senior notes to DVI's other creditors, these notes will likely face a severe loss of principal, Moody's said.

In Moody's opinion, recovery prospects were made even more uncertain as a result of the firm's disclosure of the "discovery of the apparent improprieties in its prior dealings with lenders involving misrepresentations as to the amount and nature of collateral pledged to lenders."

Fitch expects to cut DVI

Fitch Ratings said it expects to downgrade DVI, Inc.'s senior unsecured debt to D from C when it files for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code within the next several days.

A D rating would reflect Fitch's belief that the recovery potential for the rated securities is very low, below 50%. This view is based on the lack of any substantial unencumbered assets on DVI's balance sheet. Further, a meaningful component of the value of assets pledged to secured lenders in excess of secured obligations consists of non-accruing, delinquent, and repossessed assets.

Fitch said it also believes that DVI's historical delinquency and charge-off trends will weaken if the company or its principal lending officers are not able to continue servicing the receivables. Loss severity may be heightened depending upon the scope of DVI's misrepresentations regarding its collateral.

S&P cuts Romacorp

Standard & Poor's downgraded Romacorp Inc. including cutting its 12% senior unsecured notes due 2006 to D from CCC-.

S&P said the action follows Romacorp's announcement that it failed to make its $3.3 million interest payment due July 1 on its $55.0 million senior secured notes and that the grace period to make the interest payment expired on July 31.

Romacorp has continued to experience poor operating performance at a time when a weak economy is contributing to an overall industry slowdown, S&P said.

S&P cuts CESP

Standard & Poor's downgraded Companhia Energetica de Sao Paulo including cutting its $300 million 10.5% notes due 2004 and €200 million 9.75% notes due 2004 to D from CC.

S&P said the downgrade reflects the conclusion and acceptance by bondholders of the exchange offer solicitation made by CESP on July 16.

Under the terms of the solicitation, CESP offered to amend the terms and conditions of the existing series 1 and 2 notes, extending their maturity to 2008 and increasing the coupon to 13%.

Alternatively, CESP offered to exchange the existing series 1 and 2 notes for new notes with a 5% increase in the nominal amount, a 14% coupon and a new maturity in 2011. In addition, the company offered to bondholders a 5% cash payment.

S&P said it views the conclusion of the exchange offer as tantamount to default, since the company, absent the restructuring, would not have the resources to pay the notes in full on the maturity dates.

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