Fitch rates Globe Telecom BB

Fitch Ratings assigned a BB senior unsecured rating to Globe Telecom Inc. The outlook is stable.

Fitch said the rating takes into consideration such positive factors as: Globe's strong brands and market positions within the high-growth Philippine cellular sector; the relatively stable regulatory environment; and Globe's very sound financial position, which is aided by robust revenue growth, stable operating margins and reducing capex.

The rating also takes into account Fitch's concerns about: the competitiveness of the cellular market where 90% of Globe's revenues are generated; Globe's high capex to sales ratio (although it is trending down as capex requirements moderate); and Globe's level of total debt and high exposure to foreign exchange borrowings (although the latter is partly mitigated by financial hedging on around 40% of total dollar-denominated debt and 27% of fiscal 2002 revenue being dollar-linked).

Fitch recognises that the cellular market in the Philippines has been intensely competitive, even under the previous two-player structure, and that competition could further intensify following the recent launch by Digital Telecommunications Inc of its "Sun Cellular" service. The effect of competition could also be compounded by the Philippines's subdued economic climate.

Globe's financial profile is very sound for its current rating, Fitch said. Apart from a good level of liquidity stemming from positive free cash flow and committed standby lines of credit of over PHP18.0 billion, debt maturities are well spread with PHP7.6 billion due in 2003. Liquidity is comfortable despite Globe having commenced paying cash dividends to common shareholders in 2003.

At the current rate of around 31% of net income, dividend payments are manageable within current rating parameters. Globe's fiscal 2002 credit metrics are also healthy: leverage (measured by net debt to EBITDA) was 1.3x, EBITDA to net interest cover 8.0x and total debt to total capitalization was 53%.

Fitch rates Ryland notes BB+

Fitch Ratings assigned a BB+ rating to Ryland Group, Inc.'s $150 million 5 3/8% senior notes due 2008. The outlook is positive.

Fitch said the new issue has more favorable rates and similar maturity relative to the debt it would replace.

Over the longer term debt-to-capital is expected to be maintained within the company's targeted range of 45%-50%.

Fitch said Ryland's ratings are based on its solid, consistent, internally generated profit performance in recent years (as well as over the past decade), the successful execution of its business model, moderate financial policies and geographic and product line diversity. Over recent years the company has improved its capital structure, pursued conservative capitalization policies and has positioned itself to withstand a meaningful housing downturn. Risk factors include the inherent cyclical nature of the homebuilding industry.

The company has demonstrated solid margin improvement since the mid-1990s, with EBITDA margins expanding from 4.2% in 1995 to 8.6% in 2000 and then 11.9% in 2003, Fitch noted.

Although Ryland has certainly benefited from strong economic conditions, a degree of margin enhancement is also attributed to purchasing, design and engineering, access to capital and other scale economies that have been captured by the large national public homebuilders in relation to second-tier, private builders. The company's significant ranking (within the top five or top ten) in most of its markets, which are among the stronger housing growth locations in the country, enables it to more easily access prime land and labor to the advantage of margins.

Debt-to-capital steadily decreased from 56.8% at the end of 1995 to 46.6% in 2001, Fitch said. The ratio slipped to 41.9% at the close of 2002 and was 41.2% at March 31, 2003. The strong state of the housing sector and Ryland's measured pace of reinvestment have led to substantial cash accumulation that totaled approximately $161.4 million as of March 31, 2003. Net debt-to-capital was 32.0% as of the end of the first quarter of 2003, a level considered very strong for the rating.

Moody's puts Chateau Communities on review

Moody's Investors Service put Chateau Communities, Inc. on review with direction uncertain including its senior unsecured debt at Ba1.

Moody's said the action reflects the REIT's announcement that it has entered into a merger agreement with Hometown America LLC.

Moody's review reflects its opinion that there are several possible outcomes regarding Chateau's debt stemming from this proposed transaction. For example, the legal structure of the firm is unclear post-acquisition, as are the ultimate capital structure, financial policies and strategy. In addition, it is unclear whether the State of Washington Pension Fund, which owns 100% of Hometown America, will provide support for Chateau's bonds, and, if so, what form that support may take.

Moody's raises Cooperative Computing outlook, rates notes B2

Moody's Investors Service raised its outlook on Cooperative Computing to stable from negative, assigned a B2 rating to its planned $175 million senior unsecured notes and confirmed its existing ratings including its $100 million senior subordinated notes due 2008 at B3.

Moody's said the ratings reflects Cooperative Computing's improving financial performance, which results from the streamlining of its operations and the reduction or elimination of various unprofitable activities. In addition, it recognizes the company's recurrent revenue stream, which results from the services it offers to purchasers of its systems.

The rating also incorporates the company's enhanced, though still constrained, liquidity position. Finally, the rating encompasses the company's negative tangible net worth, the result of losses in prior years, and the challenges it faces in growing its business.

The stable rating outlook reflects Moody's expectation that Cooperative Computing will continue to grow its revenues modestly as it introduces new products to its existing and new customers, and that continuing improvements in operating efficiency will lead to modestly improving gross margins and cash flow from operations.

Moody's said Cooperative Computing has made significant progress in addressing many of its operating challenges over the last six quarters. Revenue, which had been declining since fiscal 1999, has begun to grow and it is likely to continue to grow at a rate in the low single digits over the rating horizon, once the company has completed its sale of its auto recycling business. Cooperative Computing has also begun to report net income, rather than net losses, and gross profit margins have climbed from 46.7% in fiscal 2001 to 50.3% for the 12 months ending with the second quarter of 2003.

The improved operating performance has and will continue to have a positive impact on the company's credit metrics. EBIT/Interest Expense, which had improved from 0.2x in fiscal 2001 to 2.8x for the 12 months ending with the second quarter of 2003; will be about 1.7x by year-end 2003, Moody's believes.

Moody's rates Ryland notes Ba1

Moody's Investors Service assigned a Ba1 rating to the new $150 million senior note issue of The Ryland Group, Inc. and confirmed its $100 million 8% senior notes due 2006 and $150 million f 9.75% senior notes due 2010 at Ba1 and $100 million 8.25% senior subordinated notes due 2008 and $150 million 9.125% senior subordinated notes due 2011 at Ba2. The outlook is stable.

Moody's said the ratings reflect Ryland's strong financial profile, disciplined growth strategy that eschews acquisitions, conservative land policy, tight cost controls and healthy liquidity.

At the same time, the ratings consider the company's modest size relative to its peer group, its ongoing share repurchase program and the cyclical nature of the homebuilding industry.

The company's financial results and profile have improved in recent years, Moody's said. At the same time as it has been reducing its debt leverage (debt/cap and debt/EBITDA) to among the lowest in its peer group, it has managed to increase its returns (ROE and ROA) to among the best in its group. For 2002, Ryland lowered its debt/cap to 41.9% (from 46.6% in 2001) and debt/EBITDA to 1.3x (from 1.6x) while registering an ROA of 21.0%% and an ROE of 27.3%. EBIT interest coverage was a strong 7.5x (vs. 5.5x).

Moody's rates Bank Zenit notes B2

Moody's Investors Service assigned a B2 rating Bank Zenit's planned loan participation notes to be issued by WestLB on limited-recourse basis. The outlook is stable.

Moody's said the rating is at the same level as Zenit's B2 deposit rating, which reflects the growing importance of Zenit to Russia's banking system (it is one of the top 20 banks in Russia).

The bank's prevailing high, although gradually declining, level of business with related parties, particularly the low-rated Tatneft, is the main factor constraining the ratings, Moody's said.

The rating does not incorporate any support in case of distress from the government authorities, and only a limited amount of indirect support from Tatneft, adds Moody's.

While welcoming Zenit's initiatives to further diversify its client base with the aim of reducing its dependence on both Tatneft and the oil sector as a whole, and to further reduce customer concentrations on both sides of the balance sheet, Moody's acknowledges that this will be only a gradual process.

Moody's cautioned that the rating is constrained by Russia's still difficult and potentially volatile operating environment.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.