S&P upgrades Standard Commercial

Standard & Poor's upgraded Standard Commercial Corp. The outlook remains stable. Ratings raised include Standard Commercial's $69 million 7.25% convertible subordinated debentures due 2007, upgraded to BB- from B+, and Standard Commercial Tobacco Co., Inc.'s $115 million 8.875% senior notes due 2005, raised to BB+ from BB.

S&P said it raised Standard Commercial because of the company's improved operating performance and the related improvement in profitability and cash flow measures. In addition, Standard Commercial continues to reduce debt.

However, further upgrade potential could be somewhat difficult given the current market conditions for cigarette manufacturers, both in the U.S. and abroad, and the related impact on the leaf tobacco dealers' operations, S&P said.

Following several years of disappointing results stemming from operating difficulties and a very weak pricing environment for both leaf tobacco and wool, Standard Commercial took steps to improve its operations, S&P noted. These actions included implementing better inventory management, as well as plant rationalization and cost-reduction programs. Overall, this has strengthened the company's financial position and increased financial flexibility.

Standard Commercial's operational and financial strategies have resulted in improved performance despite conservative buying patterns of cigarette manufacturers as the industry consolidates and faces ongoing litigation, fierce global competition, and political unrest in leaf tobacco producing countries, S&P said.

Credit measures, on average over the last five years and adjusted for committed tobacco inventories, are appropriate for the rating with EBITDA to interest coverage of about 4 times and EBITDA margins, in this low-margin business, of about 6%, S&P said. Adjusted total debt to EBITDA has declined to below 2x from more than 6x in fiscal 1996. S&P said it expects credit measures will remain, on average, in the above areas.

S&P notes Baxter sale

Standard & Poor's said that its ratings and outlook on Baxter International Inc. (A/stable) will not change as a result of Baxter's plans to divest service operations in its renal business line.

The services and centers to be divested accounted for about 13% of total renal sales in 2001, or about 3.2% of total revenues. These are mainly low-margin operations located in economically troubled Latin America and in Europe, S&P noted.

Baxter will retain more profitable renal care operations integral to its renal products sales. In S&P's view, this should strengthen remaining renal operations and enable Baxter to put modest levels of investment capital into other, more profitable areas.

The divestiture will result in a principally non-cash fourth quarter charge of $250 million.

S&P puts El Paso Energy Partners on negative watch

Standard & Poor's Ratings Services placed its BB+ corporate credit rating on oil and natural gas services company El Paso Energy Partners LP on negative watch due to the recent downgrade of its general partner, El Paso Corp. (BB/negative watch) as the deterioration of El Paso's credit quality pressures the partnership's credit quality.

© 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.