S&P says Delta unchanged

Standard & Poor's said Delta Air Lines Inc.'s net loss of $186 million for the second quarter of 2002 does not affect the company's credit rating or outlook. S&P assesses Delta's corporate credit at BB with a negative outlook.

Delta's pretax loss margin of 8.3% was better than that reported by AMR Corp. and than those expected from UAL Corp. and US Airways Group Inc., but worse than those reported by Continental Airlines Inc. and Northwest Airlines Corp., continuing the pattern of recent quarters, S&P noted.

The domestic market, particularly for business travel, continues to be the main revenue problem, with Delta's European (benefiting from its SkyTeam alliance with Air France) and Latin American operations performing relatively better, S&P said.

Management expects continued revenue weakness through at least the end of 2002, and is seeking to contain costs and capital expenditures ($780 million expected in the second half of the year) in response.

Delta's liquidity and balance sheet remain one of the best among large U.S. airlines, with $1.8 billion of cash, $1 billion of credit lines, and $5.5 billion of unencumbered aircraft (of which only $2 billion, however, are newer planes that are most desirable as collateral), S&P said.

Moody's cuts Superior TeleCom

Moody's Investors Service downgraded Superior TeleCom Inc. including cutting its $169 million senior secured revolving credit facilities due 2004, $300 million senior secured term loan A due 2004 and $403 million senior secured term loan B due 2005 to Caa2 from B2 and its convertible trust preferred stock to C from Caa1. The outlook remains negative. Superior Telecom's $200 million senior subordinated notes are not rated.

Moody's said it lowered Superior because of the company's constrained liquidity position and heightened concerns over its ability to meet its debt obligations.

The lower rating also reflects continued deteriorating industry fundamentals and an uncertain outlook for the foreseeable future, Moody's said.

Over the past two years, the difficult environment in Superior's end-markets, particularly the telecommunications industry, has resulted in sharply reduced demand for the company's wire and cable products, Moody's noted. This, coupled with its highly leveraged capital structure, has led to significant deterioration in the company's operating performance and credit protection measures.

The company generated EBITDA of about $130 million for the 12 months ending March 2002 and EBITDA of $20 million for the first quarter of 2002, Moody's said.

S&P takes DT off watch

Standard & Poor's confirmed DT Industries Inc.'s ratings and removed it from CreditWatch with negative implications. The outlook is negative. Ratings affected include DT Industries' senior secured debt at B-.

S&P said the outlook reflects DT Industries' weaker-than-expected revenues, resulting in modest liquidity and a default of certain bank financial covenants under its senior credit facility at the end of its second and third fiscal 2002 quarters.

In addition, the company's limited financial flexibility during the current challenging economic environment heightens financial risk, S&P said.

DT Industries has gained some near-term financial flexibility due to a recently completed recapitalization plan, which is designed to strengthen the company's balance sheet and that incorporates an amendment to the company's senior credit facility, S&P added. As a result of the transaction with its lenders, the maturity date of DT Industries' senior credit facility was extended to July 2, 2004 and the company repaid about $16 million of outstanding debt under the facility. The total commitment (including the term loan and revolver) under the facility was reduced to $76.3 million from $88.3 million.

In addition, the company raised $22.4 million in common equity in a private placement and reduced the outstanding amount of 7.16% convertible preferred securities of DT Capital Trust by about $50 million through an exchange, S&P added. The terms of the remaining convertible preferred securities were amended to reduce their conversion price and shorten their maturity.

The company's revenue and EBITDA (pro forma for asset sales) declined about 33% and 20%, respectively, in the nine months ended March 24, 2002, compared with the same period in fiscal 2001, S&P noted. The decline in sales and operating income was primarily due to the general economic slowdown in the U.S. economy, affecting many of the company's cyclical key end markets, which include automotive, pharmaceutical, plastic packaging, and heavy-duty truck.

S&P rates Swift & Co.'s loan BB; notes B+

Standard & Poor's rates Swift & Co.'s proposed $550 million senior secured credit facilities at BB, $400 million senior unsecured notes due 2009 at B+ and corporate credit rating at BB. The outlook is stable.

The credit facilities will consist of a $350 million revolver due 2007 and a $200 million term loan B due in 2008. Security is the stock of all borrowers and all stock and assets of borrowers and their wholly-owned domestic subsidiaries. Proceeds from the term B and the notes will be used to help fund the $1.2 billion acquisition of ConAgra Foods Inc.'s meat processing business.

Ratings reflect relatively high debt levels offset by the company's number 3 position in both the U.S. beef and pork processing industries, a diverse customer base and high barriers to entry, S&P said.

Pro forma for the acquisition, lease adjusted total debt to EBIDTA will be about 2.9 times and EBIDTA coverage of interest expense is expected at around 3.0 times.

S&P rates Oriental Trading's loan BB-

Standard & Poor's rated Oriental Trading Co. Inc.'s proposed $180 million senior secured credit facility at BB- and assigned a corporate credit rating of BB-.

The loan consists of a $30 million five-year revolver and a $150 million seven-year term loan B and is secured by substantially all stocks and assets. Proceeds from the bank loan will be used to refinance existing bank and subordinated debt and to fund the purchase of certain stock warrants.

Ratings reflect competitiveness and fragmentation of the market and a relatively small cash flow base. Offsetting these risks is the company's position as the leading direct marketer of valued-priced toys and party supplies and stable cash flow generation, S&P said.

Following the refinancing, EBIDTA to interest coverage will be more than 5 times, total debt service coverage will be about 3.5 times and pro forma total debt to EBIDTA will be about 2.7 times.

S&P says Northwest unchanged

Standard & Poor's said Northwest Airlines Corp. and unit Northwest Airlines Inc.'s rating and outlook are unchanged after the company reported a second-quarter net loss of $93 million, somewhat worse than the prior year, but relatively good, given the adverse industry environment. S&P rates Northwest's corporate credit at BB- with a negative outlook.

Northwest's negative 5.9% pretax margin was less unfavorable than those of most other large airlines that have reported thus far, S&P said.

Although Northwest has been hurt by the weak revenue environment, its domestic markets were less affected by the events of Sept. 11, 2001, and their aftermath than most others and have limited low-fare competition, S&P added. In addition, Northwest is more heavily concentrated on Pacific routes than any other U.S. airline, and those markets are recovering faster than average.

Management offered no specific guidance regarding expected third-quarter results, but stated it expects modest net profits in July and August (September is always seasonally weaker than the prior months), S&P continued.

Liquidity remains strong, with $2.7 billion of unrestricted cash (including a fully drawn $965 million bank facility), and all upcoming aircraft deliveries either financed or with financing commitments in place, S&P added.

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