S&P cuts Trump Atlantic City outlook, affirms ratings

Standard & Poor's said it revised its rating outlook for Trump Atlantic City Associates to negative from stable and affirmed its CCC+ corporate credit and senior secured debt ratings.

The outlook revision follows the company's lower-than-expected operating results for its third quarter ended Sept. 30, due to a combination of increased competitive pressures in Atlantic City and lower-than-normal table game hold percentage at the Trump Plaza. The weak performance increases the company's already high debt leverage and further constrains its liquidity.

Ratings reflect Trump Atlantic City Associate's limited diversity, the intensely competitive market conditions in Atlantic City, weak credit measures, and sizable debt maturities in 2006. These factors are somewhat offset by the company's established position in the Atlantic City market.

Consolidated EBITDA for the nine months ended Sept. 30, was $143 million, an approximately 20% decline over the prior-year period. Based on current operating trends, total debt to EBITDA is expected to be more than 7x and EBITDA to interest modestly above 1x.

The negative outlook reflects S&P's concern that Trump Atlantic City Associates will be challenged to improve its operating performance and liquidity position in the current market environment. If the company's operating performance does not improve, or if its liquidity position deteriorates, the ratings could be lowered.

S&P affirms Trump Casino, revises outlook

Standard & Poor's revised its rating outlook for Trump Casino Holdings LLC to negative from stable and affirmed its B- corporate credit and senior secured debt ratings on the company. The outlook is negative.

The ratings agency said the outlook revision follows the company's announcement of weaker-than-expected operating results for its third quarter ended Sept. 30, due to a combination of increased competitive pressures in Atlantic City that affected Trump Marina and higher gaming taxes and insurance costs at Trump Indiana. As a result, the company's debt leverage has increased.

The ratings for Trump Casino Holdings reflect the competitive market conditions in its markets served, limited expected levels of free cash flow to reinvest in its properties, its relationship to its more highly leveraged affiliate, Trump Atlantic City Associates, and pressured operating results. These factors are somewhat offset by the company's niche positions in each of its markets and adequate, yet modest, expected near term liquidity.

Consolidated EBITDA for the nine months ended Sept. 30, 2003 was $62 million, a decline of more than 15% compared to the prior-year period. Based on current operating trends, total debt to EBITDA is expected to be more than 6x, and EBITDA coverage of cash interest expense less than 2x for 2003.

S&P said that given the company's weaker-than-expected operating results through the first three quarters of 2003, and based on current operating trends, credit measures have significantly deteriorated from levels achieved during 2002. While near-term liquidity at Trump Casino Holdings is adequate, its relationship to liquidity-constrained Trump Atlantic City Associates could result in lower ratings.

S&P puts Milacron on watch

Standard & Poor's placed its B- corporate credit rating and other ratings on Milacron Inc. on CreditWatch with negative implications on concerns about the company's debt maturities.

Total lease-adjusted debt was about $390 million at Sept. 30 for Cincinnati-based Milacron, a leader in the plastics machinery sector.

In resolving the Creditwatch, S&P said it will evaluate Milacron's near-term progress in working with potential lenders to replace its revolving credit facility and receivables securitization program by year-end (about $80 million outstanding) as well as how its intends to refinance its public debt, which matures in March 2004 ($115 million) and April 2005(Euro 115 million).

The ratings agency said ratings would be lowered if prospects for meeting debt maturities are judged to be diminished.

Moody's rates Merisant notes Caa1

Moody's Investors Service downgraded the ratings of Merisant Co. and assigned a Caa1 rating to the proposed $75 million senior subordinated discount notes to be issued by Tabletop Holdings Inc., the holding company of Merisant.

Proceeds from the Tabletop discount notes are planned to fund a payment to equity owners, including majority owner Pegasus Capital Advisors. The ratings outlook is stable.

Downgraded by Moody's were the ratings of Merisant's $35 million revolving credit facility that matures 2009 - to B1 from Ba3; $50 million Euro term loan A maturing 2009 - to B1 from Ba3; $255 million term loan B maturing 2010 - to B1 from Ba3; and $225 million senior subordinated notes due 2013 - to B3 from B2.

The ratings downgrade of Merisant reflects the cumulative increase in enterprise leverage resulting from this and a larger equity distribution in July, and the potential that future distributions will keep leverage higher than previously expected.

In addition, Moody's notes that although Merisant's margins and cash flow have been strong, sweetener markets and the food retail environment are increasingly competitive, which may constrain future cash flow generation levels.

Merisant's ratings are limited by the company's relatively small size ($359 million for last-12-month revenues) and largely single product focus (aspartame sweetener for tabletop use), its reliance on a limited number of brands ('Equal' in the US and 'Candarel' in overseas markets), and a business environment that is expected to grow more competitive from both competing products and a consolidating retail segment.

In addition, the ratings take into account the leverage taken on by the enterprise this year to fund shareholder distributions, and the possibility that Pegasus may continue to monetize accreted value from Merisant, via dividends or other mechanisms, as it becomes available.

Pro forma for the transaction, Merisant's total debt (including the planned Tabletop discount notes considered at a nominal value of $75million) will be about $555 million (considering $20 million in debt amortization subsequent to June 30), yielding a total debt to June 30 last-12-month EBITDA level of 5.0x.

The leverage is considerable as measured against EBITDA but more moderate in relation to the company's strong cash flow, which in the last 12 months has allowed debt reduction of roughly $63 million (or 11% of pro-forma total debt), implying good de-leveraging capability for the rating level.

S&P cuts Merisant, rates Tabletop notes B-

Standard & Poor's assigned its B- rating to Chicago-based Tabletop Holdings Inc.'s proposed $75 million senior subordinated discount notes due 2014 and a B+ corporate credit rating to Tabletop, the parent company of sugar substitute maker Merisant Co.

S&P also lowered its senior secured bank loan rating on Merisant's bank credit facilities to B+ from BB- and its subordinated debt rating on Merisant's 9.5% senior subordinated notes due 2013 to B- from B.

The ratings agency said the downgrade reflects Tabletop's increased consolidated debt burden after its proposed debt issue, as well as the company's more aggressive financial policy, specifically the timing of what will be its second distribution to shareholders within a four-month time frame. Merisant's credit protection measures were already weak following a $170 million debt-financed distribution to shareholders in July. The new discount notes will add $75 million of incremental debt that further weakens consolidated credit protection measures.

The ratings on Tabletop reflect the company's narrow product focus, supplier and customer concentration, and its leveraged financial profile. Somewhat mitigating these factors are the company's leading market position and favorable industry growth prospects.

After the transaction, Tabletop will be highly leveraged, S&P said. Lease-adjusted EBITDA (for the 12 months ended June 30), is about 2x the pro forma full-year interest expense. At closing, lease-adjusted total debt to EBITDA will be about 5x.

S&P expects Tabletop to pay down debt under the mandatory excess cash flow sweep provision under the bank credit agreement, thereby improving somewhat its credit protection measures in the near to intermediate term.

Liquidity is expected to be adequate for the ratings. At closing, Tabletop is expected to have full availability under its $35 million revolving credit facility due 2009.

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