Moody's rates Graphic Packaging new notes Ba3

Moody's Investors Service assigned a Ba3 rating to Graphic Packaging Corp.'s planned offering of $250 million senior subordinated notes due 2012, its new $300 million guaranteed senior secured revolving credit facility maturing 2007 and its new $150 million guaranteed senior secured term loan maturing 2009. The outlook is stable.

Moody's said its rating reflects Graphic Packaging's "high leverage, negative tangible book equity, and thin operating margins."

It also noted the company's customers are primarily major consumer product manufacturers that have substantial negotiating strength and therefore ability to resist price increases due to consistent overcapacity in folding cartons.

"The company has limited ability to increase prices, except to pass through paperboard costs, and has an on-going need to control and reduce costs, as well as to maintain state-of-the art presses in order to provide full service for its customers' product needs," Moody's said. In addition, the top 20 customers representing about 80% of sales and the largest customer, Kraft, accounted for 19% of net sales for the nine months ended Sept. 30, 2001. Second was General Mills/ Pillsbury at 11% and third Coors Brewing also at 11%.

On the positive, side, Graphic Packaging has a leading market position, long-standing customer relationships with companies in non-cyclical industries, relatively low cost operations and experienced management, Moody's said. It has invested in innovative technology, including high-speed web-litho presses that permit it to satisfy the high volume needs of its customers, and focuses on six sigma cost reduction in order to improve margins.

Moody's downgrades WCI Steel, Renco Steel

Moody's Investors Service downgraded WCI Steel, Inc. and Renco Steel Holdings, Inc. The outlook remains negative. Ratings affected include WCI Steel's $300 million of 10% senior secured notes due 2004, downgraded to Caa2 from B3, and its $100 million secured credit facility, lowered to B2 from B1; and Renco Steel Holdings' $120 million of 10.875% senior secured notes due 2005, downgraded to C from Ca.

Moody's said it lowered WCI because of its weak financial profile and, given its reduced liquidity, heightened vulnerability to a weak or delayed turnaround in steel industry conditions or the U.S. economy.

Moody's said it lowered Renco Steel because of its inability to service its debt in the absence of dividends from WCI, and the limited capacity for The Renco Group to support Renco Steel.

Liquidity at WCI fell from $107 million at the end of its fiscal year on Oct. 31 to $46 million on Dec. 31, 2001, Moody's said. At Dec. 31, WCI had used all its cash and had $46 million of unused availability under its revolving credit facility, after adjusting for a $25 million availability reserve imposed by its revolver lenders in January 2002.

The decrease in liquidity was primarily due to a worsening of WCI's operating losses in its first fiscal quarter, a $15 million semiannual interest payment, and the imposition of the $25 million availability reserve.

Renco Steel did not have sufficient liquidity to make its Feb. 1, 2002 interest payment on its senior secured notes although it expects The Renco Group to provide the necessary funds before the end of the 30-day grace period. However Moody's believes it is unlikely to fund future interest payments.

WCI will not be able to pay dividends for many years and most of the other investments of The Renco Group are currently impaired, including Doe Run Resources, Lodestar Holdings, and Renco Metals, Moody's notes.

Moody's downgrades Jones Media

Moody's Investors Service downgraded Jones Media Networks, Ltd's $100 million of 11.75% senior secured notes due 2005 to Caa2 from B3 and changed the outlook to negative.

Moody's said its action reflects Jones Media's "thin liquidity position" and operating performance that has been "well below" the rating agency's expectations.

"Approximately 90% of the company's revenue is advertising based. Jones' syndicated radio network is heavily reliant on the national advertising market which has been markedly more depressed than the local advertising environment," Moody's noted. Great American Country is heavily reliant on the cable advertising market, which is expected to remain soft well into 2002.

Once the advertising environment improves, Moody's said it expects national advertisers to initially focus extra spending on major broadcast networks and more established cable networks before approaching more developmental properties like GAC.

Moody's downgrades Elizabeth Arden

Moody's Investors Service downgraded Elizabeth Arden, Inc. including lowering its $175 million senior secured revolving credit facility due 2005 to B1 from Ba3; $160 million 11.75% senior secured notes due 2011 to B2 from B1; and $155 million 10.375% senior unsecured notes due 2007 to Caa1 from B2. The outlook is negative.

Moody's said its action is in response to "significantly reduced expectations for sales, profitability and cash flow following the company's recently announced operating challenges."

The rating agency said Elizabeth Arden recently announced normalized EBITDA for the fourth quarter of fiscal 2002 would be near zero "as the challenging economic environment during the important Christmas season caused mall-based retailers to lower inventories and resulted in poor sell-through of gift sets."

The problems were worst at prestige department stores but there was also a dramatic reduction in the highly profitable travel and military base sales channels, Moody's said.

As a result of the fourth quarter operating performance, Elizabeth Arden expects to be out of compliance with its bank credit facility covenants and is negotiating for a waiver and amendments, the rating agency added.

Moody's downgrades Metaldyne

Moody's Investors Service downgraded Metaldyne Corp. and its Metaldyne Co. LLC unit. The outlook is stable. Ratings affected include Metaldyne's $305 million 4.5% convertible subordinated debentures due 2003, lowered to B3 from B2, and its $1.3 billion of senior secured credit facilities, lowered to B1 from Ba3.

Moody's said its action was in in response to soft conditions in Metaldyne's end markets, high leverage and declining operating margins.

For the 12 months to Sept. 30, 2001, Metaldyne had a debt to revenues ratio of 79%, Moody's said, adding that it expects upcoming fourth quarter 2001 financial results will show additional stress on operating cash flows caused by the current uncertain economic environment; lower levels of domestic vehicle production; and softness within most of Metaldyne's automotive and industrial end markets.

Moody's also said Metaldyne will be under pressure over the next few years to consistently invest capital well in excess of depreciation in order to increase productivity and capacity; remain state-of-the-art and competitive; and support its growing book of new business scheduled to come on stream over the next several years.

Moody's downgrades Sun International

Moody's Investors Service downgraded Sun International Hotels Ltd. and its co-issuer and wholly-owned subsidiary, Sun International North America, Inc. The outlook is negative. Ratings affected include Sun' $200 million 9% senior subordinated debt due 2007, $100 million 8.625% senior subordinated debt due 2007 and $200 million 8.875% senior subordinated debt due 2011, all lowered to B2 from Ba3; and its $200 million senior secured revolver due 2002, cut to Ba3 from Ba2.

Moody's said it lowered Sun International in response to the significant negative impact that the Sept. 11 terrorist attacks have had on the credit profile of the company.

Since then, Sun International experienced a significant decline in operating trends and EBITDA, Moody's said.

For the three months to Dec. 31, 2001, the occupancy rate at the company's Paradise Island property was 56% compared to 78% a year earlier and the average room rate was $211 versus $227, the rating agency said. EBITDA was $10.4 million versus $20.7 million.

While Sun International has taken "several key steps" before and after Sept. 11 to strengthen its financial flexibility, the single property, upscale destination nature of the resort makes it highly vulnerable to uncertain travel and economic trends.

S&P downgrades Pinnacle Holdings, still on watch

Standard & Poor's downgraded Pinnacle Holdings Inc. and its Pinnacle Tower Inc. unit and kept the companies on CreditWatch with negative implications. Ratings affected include Pinnacle Holdings' $325 million 10% senior discount notes due 2008, lowered to C from CCC-, and Pinnacle Towers' $285 million secured revolving credit facility, $125 million secured term loan and $110 million secured term loan, all lowered to CC from CCC+.

S&P said its action follows Pinnacle's statement that it may have to file for bankruptcy protection because its forbearance agreement with senior bank lenders prohibits it from distributing funds to its parent for servicing of interest payments on Pinnacle Holdings' $200 million 5.5% convertible subordinated note issue. Failure to pay interest on the convertible subordinated notes could result in an acceleration of repayment of the notes as well as other debt.

S&P upgrades Carmike, rates new notes

Standard & Poor's upgraded Carmike Cinemas Inc. as the company emerged from bankruptcy. S&P lifted Carmike's corporate credit rating to CCC+ from D and assigned a CCC- rating to its new 10.375% $154 million subordinated notes. S&P does not rate the company's new bank debt consisting of a $50 million revolving line of credit and $231 million in term debt. The outlook is stable.

S&P said its ratings reflect Carmike's "still-aggressive financial profile, moderately high near-term principal repayments, and improvements in the company's theater circuit."

Also incorporated in the assessment is the still-troubled, but improving, industry operating environment and Standard & Poor's view that Carmike will need to upgrade its theater circuit to maintain and improve its market position.

While Carmike's circuit improved through the closing of more than 130 unprofitable theaters it still has a relatively high percentage of older theaters and a low percentage of screens with popular features such as stadium seating, S&P said. More than 10% of its venues are second-run theaters which are generally less profitable.

S&P rates new Charming Shoppes bank facility BB-

Standard & Poor's assigned a BB- rating to Charming Shoppes Inc.'s new $375 million senior secured bank facility and affirmed the company's ratings including its subordinated debt at B. The outlook is stable. The credit facility is made up of a $75 million term loan and a $300 million revolver and matures on August 16, 2004.

S&P said that although the bank facility derives strength from its secured position, under a simulated default scenario it is uncertain that the collateral value would be sufficient to cover the entire loan.

The rating agency added that its assessment of Charming Shoppes reflects the company's "high business risk, given its participation in the highly competitive and volatile specialty apparel industry." However Charming Shoppes has good credit protection measures, S&P said, noting total debt to EBITDA is 3.1 times.

S&P rates new Regal Cinemas notes B-

Standard & Poor's assigned a B- rating to Regal Cinemas Inc.'s recent sale of $200 million 9.375% senior subordinated notes due 2012.

S&P raises Road King to investment grade

Standard & Poor's upgraded Road King Infrastructure Finance (1997) Ltd. to investment grade, including lifting its $140 million 9.5% notes due 2007 to BBB- from BB+. The outlook is stable.

S&P rates AIM loan BB-

Standard & Poor's assigned a BB- rating to Apartment Investment and Management Co.'s $287 million senior unsecured term loan due 2004.

S&P rates new Tandus deal B

Standard & Poor's assigned a B rating to Tandus Group, Inc.'s offering of $175 million notes due 2010 to be sold via Collins & Aikman Floorcoverings Inc.

S&P raises Mexican corporates to investment grade

Standard & Poor's upgraded the foreign currency debt ratings of several Mexican corporations.

Ratings affected are:

--Dine, SA de CV $135 million 8.75% notes due 2007 guaranteed by Desc, SA de CV to BBB- from BB+;

--Pemex Project Funding Master Trust €500 million 7.75% notes due 2007 and $750 million 8% bonds due 2011 to BBB- from BB+;

--Fideicomiso Petacalco Topolobampo $250 million 8.125% secured notes due 2003 supported by the Comision Federal De Electricidad to BBB- from BB+;

--Monterrey Power, SA de CV $235.2 million senior secured bonds due 2009 to BBB- from BB+;

--Pemopro SA de CV $440 million senior secured bank loan A due 2003 guaranteed by Petroleos Mexicanos, $161 million senior secured floating rate notes series A due 2003, $161 million senior secured floating rate notes series B due 2003 and $205 million floating rate senior secured notes notes series C due 2003 to BBB- from BB+;

--Conproca SA de CV $437.41 million 12% senior secured bonds due 2010 to BBB- from BB+;

--Fideicomiso Petacalco $308.9 million 10.16% senior secured notes due 2009 to BBB- from BB+;

--Petroleos Mexicanos various series of notes to BBB- from BB+;

--Proyectos de Energia, SA de CV $100 million senior secured notes due 2013 to BBB- from BB+;

--Telefonos de Mexico, SA de CV $1 billion 4.25% convertible subordinated debentures due 2004 and $1.5 billion 8.25% notes due 2006 to BBB- from BB+;

--Grupo Imsa, SA de CV $150 million 8.93% notes due 2004 to BBB- from BB+;

--Kimberly-Clark de Mexico SA de CV $250 million 8.875% senior unsecured notes due 2009 to BBB+ from BBB;

--Pepsi-Gemex, SA de CV $160 million 9.75% notes due 2004 and $150 million syndicated loan to BBB- from BB+;

--Coca-Cola Femsa, SA de CV $200 million 8.95% notes due 2006 to BBB from BBB-;

--Controladora Comercial Mexicana, SA de CV $130 million 9.375% notes due 2005 to BBB- from BB+.

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