S&P says Premcor unchanged

Standard & Poor's said Premcor Refining Group Inc.'s ratings including its corporate credit at BB- with a stable outlook are unchanged following the company's announcement that it plans to expand its refinery in Port Arthur, Texas.

The plan possibly includes increasing the refinery's crude throughput capacity to about 325,000 barrels per day (bpd), from its current rate of 250,000 bpd. The cost is estimated between $200 million and $220 million and should be completed in fourth-quarter 2005.

While S&P said it expects Premcor to finance this transaction, as well any future acquisitions, in a balanced manner, the potential for positive rating actions is limited until Premcor has successfully funded its significant capital outlays through 2005 (including $530 million for clean-fuels spending) in a manner that does not materially increase leverage.

Moody's cuts Prime Hospitality

Moody's Investors Service downgraded Prime Hospitality Corp. including cutting its $200 million 8.375% senior subordinated notes to B2 from B1. The outlook is negative.

Moody's said the downgrade was prompted by Prime Hospitality's weak operating performance over the past several quarters, which has resulted in a general deterioration in credit metrics and considerably limited liquidity.

The ratings also reflect Moody's view that the company will be challenged in its ability to material improve operating performance over the near term given the uncertainty regarding the current lack of demand and increased pricing pressures.

The company's financial performance continues to be impacted by a lack of customer demand, predominantly the business traveler, the concentration of its facilities in regions with a greater reliance on business travel such as Atlanta, Chicago, Dallas and the North East, and increased pricing pressures as companies attempt to slow the erosion of occupancy rates by discounting room rates.

Prime's operating performance metrics such as RevPAR and Average Daily Rate continued to deteriorate and liquidity has become a concern as cash balances were relatively low and availability under Prime's bank revolver is limited due to covenant restrictions. For the first quarter 2003, RevPAR declined 7.1% on a comparable basis quarter over quarter, which was driven by a decline in ADR of 7.9% but mitigated to a certain degree by slightly higher occupancy rates at its Wellesley Inns and Suites, Moody's said. As of March 31, 2003, the deterioration in operating performance reduced availability under its bank revolver to approximately $10 million based on last 12 months EBITDA of about $62.5 million and debt to EBITDA of approximately 4.38x. Prime's leverage covenant under its bank agreement steps down to 4.25x in the third quarter of 2003, from 4.5x currently and meeting this covenant level could be difficult, Moody's said.

S&P rates TriMas loan BB-

Standard & Poor's assigned a BB- rating to TriMas Corp.'s proposed additional offering of $90 million on its existing term loan B senior secured credit facility due 2009 and confirmed its existing ratings including its senior secured debt at BB- and subordinated debt at B. The outlook is stable.

S&P said TriMas' ratings reflect its strong positions in niche markets, offset by the highly competitive and cyclical nature of certain of its businesses, high debt leverage and thin cash flow protection.

TriMas continues to rationalize its manufacturing facilities and reduce headcount. The changes are expected to achieve about $25 million in annual cost savings, S&P noted. TriMas is expected to continue to pursue cost savings and to capitalize on product development. As expected, it has pursued niche acquisitions on an opportunistic basis.

Meanwhile, the company is highly leveraged, with total debt to EBITDA at more than 5x on a pro forma basis for these acquisitions, adjusted for operating leases, S&P said. This has put some pressure on meeting its leverage covenants and the company expects to amend its covenants as it increases its credit facility to repay amounts under its acquisition revolving credit facility and accounts receivable facility. Over the intermediate term, Standard & Poor's expects the company to operate with total debt to EBITDA of around 4x, and EBITDA to interest coverage in the 2.5x-3x area, which is appropriate for the rating; it is currently at 2.5x on a pro forma basis.

Moody's rates CBD Media's loan Ba3; notes B3

Moody's Investors Service rated CBD Media LLC's $165 million secured credit facility at Ba3 and $150 million senior subordinated note due 2013 at B3. The rating outlook is stable.

The credit facility consists of a $5 million six-year revolver and a $160 million 6 1/2-year term loan B. Security is a first lien on all tangible and intangible assets of CBD and all of its capital stock.

Proceeds from the bank debt and the bond sale will be used to refinance the existing credit facility, repay indebtedness and to provide a cash dividend of approximately $133 million to the company's existing equity holders, Spectrum Equity Investors and Broadwing Inc.

Ratings are constrained by the company's large debt load that exceeds revenue of $83 million, the company's small size relative to other publicly rated telephone directories publishers, and the significant concentration risk serving only the Greater Cincinnati area, Moody's said.

On the plus side, the company has good cash flow and solid revenue streams afforded by its incumbent position as the owner and publisher for Cincinnati Bell branded yellow pages, Moody's added.

Pro-forma for the closing of the proposed transactions free cash flow to total debt is approximately 10%, total debt to EBITDA is slightly over 6 times, debt is 3.6 times total revenue and EBITDA less capital expenditures covered interest expense approximately 3 times.

Moody's rates Crum & Forster notes B1

Moody's Investors Service assigned a B1 rating to Crum & Forster Funding Corp.'s proposed $200 million senior notes. The outlook is stable.

Fairfax Financial Holdings Ltd. is the ultimate parent company of Crum & Forster Holdings Corp., a downstream intermediate holding company. Fairfax Financial is in the course of renegotiating its current credit facility. Upon completion of the renegotiation of the credit facility, Crum & Forster Holdings Corp. is expected to assume the notes and the related indenture issued by Crum &Forster Funding Corp.

The debt rating reflects the group's current inability to access dividends from its insurance operating companies, given that those companies are currently unable to pay dividends due to regulatory constraints, Moody's said.

The rating agency also noted that both United States Fire and North River have historically been troubled by weak and volatile earnings and significant adverse development on reserves. Moody's believes that the current management team has significantly changed the Crum & Forster's business mix having re-priced and re-underwritten the majority of the group's business including shifting its distribution platform.

The turnaround had been slow to materialize but 2002 statutory results significantly improved.

Moody's believes that 2003 results will also continue to improve, helped by the current favorable market conditions. Crum & Forster also benefits from a high-quality investment portfolio, more conservative underwriting standards, an improving expense structure and significantly reduced catastrophe exposure.

Nevertheless, Moody's believes that adverse reserve development written on business in prior years remains a risk as does the company's exposure to asbestos and environmental claims. Moody's said it continues to be concerned with the general trends in asbestos settlements and the current legal environment.

Moody's rates Georgia-Pacific notes Ba2

Moody's Investors Service assigned a Ba2 rating to Georgia-Pacific Corp.'s planned $500 million senior unsecured guaranteed notes and confirmed its existing ratings including its senior unsecured notes, debentures and industrial revenue bonds at Ba3, senior unsecured notes guaranteed by Fort James at Ba2, G-P Canada Finance Co.'s notes at Ba3, Great Northern Nekoosa's industrial revenue bonds at Ba3, Fort James Corp.'s senior unsecured notes, debentures and medium-term note program at Ba2, pollution control revenue bonds at Ba2 and Fort Howard pollution control revenue bonds at Ba2. The outlook remains negative.

Moody's said Georgia-Pacific's ratings reflect the company's high financial leverage, the significantly greater financial strength of its principal competitors in the tissue business and the long-term uncertainty surrounding the company's asbestos liabilities.

The ratings also consider its substantial share of the consumer and away from home tissue markets, strong brand position, sizeable presence in building products and low cost packaging operation.

The negative outlook indicates the potential for continued adverse asbestos developments, limited covenant room on its revolving credit facility, growing unfunded pension obligations and refinancing requirements during the next two years.

Georgia-Pacific's cash generation has been significantly below expectations since the acquisition of Fort James in 2000. This, combined with a high level of debt (currently about $11.9 billion) has caused debt protection measurements to remain weak, Moody's said. Over the near and intermediate term, a relatively weak outlook for the company's commodity products, and price competition in the tissue business, are expected to result in a low level of cash flow in relation to debt, and will inhibit meaningful debt reduction.

For 2003, Moody's estimates retained cash flow to total debt of about 10-12%, and unless the building products operations recover to mid-cycle or above levels, we expect financial leverage to remain high for at least the next several years.

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