Moody's cuts IMC Global

Moody's Investors Service downgraded IMC Global Inc. including cutting its guaranteed senior unsecured notes to B1 from Ba2, senior unsecured notes and debentures to B2 from Ba3 and guaranteed senior secured credit facility to Ba3 from Ba1 and assigned a Caa1 rating to its new $125 million mandatory convertible preferred shares due 2006. The outlook is stable.

Moody's said the downgrade reflects IMC Global's high leverage with pro forma debt (adjusted for the proposed preferred securities) to last 12 months EBITDA of 6.3 times, weak coverage of interest expense, weaker than expected domestic fertilizer demand, higher average feedstock costs and substantial intermediate-term debt obligations even after completion of the most recent financing.

The downgrade reflects Moody's concern that IMC Global's operating margins will continue to be negatively impacted by increased production costs stemming from elevated average ammonia and rock costs for 2003. Sulfur prices remain elevated, but Moody's expects sulfur prices to decline over the next several years. Ammonia costs have increased significantly due to higher natural gas costs. Although ammonia prices are also expected to decline through the remainder of 2003, Moody's is concerned over the company's ability to address the prospect for continued volatility in natural gas costs and its impact on raw material costs and operating performance.

The revised ratings are supported by strength in (diammonium phosphate) DAP pricing, recent actions taken to reduce costs and balance the market, the prospect for limited global DAP capacity additions in the near-term, improved liquidity following recent asset sales and the company's willingness to issue equity-like instruments to support its capital needs, Moody's said. The ratings also derive support from the company's leading position as the largest global supplier of phosphate and potash fertilizers and the relative stability of the potash business.

S&P cuts Allegheny Technologies to junk

Standard & Poor's downgraded Allegheny Technologies Inc. to junk including cutting its corporate credit to BB+ from BBB and senior unsecured debt to BB from BBB. The outlook is stable.

S&P said the senior unsecured debt was lowered to one notch below the corporate credit rating, reflecting its disadvantaged position in the capital structure due to the company's new $325 million senior secured revolving bank credit facility.

The downgrade reflects Allegheny Technologies' continued weak financial performance due to persistent difficult industry conditions and the ongoing challenges it faces from a sluggish economy, which has thwarted management efforts to restore its financial profile, S&P said.

The downgrade also reflects the company's growing, unfunded postretirement benefit liabilities, including defined benefit pension and retiree medical liabilities.

Since 2000, the company has experienced a significant decline in its profitability, due mainly to weakened demand and poor pricing in its flat-rolled products, which constitute more than half of Allegheny's revenues. It also reflects the meaningful decline in its high-performance metals segment, which continues to suffer from the falloff in demand, particularly from the aerospace industry, a key end market, S&P said. A rebound in the aerospace and power generation markets, another key end market, is not expected before 2005. These challenges have been exacerbated by higher natural gas costs.

Moody's rates Crown Liquidity SGL-2

Moody's Investors Service assigned an SGL-2 speculative-grade liquidity rating to Crown Holdings, Inc.

Moody's said the rating reflects good short-term liquidity driven primarily by strong free cash flow after asbestos and pension cash payments, ample cash on hand (approximately $266 million unrestricted cash for at March 31, 2003), cushion under financial covenants, and approximately $286 million of availability under the existing $550 million revolver.

Moody's rates True Temper loan Ba3

Moody's Investors Service assigned a Ba3 rating to True Temper Sports, Inc.'s $40 million senior secured credit facilities and confirmed its $99.7 million 10.875% senior subordinated notes due 2008 at B3. The outlook is stable.

Moody's said the confirmation reflects Moody's expectation that True Temper will continue to focus on product development, cost control and debt repayment, and thereby maintain its leading market position and appropriate credit measures, despite ongoing exposure to a challenging golf equipment sales environment.

True Temper's ratings are supported by its dominant market position and brand recognition in steel golf shafts and by its history of product innovation. The latter point has been important in recent years, as the company's introduction of new lighter-weight steel shafts has allowed True Temper to post relatively stable top-line trends during a challenging period for overall golf participation rates and equipment sales, Moody's said. The company's resilient market position also has been supported by its strong relationships and co-branding programs with the leading golf club manufacturers.

Notwithstanding True Temper's operating and financial achievements, the company's ratings are restrained by its narrow business focus, still material financial leverage, and small absolute size ($110 million revenue base), which limit its ability to withstand unexpected shocks to its business, Moody's said.

For fiscal 2002, True Temper's cost control efforts enabled the company to report virtually flat EBITDA versus the prior year (around $32 million), despite a 3% sales decline. At the same time, True Temper's debt reduction and balance sheet focus allowed for somewhat improved credit statistics, with EBITDA interest coverage (including holding company discount note interest) of 2.1x (from 2.0x in FY2001), debt-to-EBITDA of 4.1x (from 4.5x), and funds from operations less capex-to-debt of 15% (from 12%), Moody's said.

S&P rates Community Health loan BB-

Standard & Poor's assigned a BB- rating to CHS/Community Health Systems Inc.'s $200 million incremental term loan B facility and confirmed Community Health Systems' ratings including its subordinated debt rating at B. The outlook is stable.

S&P said Community Health's ratings reflect its concern about the company's somewhat aggressive acquisition activity and uncertain reimbursement levels by the government and other third-party payors.

Despite rapid growth during the past few years, the company's use of both debt and equity has resulted in a reduction of lease-adjusted debt to capitalization to 52% in 2002 from 64% in 2000, S&p said. The combination of the company's expected cash flow coupled with modest expected use of debt should enable it to continue growing without materially increasing leverage. At the same time, however, acquisition activity will likely consume all of the improved free cash flow.

S&P puts Packaging Corp. on positive watch

Standard & Poor's put Packaging Corp. of America on CreditWatch positive including its senior secured bank debt at BBB and subordinated debt at BB+.

S&P said the watch placement is pending the successful completion of the company's recently announced tender offer for its $550 million 9 5/8% senior subordinated notes due 2009.

If the tender offer is completed successfully and Packaging Corp. refinances with lower-cost debt, S&P said it will raise all of its ratings by one notch. The outlook will be stable.

If Packaging Corp. does not refinance, S&P will confirm affirm its existing ratings and the outlook will be positive.

These rating actions would reflect, to varying degrees, the strengthening of the company's financial profile that has occurred and is expected to continue, S&P said. As one of the lowest cost producers in the industry, even at the bottom of the cycle Packaging Corp. generates solid cash flows, which are expected to be used to repurchase shares, finance bolt-on acquisitions, and continue modestly reducing debt.

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