S&P keeps Airborne on positive watch

Standard & Poor's said the ratings of Airborne Inc., including its BBB- senior secured and unsecured debt, will remain on positive watch following the acquisition of its ground operations by DHL Worldwide Express, a subsidiary of Deutsche Post A.G.

DHL acquired Airborne's ground operations for $21.25 a share, or a total equity value of $1.05 billion. Airborne's air operations were separated and are now an independent company called ABX Air Inc.

ABX is owned by Airborne's previous shareholders, who each received one share of ABX for each Airborne share.

The Airborne ratings reflect its position as the third-largest integrated package express carrier in the U.S. and a cost structure that is less capital-intensive and more variable than those of its competitors.

These factors are offset by recent subpar operating performance, which has weakened the financial profile, and long-term industry trends that favor larger, more diversified competitors.

Moody's revises Village Roadshow outlook to developing

Moody's Investors Service revised its outlook on Village Roadshow Ltd. to developing from stable including its subordinated debt at B2.

Moody's said the revision is in response to Village Roadshow's proposal to repurchase its non-redeemable non-cumulative preference shares, representing a principal and interest outlay over three years of A$352 million.

Approval from shareholders to repurchase the preference shares could have a negative impact on Village Roadshow's financial profile given additional demands on cash unless offset by greater certainty surrounding prospective cash flows to Village Roadshow's from film production including the Matrix series.

Moody's says that the proposed buyback value of approximately A$300 million for the preference shares is higher than the reported value of A$213 million as of June 30, 2002. The buyback also converts the perpetual nature of the preference shares into three-year debt repayment obligations.

Village Roadshow's management expects that total cash requirement of A$352 million will mainly be funded by projected operating cash flow and cash on hand.

Moody's however noted that a significant portion of the projected cash flow will be generated from the film production business which, in Moody's opinion, is less predictable and remains uncertain at this stage.

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