Moody's upgrades Domino's ratings

Moody's Investors Service upgraded all of Domino's Inc.'s ratings including its $474 million bank facility to Ba3 from B1, $256 million 10 3/8% senior subordinates notes due 2009 to B2 from B3, senior implied to Ba3 from B1 and issuer rating to B1 from B2. The outlook is stable.

The upgrade reflects the "steady improvements in operating performance, and our belief that continued strong operating performance will lead to further leverage improvement," Moody's said.

Negative factors reflected in the ratings include leverage, amount of debt service payments compared to free cash flow, and competitiveness of the sector, Moody's said.

Positive factors influencing the ratings include the company's well-recognized trade name, expected growth of the segment, the diversity of revenue inflows, simple business model that requires franchisees to invest their own capital and steady royalty revenue, Moody's said.

The stable outlook reflects Moody's expectation that the company will continue improving operations and paying down debt.

The bank loan, consisting of a $100 million revolver, a $126 million term A, a $124 million term B and a $124 million term C, is secured by a first priority lien on basically all of the company's assets. At the end of the first quarter of 2002, there were no borrowings outstanding on the revolver. Required term loan amortization of $5 million per quarter in 2001 grows to $9 million per quarter in 2002 and $12 million per quarter in 2003.

EBITDA covered cash interest expense by 2.9 times for the twelve months ending March 2002 versus 2.6 times for fiscal 2001 and 2.1 times for fiscal 2000. For the twelve months ending March 2002, lease adjusted debt equaled 4.3 times EBITDAR compared to 4.6 times and 5.2 times for fiscal 2001 and fiscal 1999, respectively.

Moody's cuts Ormet

Moody's Investors Service downgraded Ormet Corp. including cutting its $150 million of 11% guaranteed senior secured notes due 2008 and $75 million guaranteed senior secured floating rate term loan due 2008 to Caa1 from B3. Moody's also withdrew the B1 rating for Ormet's $100 million senior secured revolving credit facility as it was replaced with a new, unrated $160 million credit facility due 2005 secured by receivables, inventory and fixed assets of Ormet and its subsidiaries. The outlook is stable.

Moody's said the downgraded is in response to Ormet's weak cash flow in an environment of low aluminum prices and demand, which has resulted in very high leverage relative to cash flow. In addition, Moody's expects cash flow will remain relatively weak over the near term.

In each of the last three years, Ormet has had operating losses and EBITDA has not covered interest expense and capex, the rating agency noted.

This is also likely to be the case in 2002, although Moody's said it expects Ormet's financial results to improve in the second half of the year.

While the company's debt, including usage under the accounts receivable facility, has been fairly stable over the last two years, declining cash flow has pushed its ratio of debt to EBITDA to 14 times, Moody's said.

S&P takes Rural/Metro off watch

Standard & Poor's removed Rural/Metro Corp. from CreditWatch with negative implications and confirmed the ratings including its $150 million 7.875% senior notes due 2008 and $200 million unsecured revolving credit facility due 2003, both rated CCC. The outlook is negative. The ratings were put on CreditWatch on Jan. 27, 2000.

S&P said the action reflects Rural/Metro's improving but still weak financial performance and cash flow and its ability to remain current on its required debt payments.

The original CreditWatch action was in response to S&P's ongoing concern about the company's liquidity position and uncertainty regarding the eventual resolution of noncompliance with the financial covenants in its bank agreement.

Those risks are considered to be adequately reflected in the new ratings and outlook, S&P said.

S&P noted Rural/Metro has experienced weak operating performance and limited financial flexibility due to reimbursement pressures, poor receivable collections and turmoil in Argentina.

Extensive efforts to improve its portfolio of service contracts, operating efficiency, and cash collections have had a positive impact, S&P noted.

S&P cuts Pinnacle Holdings to D

Standard & Poor's lowered the senior unsecured debt rating on wireless tower operator Pinnacle Holdings Inc. to D from C due to the company's Chapter 11 bankruptcy filing.

The senior secured bank loan rating on subsidiary Pinnacle Towers Inc. was also lowered to D from CC.

The corporate credit rating on Pinnacle Holdings was lowered to D on March 21, following the company's missed March 15 interest payment on its 5.5% convertible subordinated notes due 2007.

S&P says Jordan unchanged

Standard & Poor's said Jordan Industries Inc.'s announcement it purchased $110 million principal amount of its $214 million 11.75% senior subordinated debentures due 2009 has no effect on the company's credit rating of B- or negative outlook.

Although the transaction cuts net debt by $84 million and will lower future cash interest payments by $11 million annually, debt leverage remains very aggressive and liquidity limited, S&P said.

Moody's puts James Cable on review

Moody's Investors Service put James Cable Partners, LP on review for possible downgrade including its $88 million 10¾% senior unsecured notes due 2004 at Caa2.

Moody's said the review follows a period of heightened concern about the company's questionable ability to meet its near-term financial obligations and remain viable over the medium-to-longer term.

Specifically, Moody's said it believes the company will have difficulty making its upcoming coupon payment due in August in the absence of assistance from some alternative outside funding source.

Liquidity remains very tight at present, and cash flow continues to decline along with subscribers as top line growth fails to keep pace with higher operating expenses, Moody's said.

Compliance with last year's revised financial maintenance covenants under the redone and no longer rated bank credit facility is also anticipated to be very tight and potentially suspect both at present and over the ensuing rating horizon, Moody's added.

S&P cuts WKI loan

Standard & Poor's cut WKI Holding Co. Inc.'s senior secured bank loan rating to D from CC following its Chapter 11 bankruptcy filing.

The corporate credit and subordinated debt ratings were lowered to D on May 2 because the company did not make an interest payment on its subordinated notes due on that day.

Moody's cuts Wickes

Moody's Investors Service downgraded Wickes Inc. including lowering its $236 million secured revolving credit facility due 2005 to Caa1 from B1 and its $64 million 11.625% senior subordinated notes due 2003 to Ca from Caa1. The outlook is negative.

Moody's said the downgrade and negative outlook reflect Wickes' aggressive debt leverage, thin interest coverage, tight liquidity and weak free cash flow generation and the fact that the unfavorable trends in these credit measures have lasted longer than expected. The ratings further reflect the sluggish revenue growth and essentially flat (but volatile) earnings progression of the past five years.

However Moody's noted Wickes has made some progress in recent months.

For the first quarter ended March 30, 2002, the company registered flat sales of $185 million but same store sales growth of 5.1% compared to the first quarter of 2001, the rating agency said. This was accomplished with 700 fewer employees, an inventory position that was reduced by $26 million (20%), an accounts receivable balance reduced by $7.1 million (8.8%), and total debt that decreased by $26 million.

As a result of this restructuring and close attention to managing its working capital, the company was able to post a positive $4.3 million swing in EBITDA versus the first quarter of 2001, Moody's said.

However Moody's added: "This type of improvement must be maintained going forward and the top line needs to begin showing growth before the negative rating outlook can be lifted."

Moody's rates Boyd's bank loan Ba1

Moody's Investors Service assigned a rating of Ba1 to Boyd Gaming Corp.'s $500 million second amended and restated credit facility. The loan consists of a $400 million senior secured revolver due 2007 and a $100 million senior secured term due 2008.

In addition, Moody's confirmed the company's existing ratings including its $200 million 9¼% senior notes due 2003 and $200 million 9.25% senior notes due 2009 at Ba3; $250 million 9½% senior subordinated notes due 2007 and $250 million 8.75% senior subordinated notes due 2012 at B1; senior implied rating at Ba2 and long-term senior unsecured issuer rating at Ba3. The outlook remains negative.

"The ratings confirmation acknowledges the company's continued positive operating results and de-leveraging effort," Moody's said. "At the same time, the ratings take into account that Boyd is responsible for all cost overruns related to the Borgata project which is still under construction and expected to open in the summer of 2003. Currently, construction of the Borgata is on time and on budget."

The company's debt to EBIDTA was 4.8 times for the 12 month period ending March 31.

Moody's lowers Atlas Air

Moody's Investors Service downgraded Atlas Air, Inc., affecting $1.9 billion of debt. The company's various enhanced equipment trust certificates were lowered one notch, its $140 million secured aircraft revolver/term loan due 2005 to Ba2 from Ba1 and its $137.5 million 10¾% senior unsecured notes due 2005, $153 million 9¼% senior unsecured notes due 2008 and $147 million 9 3/8% senior unsecured notes due 2006 to B2 from B1. The outlook is negative.

The negative outlook reflects the uncertainty and vulnerability of Atlas Air's performance compounded by the possibility of a pilots strike following the National Mediation Boards' release of the airline and its pilots and engineers from mediated negotiations upon the union's rejection of binding arbitration, Moody's said.

An uneconomic settlement and/or an extended strike, would result in a further ratings downgrade, Moody's said.

Moody's said the downgrade is in response to an increase in Atlas Air's financial risk profile due to the weakened global economy and the attendant reduction in the company's cash flow.

Atlas Air experienced a 17.4% reduction in block hours in 2001 as the industry experienced the worst air cargo year on record with total world traffic estimated down about 9.7%, Moody's noted. Atlas Air's first quarter 2002 block hours declined 22.1% from the first quarter of 2001; industry-wide international airfreight volume was down 12.8% for the period.

The downgrade recognizes the company's current excess lift capacity situation and the challenges of placing into revenue service aircraft coming off-contract this year from three ACMI customers and four new B747-400Fs scheduled for delivery (three in 2002 and one late-2003), the rating agency said.

Atlas Air continues to be highly leveraged both on and off balance sheet and is expected to see further increases due to the new deliveries. Lease adjusted debt to EBITDAR as of YE2001 stood at 7.1x (compared to 4.1x as of YE2000) with adjusted debt to capitalization at 82%, Moody's said.

S&P raises some Hercules notes

Standard & Poor's upgraded the senior unsecured notes of Hercules Inc. and confirmed its other ratings and removed them from CreditWatch with positive implications. The outlook is positive. Ratings affected include Hercules' $400 million 11.125% senior notes due 2007, raised to BB- from B+, its $125 million 6.625% senior secured notes due 2003, $100 million 6.6% notes due 2027 and $200 million revolver due 2003, all confirmed at BB, and Hercules Trust I's $350 million 9.42% trust originated preferred securities and Hercules Trust II's $350 million preferred securities, confirmed at B.

S&P said the actions follow the completion of Hercules' sale of the Water Treatment business of its BetzDearborn Division to GE Specialty Materials for $1.8 billion in cash (after-tax proceeds $1.665

billion).

As anticipated, the proceeds have been used to substantially reduce debt, thereby improving the financial profile and eliminating concerns about near-term debt maturities and constrained liquidity due to financial covenant pressures, S&P said.

S&P said it believes the transaction will largely complete management's proactive strategic review of the business portfolio, thereby reducing the prospects for further M&A activity and uncertainty in the ratings.

The ratings on the senior unsecured notes have been raised to one notch below the corporate credit rating to reflect the note holders' improved recovery prospects in a default scenario following the reduction of a substantial portion of the secured bank debt, S&P said.

S&P puts Ispat on positive watch

Standard & Poor's put Ispat International NV on CreditWatch with positive implications and confirmed its ratings. The company was previously on CreditWatch with developing implications.

Ratings affected include Ispat Europe Group SA's €150 million 11.875% notes due 2011, Ispat Inland Inc.'s 7.9% first mortgage bonds due 2007, Ispat Inland LP's $850 million senior secured credit facility and Ispat Sidbec Inc.'s $400 million senior secured credit facility, all rated CCC+.

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