Moody's puts United Defense on upgrade review

Moody's Investors Service put United Defense Industries, Inc. on review for possible upgrade including its $200 million senior secured revolving credit facility due 2007, $95 million senior secured term loan A due 2007 and $495 million senior secured term loan B due 2009 at Ba3.

Moody's said the review was prompted by recent strong operating performance in a very favorable defense contracting environment, successful integration and contribution from its US Marine Repair subsidiary and mitigation of concerns regarding the loss of revenue associated with the Crusader program (canceled in 2002), all of which have significantly improved the company's intermediate term credit fundamentals.

For the six months through June 2003 the company's revenue and EBITDA increased to $1.02 billion and $139 million, respectively, from $675 million and $64 million in the same period in 2002. The most significant contribution to growth came from the July 2002 US Marine Repair acquisition, which provided $241 million in six months sales alone, enhanced by the increased amount of shipyard work in advance of U.S. naval fleet deployment, Moody's said.

As a result, the company's credit metrics have improved substantially: debt to trailing 12 months EBITDA at June 2003 has improved to 1.9x from 2.6x as of year-end 2002; EBIT-to-interest improved to 7.4x from 5.6x, Moody's said.

Moody's cuts ANP Funding to junk

Moody's Investors Service downgraded ANP Funding I, LLC's syndicated bank loan to Ba3 from Baa3, ending a review begun on Jan. 31. The outlook is negative.

Moody's said the action reflects the poor outlook for wholesale power markets in Texas (ERCOT) and New England (NEPOOL), where the company's assets are located.

With a generating fleet that primarily operates on a merchant basis, ANP has substantial exposure to future movements in natural gas and power prices.

The combination of substantial excess generating capacity and high natural gas prices have resulted in poor margins for gas fired merchant plants. As a result, ANP Funding's cash from operations has been significantly below expectations. Liquidated damages from contractor Alstom have helped to support the company but these payments are now diminishing.

Moody's expects that wholesale prices and spark spreads are likely to continue to show weakness in ERCOT, the market where ANP Funding has the majority of its generating assets.

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