S&P rates Fairchild bank loan BB-

Standard & Poor's assigned a BB- rating to Fairchild Semiconductor International Inc.'s new senior secured bank loan and confirmed its BB- corporate credit and B subordinated note ratings.

The new $175 million revolving credit facility, undrawn at closing, replaces an undrawn $300 million facility and provides financial flexibility beyond the company's cash balances.

Ratings reflect a leveraged balance sheet, offsetting its good position in manufacturing medium-technology semiconductors and a moderate degree of diversity, S&P said.

The bank facility represents about 45% of debt on a fully drawn basis. Fairchild's cash balances of $660 million currently plus subordinated debt up to $250 million could be used to fund sizable acquisitions, which could present significant challenges to manage and integrate, potentially contributing to a default.

Free cash flows have been modestly positive in the past two years and liquidity is expected to be ample for operating purposes, S&P said. Still, a substantial amount of cash could be used for acquisitions, within limits stipulated in the bank facility.

The outlook is stable. Industry volatility and the potential challenges of Fairchild's acquisition program are expected to constrain ratings intermediately. Good operational performance in core businesses provides a good degree of downside protection.

The company's free cash flows have been modestly positive during the past two years, on largely flat sales, S&P noted. Debt had been over 5x EBITDA until the mid-2002 equity-based redemption of a note issue. Debt of $915 million at March 31, 2003, including capitalized operating leases, is consistent with the rating level, at about 3.5x last 12 months EBITDA.

S&P puts Dean Foods on positive watch

Standard & Poor's put Dean Foods Co. on CreditWatch positive including its senior secured debt at BB+ and preferred stock B+ and Dean Holding Co.'s senior unsecured debt at BB-.

S&P said the watch placement follows Dean's recent announcement that it would redeem the remaining approximately $300 million of trust convertible preferred securities.

In addition, over 99% of the holders of the previous two tranches of preferred securities - about $300 million - announced for redemption elected to convert to common stock.

The conversion of the first $300 million of preferred securities has improved credit protection measures, S&P noted. Furthermore, if the last tranche of preferred securities is converted to common stock, S&P anticipates that there would be further improvement in the company's financial profile, which given the firm's average business position could result in a one-notch upgrade.

S&P said it will meet with management to discuss the company's business strategy and financial policies to ascertain if they are commensurate with an investment-grade rating.

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