Moody's cuts American Restaurant

Moody's Investors Service downgraded American Restaurant Group, Inc. including cutting its $161.8 million senior secured notes due 2006 to Caa2 from B3 and $77.4 million 15.0% PIK preferred stock due August 2003 to C from Caa3. The outlook is negative.

Moody's said the action is because of its expectation that American Restaurant will not have the liquidity resources to make future coupon payments on the senior secured notes, as well as the adverse effects of extremely poor sales.

Moody's withdrew the ratings on the 14.0% senior discount debentures due 2005 issued by American Restaurant Group Holdings, Inc. because of the highly concentrated debenture ownership, lack of ongoing financial information from Holdings and Moody's opinion that recovery value is minimal.

Based on Moody's assumption that the company likely cannot make future interest payments, the ratings recognize that senior secured noteholders and preferred equity investors would suffer losses following a default.

Moody's believes that negative trends for sales will cause further declines in franchise value. The limited ability to buffer volatile commodity food costs or demand for beef because of the company's identification as a steakhouse and the significant revenue correlation with economic conditions in California also impact the rating agency's view of the risks facing the company.

The negative outlook reflects Moody's opinion that franchise value will continue to decline given the unresolved operating challenges facing the company, the need to arrange certain access to adequate sources of liquidity, and the uncertainty of maintaining the confidence of important constituencies such as customers and vendors. Furthermore, to ensure the long-term relevance of ARG/Black Angus in spite of stiff competition from other much larger casual-dining competitors, Moody's believes that the company must find the resources to make substantial capital investments over the next several years.

Moody's confirms Tranz Rail

Moody's Investors Service confirmed Tranz Rail Ltd.'s of Tranz Rail Finance Ltd. Passthrough certificates series 1996 at Caa1, concluding a review begun on May 20. The outlook remains negative.

Moody's said the confirmation follows RailAmerica's announcement that it will not pursue its previously announced proposed tender offer for the equity securities of Tranz Rail.

Fitch upgrades Fremont General

Fitch Ratings upgraded Fremont General Corp.'s senior debt to CCC+ from CCC- and revised the outlook to stable from evolving. Fremont General Financing I's trust preferred securities remain at CC.

Fitch noted that Fremont has used excess cash flows generated by its remaining subsidiary, Fremont Investment and Loan, a California-chartered industrial bank, to repurchase its senior debt in the open market. The amount of senior debt outstanding has declined considerably, to $213 million currently from $260 million at year-end 2002 and $425 million when originated in 1999. Trust preferred securities outstanding remain at $100 million.

Expected future cash contributions by Fremont for its discontinued insurance operations have been capped by an agreement with the California Department of Insurance. The maximum contribution amount under this agreement is $13.25 million per year for the next six years, totaling $79.25 million. Fremont has accrued and expensed the present value of this amount. Due to the decline in the senior debt levels outstanding, the establishment of a maximum for future insurance cash contributions, and strong recent profitability at Fremont Investment and Loan, Fitch believes that the pressure on Fremont has abated somewhat. Default risk, while less imminent, remains possible.

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