S&P cuts Penn Traffic, on watch

Standard & Poor's downgraded Penn Traffic Co. and put it on CreditWatch with negative implications including its $100 million 11% senior unsecured notes due 2009, cut to CCC- from B- and $205 million revolving credit facility due 2005, $40 million term loan A due 2005 and $75 million term loan B due 2006, cut to B- from BB-.

S&P said the action follows Penn Traffic's announcement that it has obtained a waiver and forebearance agreement with its bank lenders only until May 9. This waives events of default that would have arisen under the credit facility as of the end of the company's first fiscal quarter on May 3.

Penn Traffic is currently in negotiations to amend the credit facility by the May 9 deadline. If the company is unable to modify or amend its credit facility, it will be in default under the credit facility.

The bank facility was previously amended on Oct. 31, 2002, waiving any defaults or events of default relating to accounting misstatements and the restatement of the company's financial statements.

These rating actions also are based on recent weak operating trends which have reduced credit measures and liquidity, S&P said. Penn Traffic's operations have been negatively affected by the weakened economy, more selective consumer spending patterns, and increased promotional activity from competitors. As a result, same-store sales declined 2.4% and EBITDA declined to $10.8 million from $21.4 million in the third quarter of 2002.

S&P cuts Neenah Foundry to D

Standard & Poor's downgraded Neenah Foundry Co. including cutting its $20 million term A bank loan due 2003 and $125 million term B bank loan due 2005 to D from B- and total $282 million 11.125% senior subordinated notes due 2007 to D from CCC.

S&P said the action follows Neenah's announcement that it has commenced an offer to exchange its 11 1/8% subordinated notes for either cash or new subordinated notes.

The exchange would significantly impair the note holders relative to the par value of the instrument. In addition, Neenah did not make its interest payment on the notes on May 1.

The financial restructuring, which is expected to be completed no later than Sept. 30, 2003, will eliminate a significant amount of debt and reduce cash interest payments, which had become onerous over the past couple of years relative to cash flow, because of depressed conditions in the heavy-duty truck and general industrial markets, S&P said.

Moody's changes Samsonite outlook to developing

Moody's Investors Service revised its outlook on Samsonite Corp. to developing from negative and confirmed its ratings including its $70 million senior secured revolving credit facility due 2004, $35.2 million senior secured European term loan due 2004 and $46.2 million senior secured U.S. term loan due 2005 at B2, $322.8 million 10¾% senior subordinated notes due 2008 at Caa2 and $309.1 million 13 7/8% senior redeemable preferred stock due June 2010 at C.

Moody's said the action follows the company's announcement of a recapitalization agreement that could substantially reduce the company's debt and preferred stock obligations and refinance its current credit facility.

The rating outlook revision reflects the potential for upward rating pressure if the proposed recapitalization materially reduces the company's cash debt service obligations and if Samsonite can sustain the momentum in its operating improvements that were achieved in fiscal 2003, Moody's said.

Nonetheless, Moody's recognizes that if the recapitalization is not completed, Samsonite will need to address its debt maturities and capital structure issues. In addition, the company continues to face risks from the uncertain geopolitical environment and SARS outbreak, which could potentially erode its steady profitability gains since the quarter following September 11, 2001.

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