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Moody's Lowers Ratings On Aavid Thermal, Phelps Dodge, TRW

11 Mar 2001

Moody's Investors Service lowered the rating to B3 from B2 on Aavid Thermal Technologies, Inc.'s $75 million guaranteed senior secured bank facility because of disappointing revenues over the last fiscal year. Net sales of $294 million from its business lines were modestly lower than the pro forma estimate for Aavid after adjusting its acquisition of the Thermalloy Group. The company's resulting debt to cash flow ratio of just over five times, based on $41 million adjusted earnings before interest, taxation, depreciation, and amortization, is in violation of the respective bank covenant.

The downgrade also factors in the softening in Aavid's computer and networking end use markets and the company's inability to compete effectively for a higher proportion of customer reference designs in its thermal products segment. Supporting the rating is Moody's confidence that changes are being implemented throughout the company's worldwide engineering, sales and marketing organizations. Aavid, headquartered in Concord, N.H., is the leading global provider of thermal management solutions for electronics products and the leading developer and marketer of CFD softer.

* Moody's downgraded the senior debt ratings of Phelps Dodge Corporation to Baa2 from A3 because of the company's weaker than anticipated operating performance as well as the erosion of the company's debt protection measurements and continued high leverage stemming from the acquisition of Cyprus Amax Minerals in late 1999. Phelps Dodge's operating performance during 2000 was adversely affected by a number of factors including higher energy costs, operational challenges caused by power interruptions and power curtailments, unusually heavy rain that affected production at the Morenci mine in the fourth quarter, and a significant drop in molybdenum prices, also in the fourth quarter. Supporting the rating is Moody's expectation that the company will continue to seek to manage this situation and identify savings that will offset higher energy costs. Headquartered in Phoenix, Ariz., Phelps.

* A rapidly deteriorating automotive market prompted Moody's to lower its rating of TRW Inc.'s senior unsecured debt rating to Baa2 from Baa1. Weakening end markets, particularly in North America, have resulted in the company's weakening financial results over the last half of 2000 as well as the prospects for continued operating challenges during 2001. The rating is supported by Moody's expectation that proceeds from additional asset sales will be applied to reducing debt. TRW, headquartered in Cleveland, Ohio, provides products and services with high technological content to the automotive and space and defense markets.

* NVR, Inc.'s $60 million unsecured bank facility was upgraded to Ba2 from Ba3 because of steadily growing revenues, which went from $869 million in 1994 to $2.3 billion in 2000. Its profitability has also increased from $17.3 million to $158 million during the same period. NVR accomplished this growth by capturing market share from its competitors in the Washington/Baltimore markets and expanding into new markets. The rating also notes that NVR has pursued an aggressive shareholder approach over the past few years. As of Sept. 30, 2000, NVR purchased a total of 935,000 shares of its common stock for an aggregate price of $53 million for 200, a strategy that weakens bondholder protection.

11 Mar 2001