Tesoro Rises From Junk; Six Flags Loans Hold On Negative Watch

Standard & Poor's has raised the senior secured debt rating on Tesoro Petroleum Corp. to BBB- from BB. "The upgrade reflects the marked improvement in Tesoro's financial profile since 2002 when the company completed the second of two heavily debt-financed acquisitions," said S&P credit analyst John Thieroff.

Management has displayed an almost single-minded focus in its effort to reduce debt, he added. This has been done through asset sales, capital discretion, cost reductions, and more recently, abundant cash flow. Tesoro has a $650 million revolver. Scott Spendlove, v.p. of finance and treasurer of the oil refiner and marketer, did not return calls.

* Six Flags' bank debt levels have stayed above par, despite weak operating performance in the second quarter and S&P's announcement that it has placed the company's B+ corporate credit ratings on watch with negative implications. Lehman Brothers leads the $730 million "B" loan, which was quoted at 100 1/4-101 by Mark-It Partners/LoanX. The theme-park operators' 9 3/4% bonds have dropped from par to 94 and the 9 1/2% notes have slipped to 94-96 from 102-103. Jim Dannhauser, Six Flags' cfo, did not return calls.

According to S&P, an anticipated improvement in credit measures is unlikely to materialize given the weak first-half operating performance. EBITDA was down 7% in the three months ended June 30 reflecting a 4% fall in June attendance, S&P states. The agency also has some longer-term concerns over underinvestment in rides and attractions. Discretionary cash flow has been minimal during the past three years despite reduced capital spending, S&P states. The company plans to further reduce capital spending in 2004 to roughly $75 million from $113 million in 2003. The company has stated that it expects to remain in compliance with all covenants in its credit agreements.