Cable Co. Downgraded On Bond Call; Stericycle Cleans Up

Moody's Investors Service has downgraded Susquehanna Media's recently closed $600 million senior secured credit facility one notch to Ba2 following the redemption of $150 million of bonds with bank debt. "This is more of a technical downgrade that reflects a change in the capital structure," said Christina Padgett, v.p. and senior credit officer with Moody's. Susquehanna is a subsidiary of Susquehanna Pfaltzgraff.

The credit facility, which closed last month, is led by Wachovia Securities with Bank of America as syndication agent. The debt consists of a $250 million "B" loan and $200 million revolver. There is also a $150 million delayed-draw "A" loan. The cable and radio broadcasting company used the new facility to purchase a cable system in Carmel, N.Y. from RCN Corp. for $120 million, refinance existing bank debt and fund the call of the 81/2% notes.

The redemption of the bonds will not occur until May and Susquehanna will not draw the term loan until the call date. Following the debt redemption more than 75% of the debt capital structure will be senior secured. The downgrade reflects a higher proportion of senior secured debt than contemplated when the original ratings were assigned. John Finlayson, Susquehanna Pfaltzgraff's cfo, declined comment.

* Medical waste management company Stericycle's improved financial performance and continued debt reduction have led Standard & Poor's to raise the senior secured bank loan rating to BB+ from BB. Stericycle has consistently grown its revenues and improved its operating efficiency and profitability over the last two years, according to Paul Blake, an S&P credit analyst. "They have excellent financial fundamentals and have consistently reduced debt," he said. Operating profit margins have been above 30% and increasing cash flow generation allowed the company to reduce debt by approximately $60 million in both 2002 and 2003.

According to S&P, industrywide cost reduction pressures have increased the amount of outsourcing by hospitals. Also broader regulatory awareness and compliance issues in the medical waste industry have raised the company's market acceptance. But there are still challenges, including a highly competitive environment in a relatively small industry and pricing pressures in the midst of healthcare cost-containment efforts. A Stericycle spokesperson did not return calls.