Dairy Co. May Need Relief; Automotive Co. Sputters

* Moody's Investors Service has downgraded the bank loan ratings of National Dairy Holdings (NDH) to B1 from Ba2. The cushion under the leverage covenant in NDH's credit facilities is thin, and the company may require covenant relief from its banks, according to Moody's.Wachovia Securities is the lead arranger of NDH's bank debt, which consists of a $125 million revolver, a $103.75 million "A" loan and a $171.94 million "B" loan. Teresa Webb, cfo, referred questions to another NDH official, who did not return calls. A Wachovia spokeswoman declined comment.

The downgrade is due to weak operating performance, continued acquisitions and the repurchase of equity from former owners, Moody's notes. The ratings were left under review for possible further downgrade depending on finalization of the company's operating profile and capital structure in connection with the planned sale of assets to NDH's majority owner--Dairy Farmers of America. While closing of the Dairy Farmers transaction would probably require a significant amendment or refinancing of existing bank credit facilities, it remains unclear when or if that transaction will close, Moody's concludes.

* Weak operating performance due to intense industry pressures and operating inefficiencies have led Standard & Poor's to downgrade Tower Automotive's subsidiary R.J. Tower Corp.'s bank debt from BB to B+. The company is generating sizable negative free cash flow and credit measures, S&P notes. The company faces risks associated with the high fixed-cost and capital-intensive nature of its business, ongoing pricing pressures, cyclical demand and well-positioned, financially stronger competitors, S&P adds. A Tower spokeswoman did not return calls.

Debt maturities are heavy with upcoming scheduled repayments on Tower's $240 million term loan of $77.5 million in 2005 and $162.5 million in 2006. Tower produces assemblies and modules for automotive manufacturers.