Roadway Faces Obstacles; Juno's Outlook Brightens

Roadway Corp.'s BBB corporate credit rating has been placed on watch with negative implications by Standard & Poor's. The outlook revision stems from concerns over Roadway's continuing economic softness and potential debt-financed acquisitions to expand subsidiary Roadway Next Day Corp. The Akron, Ohio-based company has a $150 million revolver and a $175 million term loan both due in 2006, and $225 million of 81/4% senior secured notes due in 2008. Roadway will be scheduling a meeting with S&P, and expects to resolve this in a satisfactory manner from their perspective, said Dawson Cunningham, executive v.p. and cfo of Roadway.

Despite additional volumes deflected from the September 2002 bankruptcy of light trucking competitor Consolidated Freightways, Roadway's June 5 report indicated that its earnings were substantially below expected levels. The entire industry has declined due to reduced tonnage levels resulting from the weak economy, higher wage and insurance costs, and waning used-equipment values. Also, at year-end 2002, Roadway's unfunded pension liability stood at about $145 million, an increase from a $23 million pension liability at year-end 2001. Its unfunded medical liabilities stood at $49 million. S&P attributed the trucking company's deteriorating funding status to weak investment portfolio performance, a lower discount rate, as well as ongoing benefits payments.

* Juno Lighting's rating outlook was raised to positive from stable by S&P due to the lighting fixture company's improving financial profile. This is exemplified by good profitability and limited fixed capital investment obligations allowing the firm to steadily generate free cash flow used primarily to reduce debt balances. S&P confirmed Juno's B+ corporate credit and B- subordinated debt ratings, and raised its senior secured bank loan rating to BB- from B+. The Des Plaines, Ill.-based company's senior secured bank loan rating was upgraded as a result of its continuing pay-down of the $40 million "A" and $50 million "B" loans, of which $34 million was outstanding at February 28. According to S&P, senior lenders can now anticipate a strong likelihood of complete recovery of principal in the event of a default or bankruptcy.