Fitch Ratings affirmed Tenneco Automotive's senior secured bank debt at B+ as the company focused on managing its cash and cutting its working capital needs in the midst of a difficult environment for auto-part companies. "Last year they did well to generate cash by focusing on the working capital base," said Scott Lee, Fitch analyst. He noted that debt on the company's balance sheet declined by $12 million relative to last year. "On top of that their cash balances increased and they have ample liquidity in their revolver and cash on hand," he added.
The company faces a difficult environment of lower vehicle build rates in its North American market and Lee expects the rate to remain flat or even to drop over the next year. Calls to Mark McCollum, senior v.p. and cfo, were not returned by press time.
*Standard and Poor's has changedClear Channel Communications' BBB- credit outlook to negative citing a recession in advertising, heavy capital expenditure, acquisition related debt, and investment spending as factors hurting the company's credit measures. "It's just weakness relative to where we would like to have the credit ratios," said Eric Geil, S&P analyst.
In addition, the company's credit agreement stipulates that by June 30, 2003 the permitted leverage ratio steps down from 5.5 times to 5 times debt to EBITDA and at the end of 2001 the company's leverage ratio was almost 5 times. S&P would like more of a cushion in case the advertising slump does not recover as expected in the second half of 2002 and has set a 4.25 times debt to EBITDA ratio target for the investment-grade company. Geil did not anticipate that the company would violate its covenants. "They value their bank access and credit market access and are committed to staying in compliance," he said.
The company is currently generating free cash flow and has decreased its fixed cost, which puts it in a great position to see a rebound in cash flow if the advertising recession lifts, said Geil. Randall Mays, company executive v.p. and cfo, said that the company is taking positive steps to change its outlook back to stable, such as focusing its free cash flow on paying down debt.
*Moody's Investors Service has placed the United Artists Theatre Company, including its B3-rated $250 million senior secured loan, on review for a potential upgrade as the company combines with Regal Cinemas and Edward Theatres to create the Regal Entertainment Group. United Artists would benefit from the higher operating margins that Regal Cinemas already enjoys, said Russell Solomon, Moody's analyst. The paring down of overhead costs would come from better lease agreements, lower rental costs from studios, and the purchase of the concessions in bulk. "Economies of scale would be bigger right off the bat," said Solomon, adding, "The savings are very material."
Calls to company officials, were not returned by press time.