Moody's Investors Service has placed the ratings of Trumbull, Conn.-based Oxford Health Plans under review for possible upgrade based on a continuation of favorable financial performance and upstream dividend capabilities, primarily from the New York subsidiaries. The senior secured bank facilities are rated Ba3. Moody's also notes a growth in membership exceeding earlier expectations. Oxford Health is a managed care company providing health benefits programs to approximately 1.5 million members in the New York metropolitan market. The company's debt levels are low and dividend capabilities relatively favorable to the debt, according to Moody's. The rating agencies will consider the company's strategy for both membership and shareholder growth, including possible acquisition activity. Calls to spokeswoman Maria Gordon Shydlo were not returned.
*Standard & Poor's has placed the B+ rating on Romacorp and Roma Restaurant Holdings senior secured bank loan on credit watch with negative implications based on the company's ability to amend the terms of the credit agreement before the end of March 2002. Dallas-based Romacorp operates and franchises the Tony Roma's restaurants. Romacorp has announced it does not anticipate it will be in compliance with the amended terms of its credit agreement, which requires consolidated EBITDA of $15 million and an interest coverage ratio of 1.7 times. The company previously amended the agreement to lower the coverage ratio and reduce the consolidated EBITDA figure last year, but the terms have been reinstated to the previous higher levels.
Credit measures have deteriorated partly due to weakness in the company's markets that are sensitive to fluctuations in tourism. More than one-third of company-owned restaurants are located in Florida and Las Vegas. In addition, operating margins decreased to 13.4% from 14.1% resulting from a significant increase in the cost of baby-back ribs, which account for 25% of the sales of the company.
* Moody's has downgraded Neenah Foundry Company's ratings, including the $50 million revolver and $195 million in term loans from B1 to Caa1. Wis.-based Neenah is a manufacturer of metal castings and forgings for the industrial, municipal and consumer markets. A decline in operating performance and debt protection measures caused the downgrade with the sharp fall off in the golf club markets also hitting hard. The business is characterized by high operating leverage making it tough to absorb overhead costs and still run the plants effectively in the face of much lower production volumes.
Neenah has rising leverage and is facing near-term liquidity issues with the revolver maturing in March, according to Moody's. Future events that could result in a further decline include failure of the company to extend the revolver, failure to honor subordinated debt payments and failure to generate enough cash to service the investment and financing requirements. The rating could rise though if Neenah exits unprofitable markets or has sufficiently reduced its cost structure related to those markets. A large debt load was put in place following a 1997 LBO along with heavy plant modernization efforts and acquisition activity.