Moody's Investors Service has placed Atlanta-based Georgia-Pacific's Baa3 senior unsecured debt ratings and Prime-3 short-term rating for commercial paper under review for possible downgrade to the dismay of company officials. A junk-grade rating would push up borrowing costs for the company, afflicted by weak performance and higher than expected debt. But, Georgia-Pacific spokesman Greg Guest disagrees with the announcement. "Georgia-Pacific is disappointed with Moody's review and confused by the timing. Georgia-Pacific is ahead of the debt-retirement schedule and is in negotiations with Willamette. If the Willamette sale goes through the debt-retirement schedule would be ahead of time," he said. Georgia-Pacific believes the review has more to do with the climate and position of Moody's than the fundamentals of the business, Guest rejoined.
Moody's contends weakness in the company's packaging, building materials and paper businesses will continue over the near term, placing stress on debt-protection measures, inhibiting planned debt reduction. But Guest stated economists and analysts see an improvement in the core business. Moody's concerns over the negotiations to sell its buildings products business to Willamette are also confusing, he added. Georgia-Pacific's debt increased to around $16 billion with the acquisition of Fort James in late 2000. The existing ratings are based on the anticipation of asset sales to reduce debt to below $9.5 billion by mid to late 2003. While total debt is now at $12.4 billion, further debt reduction may be harder over the near term. According to Moody's, cash from operations is lower than previously anticipated and absent a significant asset sale, debt will be above the target level.
* Moody's, with a negative outlook, has lowered all of the ratings of restaurant retailer Captain D's, including the $135 million bank facility to B3 from B2, because of the delays in permanently refinancing the secured bank facility. In December, Standard & Poor's put the corporate credit rating at CCC, because with weeks until maturity on the credit, Captain D's had not yet refinanced. On Dec. 21, the bank syndicate agreed to a 90-day extension and the company has since said it intends to finalize a transaction resulting in repayment of the credit facility before the new maturity date. The negative rating outlook considers further delays in refinancing the bank loan and whether operations could be disrupted because of liquidity concerns. However, Moody's believes that the secured bank debt likely would achieve substantial recovery in a default scenario. Mike Payne, cfo, for Shoney's said Shoney's has been exploring strategic alternatives that delayed refinancing..
* Air Products and Chemicals' A3 long-term rating and Prime-2 commercial paper rating are on review for possible upgrade, while the ratings of Airgas, senior unsecured at Baa3 are on review for possible downgrade. Airgas has agreed to acquire the vast majority of Air Products' U.S. packaged gas business in a $236 million debt-financed acquisition. The combo of improving margins in chemicals and cash from asset disposals and moderating level of investments is likely to keep debt well below $2.5 billion, despite the weak economy. For Airgas, the transaction represents a strategic link-up that will likely improve long-term position, but will boost debt levels. Moody's review will focus on the company's ability to refocus as planned and the integration risk of the transaction. James Ely, spokesman, did not return calls.