Moody's Investors Service upgraded the rating on Beazer Homes USA's $250 million unsecured revolving credit facility to Ba2 from Ba3 because of strong revenue and earnings growth. During the three-year period from 1997 to 2000, Beazer's revenues grew by 79% to $1.53 billion, EBITDA increased by 200% to $106 million and net income rose by 290% to $43.6 billion.
Constraining the ratings going forward is the company's lower margins and returns compared to those of its peers. Additionally, the rating is offset by a significant acquisition the company made before any material progress is made in deleveraging the balance sheet, difficulty in integrating Sanford Homes, and relatively poorer performance than its peers during an industry turn. David Weiss, cfo, was traveling and could not be reached for comment. A spokesperson was also not available.
* Moody's upgraded the senior debt of Packaging Corporation of America to Baa3 from Ba1 due to significant progress in debt reduction. In total, using proceeds of asset sales and cash from operations, the company has reduced debt over the past 18 months by approximately $500 million, which represents a nearly 40% decrease in total outstanding debt. Approximately $1 billion in debt is affected by the upgrade.
But, the ratings are stressed by reliance on a single product in a cyclical industry. Small changes in the pricing of container board can have a significant impact on the company's earnings, cash flow, and debt protection measurements. Rick West, cfo, declined to comment.
* Intermedia Communications' $3 billion in debt was upgraded to Baa3 from B3 due to its recent acquisition by WorldCom. The upgrade reflects the indirect benefits to Intermedia security holders resulting from the new ownership structure as well as the $7 billion junior preferred stock issued by Intermedia to WorldCom.
The transaction allows Intermedia to avoid a default under certain indentures which preclude its merger unless it meets certain debt to market capitalization tests. Calls to Robert Manning, cfo of Intermedia, were referred to Scott Sullivan, cfo of WorldCom, who did not return them by press time.
* Mattress Discounters' $20 million revolver was downgraded to B3 from B2 due to continuing violations of its bank covenants. According to the Moody's rating, the most recent waiver expired on July 10, so the banks could demand repayment of the fully drawn credit facility at any time.
The company has an immediate need for additional capital while it makes changes to its operating model. Supporting the rating are steps the company's taking to improve operating performance. Calls to the company's financial headquarters were not returned by press time. Calls were referred to Barbara Schechter, vp of marketing and sales, who declined to comment.