Moody's Investors Service upgraded Enterprise Products Operating L.P.'s senior unsecured debt ratings to Baa2 from Baa3, reflecting the increased scale of operations and strong market position in the Gulf Coast region. Enterprise's operating capabilities and growth opportunities have been significantly enhanced by the recent acquisitions of Acadian Gas and interests in four Gulf of Mexico natural gas pipelines.
A key element of Enterprise's strategy is to increase the fee-based portion of its revenue base. Going forward, the company expects its cash flows derived from fee-based businesses to be 75% to 80% of total cash flow, which should add an element of stability to Enterprise's future earnings.
* Moody's downgraded the rating of Alaris Medical Systems' $180 million senior secured credit facility to B2 from B1, due to deterioration in Alaris' credit profile and performance through fiscal year 2000. The company's growth has been hurt by competitive and cost containment pressures in recent years. Alaris, headquartered in San Diego, Calif., is a leading provider of infusion systems and patient monitoring products.
As a result, EBITDA has fallen from a high of $94 million in 1998 to $80 million in 2000. The company also publicly states that EBITDA for 2001 will fall further to a range of $74 million to $77 million.
* L-3 Communications Holdings' $300 million senior secured revolving credit facility was upgraded to Ba2 from Ba3 due to a successful public offering of $6.9 million shares of the company's common stock. Moody's notes that the completion of this transaction significantly strengthened the company's equity position by adding about $354 million to the equity base, bringing it over the $1 billion threshold to about $1.1 billion. However, the rating is tempered by the company's high potential for further debt-financed acquisitions using the undrawn portions of the bank facilities and its substantial levels of goodwill and of contracts-in-progress.
* Moody's downgraded Numatics Inc's $70 million senior secured credit facility to B2 from Ba3, reflecting poor financial results and limited financial flexibility. According to the rating, the company has been negatively impacted by a general economic slowdown in North America, changes in product mix, and lower fixed-cost absorption as a result of lower volume. Numatics, located in Highland, Mich., is a leading manufacturer of four-way pneumatic valves.
The company noted in its annual report that it was in default on several bank financial covenants. In March, the lenders agreed to amend the facility to waive past defaults, establish new financial covenants and accelerate the maturity of the facility to 2002.