January 4, 2003

S&P lowers ACL ratings
Standard & Poor's Ratings Services announced January 2 that it had lowered its ratings on American Commercial Lines LLC (ACL). The corporate credit rating was lowered to 'SD' (selective default) from 'CCC+'; the senior secured bank facility rating was lowered to 'CCC+' from 'B-'; the senior unsecured debt rating was lowered to 'D' from 'CCC-'; and the subordinated debt rating was lowered to 'CC' from 'CCC-'.

The corporate credit rating and senior unsecured debt rating have been removed from CreditWatch, where they were placed on Nov. 14, 2002. The bank loan rating and subordinated debt rating remain on CreditWatch with negative implications.

The rating actions follow ACL's failure to make the Dec. 31, 2002, interest payment due on its senior notes and an identifiable risk of default on other debt obligations over the near term as the company considers financial restructuring alternatives.

The Jeffersonville, Ind.-based company has about $810 million of lease-adjusted debt, says Standard & Poor's.

"The rating actions reflect the default on the senior notes, ACL's severely constrained liquidity position, and a heightened risk of default on other debt obligations over the near term," said Standard & Poor's credit analyst Lisa Jenkins.

ACL has the largest dry bulk barge fleet and the second-largest tank barge fleet in the U.S. ACL's Jeffboat subsidiary designs and manufactures barges and tugboats.

Poor weather conditions and the economic downturn have negatively affected ACL's earnings over the past few years, says Standard & Poor's, which notes that ACL was recapitalized in 1998, "leaving it with an onerous debt burden."

Although ACL was acquired by New York, N.Y.-based Danielson Holding Corp. in 2002 and recapitalized again in conjunction with the acquisition, it is still highly levered, says Standard & Poor's. Debt/EBITDA is currently estimated to be over 8x.

The company's heavy debt burden is making it especially vulnerable to current industry pressures, according to Standard & Poor's. ACL recently reported that its EBITDA for the first nine months of 2002 was $39.5 million, a decline of $38.8 million from the comparable period of 2001. (The $78.3 million in reported EBITDA for the first nine months of 2001 included $18.8 million of gains on property dispositions.)

Standard & Poor's will says it will monitor the status of restructuring initiatives. If it appears that existing creditors will be impaired (a scenario which Standard & Poor's would view as tantamount to a default) or if the company actually defaults under its bank credit agreements, ratings that remain on CreditWatch will be lowered.

American Commercial Lines announced December 31, 2002 that, as required under its senior credit facility, it had submitted a financial restructuring plan to its senior lenders on December 27, 2002. ACL has been in discussions with its lenders to explore financial restructuring alternatives.

"While discussions are ongoing," ACL said it had "elected not to make interest payments and utilize the 30-day grace period with respect to the $7.7 million interest payment due on its 11-1/4 percent senior notes and the $0.3 million interest payment due on its 10-1/4 percent senior notes. These interest payments were scheduled for December 31, 2002."

To "assist in evaluating its financial restructuring alternatives," ACL has retained Richard Weingarten & Company, Inc. and Huron Consulting Group.

Danielson Holding Corporation, ACL's parent, has formed a special committee of its board of directors to consider the financial restructuring of ACL. The DHC special committee has retained Credit Suisse First Boston as its financial advisor and Pillsbury Winthrop LLP as special legal counsel


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