EXHIBIT 99.1
Danielson Holding Corporation and Covanta Energy Corporation
Announce Release of Ratings by Moody's Investors Service
CHICAGO, IL and FAIRFIELD, NJ - May 28, 2004 - Danielson Holding Corporation
(Amex:DHC) and its subsidiary Covanta Energy Corporation today announced that
Moody's Investors Service issued a corporate ratings credit rating for Covanta's
8.25% Senior Notes and issuer ratings. The ratings are described in the attached
press release issued by Moody's Investors Service.
Danielson Holding Corporation is an American Stock Exchange listed company,
engaging in the energy, financial services and specialty insurance business
through its subsidiaries. Danielson's charter contains restrictions that
prohibit parties from acquiring 5% or more of Danielson's common stock without
its prior consent.
Danielson recently acquired Covanta Energy Corporation, an internationally
recognized owner and operator of power generation projects. Covanta's
waste-to-energy facilities convert municipal solid waste into energy for
numerous communities, predominantly in the United States. Covanta also operates
water and wastewater treatment facilities.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements in this press release may constitute "forward-looking"
statements as defined in Section 27A of the Securities Act of 1933 (the
"Securities Act"), Section 21E of the Securities Exchange Act of 1934 (the
"Exchange Act"), the Private Securities Litigation Reform Act of 1995 (the
"PSLRA") or in releases made by the Securities and Exchange Commission, all as
may be amended from time to time. Such forward looking statements involve known
and unknown risks, uncertainties and other important factors that could cause
the actual results, performance or achievements of Danielson and its
subsidiaries, or industry results, to differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Statements that are not historical fact are forward-looking
statements. Forward looking statements can be identified by, among other things,
the use of forward-looking language, such as the words "plan", "believe",
"expect", "anticipate", "intend", "estimate", "project", "may", "will", "would",
"could", "should", "seeks", or "scheduled to", or other similar words, or the
negative of these terms or other variations of these terms or comparable
language, or by discussion of strategy or intentions. These cautionary
statements are being made pursuant to the Securities Act, the Exchange Act and
the PSLRA with the intention of obtaining the benefits of the "safe harbor"
provisions of such laws. Danielson cautions investors that any forward-looking
statements made by Danielson are not guarantees or indicative of future
performance. Important assumptions and other important factors that could cause
actual results to differ materially from those forward-looking statements with
respect to Danielson, include, but are not limited to, those factors, risks and
uncertainties that are described in Item 1 of Danielson's Annual Report on Form
10-K for the year ended December 31, 2003 and in other securities filings by
Danielson or Covanta. The
forward-looking statements contained in this press release are made only as of
the date hereof and Danielson does not have and has not undertaken any
obligation to update or revise any forward-looking statements whether as a
result of new information, subsequent events or otherwise, unless otherwise
required by law.
For more information generally, please contact:
FOR DANIELSON HOLDING CORPORATION
Doreen Lubeck
Danielson Holding Corporation
(312) 466-4030
FOR COVANTA ENERGY CORPORATION
Louis D. Walters
Covanta Energy Corporation
973 882 7260
GLOBAL CREDIT RESEARCH
RATING ACTION
(MOODY'S INVESTORS SERVICE LOGO) 28 MAY 2004
RATING ACTION: COVANTA ENERGY CORPORATION
MOODY'S ASSIGNS Caa1 RATING TO COVANTA ENERGY CORPORATION'S 8.25% SENIOR NOTES
AND SGL-3 SPECULATIVE LIQUIDITY RATING; OUTLOOK STABLE
APPROXIMATELY $230 MILLION OF DEBT SECURITIES AFFECTED.
New York, May 28, 2004 -- Moody's Investors Service has assigned a Caa1
rating to Covanta Energy Corporation's (Covanta) 8.25% Senior Secured
Notes due 2011. The Notes were issued to the holders of Covanta's
secured claims upon the company's emergence from bankruptcy on March
10, 2004. Moody's assigned a senior implied rating of B3. Moody's also
assigned a Caa1 Issuer Rating and an SGL-3 speculative liquidity rating
to Covanta. The outlook of the Covanta ratings is stable.
The Caa1 Notes rating and Issuer Rating reflect the following factors:
Covanta exhibits limited financial flexibility and relatively low
interest coverage ratios assuming it is able to fully utilize new
parent Danielson Holding Company's (Danielson) net operating loss carry
forwards (NOLs). Projected interest coverage on the Notes over the next
several years ranges from a low of .97x in 2005 to a high of 1.4x in
2007. Without the NOLs, coverage levels would be lower. In addition,
the Notes are structurally subordinated to approximately $840 million
of debt at the subsidiary waste-to-energy projects and $256 million of
bank letter of credit facilities at Covanta. This is somewhat mitigated
by the fact that the letter of credit facilities are performance
letters of credit and Covanta has never experienced a draw under a
performance letter of credit. The source of repayment for the Notes
includes the cash flow generated from the Covanta projects in addition
to any available assets at Covanta itself, which are currently minimal.
Covanta is currently highly leveraged following its emergence from
bankruptcy, with total recourse debt and commitments of $486 million
compared to only $44 million of book equity, most of which was provided
by Danielson. Danielson is primarily a financial investment vehicle
with no experience in waste-to-energy, independent power production, or
water/wastewater.
There is uncertainty related to the availability of $571 million of
NOLs from Danielson, which are necessary to offset taxable income at
Covanta. These NOLs could be substantially reduced should there be an
"ownership change" at Danielson. Without the application of these NOLs,
Covanta does not generate sufficient cash flow to meet interest
obligations on the Notes and fees under its bank letter of credit
facilities. Covanta's auditors prior to its acquisition by Danielson,
Deloitte & Touche, in their 2003 independent auditors report issued
subsequent to the company's emergence from bankruptcy, expressed
substantial doubt about Covanta's ability to continue as a "going
concern". Reasons cited include Covanta's ability to utilize
Danielson's NOLs and its ability to generate sufficient cash flows from
operation, asset sales, and financing arrangements to meet its
obligations.
The B3 senior implied rating reflects the following additional factors:
The underlying waste-to-energy projects generate relatively stable cash
flows and Covanta management has exhibited a strong track record of
positive operating performance, with availability factors consistently
at 90% or above over the past several years. Although some of the
underlying waste-to-energy projects are located in the attractive
Northeast region of the country, which is characterized by dense
population and limited waste disposal alternatives, others are located
in regions where landfill and other waste alternatives are more
available and competitive with waste-to-energy.
Covanta derives approximately two-thirds of its revenues from its
waste-to-energy business, for the most part from long-term contracts
with a diverse group of municipalities, with the remaining one-third of
revenues derived from independent power sales, most of which are under
long-term contracts. Although the overall business is highly
contracted, the risk exists that contracts could be modified or
abrogated. In addition, Covanta faces the ongoing challenge of changes
in environmental laws or regulation, or the failure to comply with
existing regulations, and the need to renew permits on an ongoing
basis.
Covanta's SGL-3 speculative grade liquidity rating reflects adequate
liquidity for the next twelve months and the risks inherent in Covanta
maintaining this liquidity including: limited financial flexibility and
free cash flow, the dependence on parent company Danielson's NOLs to
provide adequate coverage of long-term debt obligations, limited
alternative liquidity sources including a relatively small $10 million
revolving credit at Covanta's domestic businesses and a $10 million
revolving credit at CPIH, its international subsidiary. There are few
assets at the Covanta parent company level and most of the assets at
the subsidiaries are pledged to $840 million of project level debt.
Covanta also operates in a very specialized industry niche, with a
limited market for assets to be sold off in a timely manner for
liquidity purposes. Offsetting these factors is Covanta's relatively
robust current cash position relative to their needs, which has
increased from $44 million immediately following its exit from
bankruptcy to approximately $48 million.
The stable outlook on Covanta's rating reflects Moody's expectation
that: (i) the waste-to-energy projects' contracts with the respective
municipalities and utilities will remain in place through their current
maturities; (ii) Covanta management will continue to operate the plants
at high availability levels and maintain stability with regard to
administrative expenses; (iii) Covanta will de-lever over the next
several years at the subsidiary project level; and (iv) Covanta will be
able to utilize all $571 million of Danielson's NOLs made available to
it. However, the Covanta rating could be raised or lowered if dividends
distributable from the projects differ from expected levels, if Covanta
acquired additional waste-to-energy projects or was subject to
unforeseen capital expenditure requirements at the existing projects,
particularly with regard to environmental regulatory compliance, or if
all or a part of Danielson's NOLs become unavailable to Covanta.
Fourteen of Covanta's 23 waste-to-energy projects are rated by Moody's:
Alexandria (A3), Babylon (Baa3), Bristol (A2), Detroit (Aa3), Fairfax
(A1), Hillsborough (Aa2), Huntington (A3), Huntsville (A1), Lancaster
(Baa2), Lee (Aa3), Mid-Conn (A1/Baa3), Montgomery (Aa3/A2), Union
(Baa2/Baa3), and Wallingford (A2/A3). Two other waste-to-energy
projects remain in bankruptcy. None of the smaller independent power or
water facilities are rated except for the Quezon project in the
Philippines, which is rated B3.
Covanta Energy Corporation, headquartered in Fairfield, NJ, is an
energy company with operations in waste-to-energy, independent power
production, and water and wastewater. Parent company Danielson Holding
Corporation, headquartered in Chicago, IL, has operations in insurance
and marine services in addition to Covanta.
New York
Daniel Gates
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Michael G. Haggarty
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
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