January 5, 2004 High Yield Report by Sarah Husband, senior editor

This week, Moody's Investor Service placed the ratings of Tyson Foods Inc. (Baa3); National Beef Packing Company(B2); and Swift & Company (B2) on review for possible downgrade, while continuing its existing review of the long term rating of Smithfield Foods (Ba2) for possible downgrade. Other companies in the high yield market affected by the mad-cow news (to a lesser or greater degree) include American Restaurant Group, Friendly Ice Cream, Sbarro, Carrols, Denny's, Stater Bros., and Yum Brands.

While it is still too early to guess as to the extent of the problem, the likely duration, and the extent to how consumer demand will be affected, the fact that numerous countries, including Japan, Taiwan and Mexico, immediately banned US meat has already sent restaurant and food stocks and bonds lower is worrying. National Beef Packing Company was one of Advantage Data's top losers last week, with its 10.5% notes dropping five points on the week to 104.625 last Tuesday.

Investors were apparently keeping their cool however, choosing to lighten up, rather than dump bonds from companies with exposure to the beef industry. Investors will become increasingly concerned if further cases are discovered, however, with companies like American Restaurant Group, a steakhouse chain out West, most likely to be adversely affected, analysts believe.

But it will take more than a mad cow, or sour milk to upset investors after 2003's go-go year. Returns in 2004 might not come close to last year's tremendous 27%, but few expect the market's positive run will end anytime soon.

Here's hoping 2004 proves to be another great year for high yield.