S&P puts El Paso Energy Partners on watch

Standard & Poor's put El Paso Energy Partners LP on CreditWatch with negative implications. Ratings affected include El Paso Energy Partners' $150 million senior subordinated notes due 2012, $175 million 10.375% notes due 2009, $230 million 8.5% senior subordinated notes due 2011 and $250 million 8.5% senior subordinated notes due 2011 at BB- and $250 million term B loan and $600 million revolving credit facility at BB+.

S&P said the action is based on the recent downgrade of El Paso Energy's general partner, El Paso Corp.

El Paso's involvement as the general partner with a 42% stake in El Paso Energy Partners influences the partnership's credit profile in several ways and effectively tethers the ratings of the two entities, S&P said.

El Paso Energy Partners has played an important role in El Paso's plan to deleverage its balance sheet plan by enabling it to transfer qualifying midstream assets to El Paso Energy Partners. El Paso continues to operate El Paso Energy Partners' assets and provide administrative support.

The deterioration of El Paso's credit quality pressures El Paso Energy Partners' rating irrespective of the partnership's stand-alone credit quality, S&P said.

Moody's cuts Sea Containers, on review

Moody's Investors Service downgraded Sea Containers Ltd. and put it on review for possible further downgrade. Ratings affected include Sea Containers $95 million 9.5% senior notes due 2003, $115 million 10.75% senior notes due 2006, $150 million 7.875% senior notes due 2008 and $63 million 10.5% senior notes due 2003, cut to B1 from Ba3, and $98 million 12.5% senior subordinated notes due 2004, cut to B2 from B1.

Moody's said it is concerned about Sea Containers' strained financial flexibility and possible liquidity difficulties next year due to significant short-term debt maturity, including $158 million of senior notes due in July 2003.

As part of the review, Moody's will evaluate the company's plan to address the scheduled debt repayment.

Sea Containers earnings have been depressed during the last several quarters, reflecting revenue pressure in all operating segments, Moody's noted, adding that it believes the company's internally generated cash flow will be insufficient by itself to cover pending debt repayments.

Alternative sources of cash identified by the management are the sale of non-core assets, increase of borrowings at the subsidiary Silja and the possible sale of about 15 million Orient Express shares.

Moody's notes that most of the other assets of the company are already encumbered, limiting the amount of incremental liquidity available from additional collateralization.

S&P upgrades Standard Commercial

Standard & Poor's upgraded Standard Commercial Corp. The outlook remains stable. Ratings raised include Standard Commercial's $69 million 7.25% convertible subordinated debentures due 2007, upgraded to BB- from B+, and Standard Commercial Tobacco Co., Inc.'s $115 million 8.875% senior notes due 2005, raised to BB+ from BB.

S&P said it raised Standard Commercial because of the company's improved operating performance and the related improvement in profitability and cash flow measures. In addition, Standard Commercial continues to reduce debt.

However, further upgrade potential could be somewhat difficult given the current market conditions for cigarette manufacturers, both in the U.S. and abroad, and the related impact on the leaf tobacco dealers' operations, S&P said.

Following several years of disappointing results stemming from operating difficulties and a very weak pricing environment for both leaf tobacco and wool, Standard Commercial took steps to improve its operations, S&P noted. These actions included implementing better inventory management, as well as plant rationalization and cost-reduction programs. Overall, this has strengthened the company's financial position and increased financial flexibility.

Standard Commercial's operational and financial strategies have resulted in improved performance despite conservative buying patterns of cigarette manufacturers as the industry consolidates and faces ongoing litigation, fierce global competition, and political unrest in leaf tobacco producing countries, S&P said.

Credit measures, on average over the last five years and adjusted for committed tobacco inventories, are appropriate for the rating with EBITDA to interest coverage of about 4 times and EBITDA margins, in this low-margin business, of about 6%, S&P said. Adjusted total debt to EBITDA has declined to below 2x from more than 6x in fiscal 1996. S&P said it expects credit measures will remain, on average, in the above areas.

Moody's rates Brickman notes B2, credit facility Ba3

Moody's Investors Service assigned a B2 rating to The Brickman Group, Ltd.'s planned $150 million of seven-year senior subordinated notes and a Ba3 to its $80 million secured bank credit facility. The outlook is stable.

Moody's said the ratings reflect the heavy debt leverage and negative tangible net worth resulting from Brickman's proposed new leveraged recapitalization (its second), the likelihood that an additional recapitalization may lie ahead, and the financial and integration risks that may accompany a possible acquisition strategy.

At the same time, the ratings consider Brickman's leading position in the commercial landscape maintenance business, its recurring, somewhat recession resistant revenue stream, its positive free cash flow generating ability, its impressive growth rates, its strengthening financial profile since the time of its first leveraged recapitalization in 1998, and the attractive industry trends, Moody's added.

Pro forma for the proposed $150 million senior subordinated note offering and take down of a $50 million term loan, total debt plus preferred stock to EBITDA amounts to 5x, Moody's said. After subtracting out goodwill and other intangibles of $150 million, tangible net worth drops to a negative $154 million.

With this transaction, the Brickman family will achieve a controlling interest of 54%, and non-family management members will own an additional 10%. CIVC Partners (one of the 1998 investors) and associated investors will own the remaining 36%. It is the intention of the Brickman family and management to buy back the entire company at some point in the future, which will probably necessitate a third recapitalization, Moody's said.

S&P cuts Atlas Air

Standard & Poor's downgraded Atlas Air Worldwide Holdings Inc. and its subsidiary Atlas Air, Inc. and kept it on CreditWatch with negative implications. Ratings lowered include Atlas Air, Inc.'s $150 million 10.75% senior notes due 2005 and $150 million 9.375% senior notes due 2006, cut to CCC from CCC+, and most of the company's various passthrough certificates, which were lowered one notch.

S&P said the action follows Atlas Air's announcement that its failure to provide timely audited financial statements has become an event of default under its credit facilities and related intercompany aircraft leases, and that lenders may now accelerate repayment of approximately $246 million in outstanding indebtedness, should lenders representing at least 50.1% of the outstanding loans choose to do so.

S&P said it has continuing concerns about near-term liquidity and the company's ability to meet debt service requirements as they come due over the near term. The company is in discussions with its banks and is attempting to negotiate a waiver of the default.

Moody's cuts Collins & Aikman Products' liquidity rating

Moody's Investors Service downgraded Collins & Aikman Products Co.'s speculative-grade liquidity rating to SGL-3 from SGL-2 and confirmed its senior implied rating at Ba3.

Moody's said the action reflects its belief that the company's short-term cash flow generation capabilities and unused effective availability (after covenants) under its various debt facilities are lower than previously anticipated.

Moody's added that it confirmed the senior implied rating based on its expectation that the company's net new business generation and overall intermediate-term revenue and margin prospects remain substantially intact.

S&P cuts Cluett American, on watch

Standard & Poor's downgraded Cluett American Corp. and put it on CreditWatch with negative implications. Ratings lowered include Cluett's $125 million 10.125% notes due 2008, cut to CCC- from CCC+, and $43.2 million term A loan due 2004, $50 million revolving credit facility due 2004 and $50.6 million term B loan due 2005, cut to CCC+ from B.

S&P said the rating action reflects its concern with Cluett's liquidity and ability to reduce the outstanding debt on its senior secured facility by approximately $45 million by March 31 as required by a Nov. 13 amendment to the loan agreement.

S&P noted that currently Cluett does not generate any free cash flow.

The facility was amended because the company was not in compliance with its financial covenants at Sept. 29, a result of the difficult retail environment, which has pressured margins and profitability, S&P said. In addition to the required debt reduction, the financial covenants for the September and December 2002 quarters were also amended.

Moody's cuts Dine notes

Moody's Investors Service downgraded the $150 million ($73 million remaining) senior unsecured guaranteed notes, originally issued by Dine SA de CV and assumed by Desc SA de CV in May 2002. The outlook is stable.

Moody's said the action reflects structural changes associated with the May 15, 2002 merger of Dine into Desc together with the significant challenges currently faced by Desc within its autoparts and chemicals sectors, which represent the company's two largest operations.

The rating actions reflect that the Dine notes were assumed by its former guarantor Desc and must now be notched relative to all of Desc's existing debt facilities and its subsidiary-level payables and other obligations, Moody's said. Desc's other committed obligations exceed $1 billion in aggregate, all unsecured.

The ratings actions also reflect the fact that Desc is currently facing significant challenges within its autoparts and chemicals sectors, which contain the company's two largest operations. Desc has therefore made limited progress to date with regard to either debt reduction or the improvement of its debt protection measures, Moody's said.

More specifically Desc is currently challenged within its autoparts sector by DaimlerChrysler's (one of the company's main OEM clients) recent closure of a production facility in Mexico City, the rating agency said. This is expected to reduce Desc's sales by about $130 million on an annualized basis.

In addition, demand for Desc's products in the U.S. automobile market could decline further if the Big 3 do not maintain their aggressive promotions.

In the chemical sector, profitability has deteriorated as Desc has been unable to pass on the increases in raw material costs to the final customers, Moody's added.

Moody's keeps Paiton Energy on upgrade review

Moody's Investors Service said Paiton Energy Funding BV's Caa2 remains on review for possible upgrade.

Moody's said that after its preliminary review of the Amended Power Purchase Agreement and the surrounding information provided by the issuer it expects to upgrade Paition to B3.

The upgrade would primarily reflect the amended terms of the power contract with the Indonesian state-owned electricity corporation, PLN which is on terms acceptable to the Indonesian government and materially reduces the front end loading nature of the tariff in return for a longer concession period, Moody's said.

As a result Paiton power costs are expected to be more competitive within the Java-Bali grid.

S&P cuts Net Serviços

Standard & Poor's downgraded Net Serviços de Comunicação SA including cutting its $185 million 12.625% notes due 2004 to D from CC.

S&P said the downgrade follows Net Serviços' announcement that it would be "re-evaluating its cash flow obligations while the company pursues an adequate capital structure."

Net already missed payments on the interest of the convertible and non-convertible debenture issues due on Dec. 1, 2002 (BrR4.5 million and BrR19 million, respectively), and S&P said it expects that the company will suspend payment of other immediate maturities.

S&P cuts Glencore Nickel

Standard & Poor's downgraded Glencore Nickel Pty Ltd. including cutting its $300 million 9% senior secured bonds due 2014 to D from CC and withdrew the ratings.

S&P said the action follows Glencore Nickel's failure to meet its Dec. 2, interest payment.

S&P added that it withdrew the rating at the company's request.

Fitch cuts Trenwick

Fitch Ratings downgraded Trenwick Group, Ltd.'s senior debt to CC from CCC and its preferred capital securities to C from CC. The remain on Rating Watch Evolving.

Fitch said the downgrade follows Trenwick's announcement that it is suspending dividends or distributions on its preferred stock and trust preferred capital securities.

Trenwick had agreed to refrain from making such payments or distributions under a forbearance agreement it entered into with its letter of credit providers on Nov. 13, Fitch noted.

Fitch upgrades Korea Exchange Bank notes

Fitch Ratings upgraded Korea Exchange Bank's $200 million 13.75% upper tier II subordinated notes due 2010 to BB from BB-. Other ratings on the bank remain unchanged including its senior debt at BBB-. The long-term outlook is positive.

Fitch said the upgrade reflects the general improvement that has been achieved in Korea Exchange Bank's standalone financial profile.

Although some areas of concern remain, including the bank's ongoing exposure to more problematic credits such as Hynix and Hyundai Engineering and Construction, as well as pressure on its capacity to generate sustainable profit growth, Korea Exchange's management has worked hard over the last few years to turn the bank around and bolster its financial health, Fitch noted. It has succeeded in considerably raising its loan loss reserve coverage levels and reducing overall exposure to larger companies by emphasizing the retail lending segment in common with most other local commercial banks.

Fitch considers that the bank's operations have been stabilized and its outlook is now more positive, further reducing the risks to investors in KEB's debt securities.

S&P cuts Cordova Funding to junk

Standard & Poor's downgraded Cordova Funding Corp. to junk and put it on CreditWatch with negative implications. Ratings affected include Cordova's $245 million senior secured bonds series A due 2019, cut to BB from BBB-.

S&P said the downgrade reflects the project's reliance on a tolling agreement with El Paso Merchant Energy Co. that expires in 2019. S&P recently cut El Paso to BB from BBB.

MidAmerican Energy Co., an affiliate of Cordova, has the option to purchase 50% of the capacity of Cordova, and has exercised this option through May 2004, S&P noted but added there can be no assurances that MidAmerican will continue to exercise this option, in which case 100% of the capacity would be under contract with El Paso.

S&P rates Banco Votorantim notes B

Standard & Poor's assigned a B rating to Banco Votorantim SA's $70 million 7.875% short-term notes due June 2003. The long-term foreign-currency credit rating is B+ with a negative outlook and the short-term rating is B.

S&P said Banco Votorantim's ratings benefit from the implicit support of Votorantim Group; its strong brand-name recognition; an experienced management team; and its efficient decision-making process.

The bank also shows better-than-average asset quality, S&P said.

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