S&P puts Alaska Air on negative watch

Standard & Poor's placed the ratings of Alaska Air Group Inc. (corporate credit at BB) on negative watch, along with 11 other airlines, reflecting risks related to a conflict in Iraq.

The ratings on Alaska Air Group Inc. reflect a medium-size route network serving competitive markets, offset by relatively low operating costs and a relatively strong financial profile.

Alaska Air's lease-adjusted debt to capital is among the lowest in the industry at 77% with a relatively healthy cash position of $636 million at Dec. 31, S&P said.

At Dec. 31, the company's $150 million secured credit facility that matures Dec. 31, 2004, was fully drawn.

Debt maturities, excluding the credit facility, average $40 million a year through 2006.

Fitch rates Mandalay convert BB+

Fitch Ratings assigned a rating of BB+ to Mandalay Resorts Group's new $350 million of senior convertible notes.

Ratings reflect strong historical operating performance and significant free cash flow, offset by current heavy capital spending plans, aggressive share buybacks and a difficult operating environment in Las Vegas, Fitch said.

The outlook is stable.

Total debt/EBITDA of 4.5x and EBITDA/interest of 2.7x expected for 2003 fiscal yearend in January would be roughly flat with the prior year period.

Fitch expects negligible improvement and potentially a moderate weakening of credit measures in fiscal 2004, as EBITDA increases will be offset by a concurrent moderate rise in debt. Fitch expects Mandalay to end fiscal 2004 with leverage and interest coverage roughly equal to those of fiscal 2003.

The leverage range of 4.5x - 4.8x is moderately high for the ratings category, but is maintained due to highly discretionary expansion projects and share repurchases.

Bank loan covenants, which currently limit leverage to a maximum of 5.5x and require interest coverage of at least 2.25x, gradually become more restrictive after Jan. 31, 2003.

Moody's cuts SK Telecom outlook

Moody's Investors Service revised SK Telecom Co. Ltd.'s rating outlook to stable from positive, and affirmed the senior unsecured rating of Baa1, given recent corporate governance problems and alleged accounting fraud.

The outlook reflects the strength of the operating, financial and liquidity profile while encompassing concerns over corporate governance regime and the potential for a moderate level of share buybacks.

Moody's said the company's large free cash flow from operations, combined with cash on hand, provides a healthy ability to cover maturing debt in 2003 and announced share buybacks.

Moody's cuts Semco ratings

Moody's Investors Service downgraded the ratings of Semco Energy Inc. (senior unsecured to Ba2 from Baa3, subordinated from Ba1 to Ba3 and trust preferred from Ba1 to Ba3) and kept the ratings on review for possible downgrade.

The downgrade reflects very high leverage, weak capitalization, low profitability and cash flow relative to debt and refinancing risk related to redemption of a large issue of Roars debt in July.

The review will continue, pending the refinancing of the $105 million original principal amount of Roars and further monitoring of the results of Semco's construction services business.

Moody's estimates leverage - including trust preferreds, operating leases capitalized and the mandatory convertible - was in the low 80% range at Dec. 31. Conversion of the $101 million mandatory issue in August will reduce leverage to about 70%, but it is still higher than peer investment-grade utilities.

S&P puts Continental Air on negative watch

Standard & Poor's placed the ratings of Continental Airlines Inc. (corporate credit at B+) on negative watch, along with 11 other airlines, reflecting risks related to a conflict in Iraq.

The ratings on Continental Airlines reflect a heavy debt and lease burden.

The relative weak point in the credit profile remains liquidity, with $1.34 billion of cash at Dec. 31, no bank line availability and no unsecured aircraft, S&P said.

Current maturities of on-balance-sheet debt and capitalized leases total $468 million in 2003. Capital expenditures in 2003 consist mostly of regional jet deliveries, for which financing is committed, and four larger planes in the fourth quarter with no financing yet arranged.

S&P keeps Tyco on negative watch

Standard & Poor's said the ratings of Tyco International Ltd., including the convertibles at BBB-, remain on negative watch pending resolution of structural subordination concerns.

Tyco's recent announcement that it will take pretax charges of $265 million to $325 million and lower earnings guidance will not cause a ratings change, S&P said, or alter its intent to affirm the ratings with a stable outlook if structural subordination concerns are successfully addressed.

The company has put together a comprehensive plan for joint and several guarantees that would provide holding company creditors with access to at least two-thirds of total tangible assets. S&P believes this is sufficient against structural.

If these are deemed acceptable, the ratings will be affirmed.

If not, the ratings would likely still be affirmed, but holding company ratings would be lowered one notch, senior unsecured debt to BB+.

Under either scenario, the outlook is likely to be stable, S&P said.

Moody's ups Action Performance

Moody's Investors Service raised the ratings of Action Performance Cos. Inc., including the 4.75% convertible to B2 from B3, reflecting improved ability to withstand volatility as cash flow has been applied to debt reduction.

The upgrade reflects meaningful growth through its affiliation with the fast-growing NASCAR organization, individual drivers and teams.

With about $80 million of balance sheet cash, minimal debt maturities and increased revolver size, there is ample liquidity to finance operations for at least the next 12-18 months.

The outlook is stable, reflecting a view that there is sufficient cushion for foreseeable levels of earnings and cash flow volatility, including the impact of recent product delays and retooling efforts.

S&P puts Hexcel on negative watch

Standard & Poor's placed the ratings of Hexcel Corp., including the convertible notes at CCC+, on negative watch due to the looming war with Iraq as it will likely have a significant impact on commercial aviation.

The ratings reflect a very weak financial profile, stemming from high debt levels and unprofitable operations, which outweigh a substantial position in competitive industries and generally favorable long-term business fundamentals.

Hexcel is currently in the process of selling $125 million secured notes and $125 million preferred stock, which S&P said would alleviate near-term liquidity concerns

Internal cash generation will likely be adequate for operational needs and modest capital expenditures, S&P said.

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