S&P rates DirecTV loan BB-, notes B

Standard & Poor's assigned a BB- rating to DirecTV Holdings LLC's proposed $1.55 billion senior secured credit facility and a B rating to its proposed to $1.4 billion senior unsecured notes due 2013. S&P also put DirecTV on CreditWatch with positive implications.

S&P said the watch placement reflects its assessment of the likelihood that DirecTV Holdings or its parent Hughes Electronics Corp. (B+/Watch Dev) could be acquired by a company with higher credit quality than Hughes.

Proceeds of the new financings by DirecTV Holdings will be distributed to Hughes in a dividend to repay Hughes' existing credit facility, which will be terminated, S&P noted. Proceeds will also prefund expected cash needs through 2004 at Hughes, as well as its DirecTV Latin America and Hughes Network Systems units, which are currently EBITDA negative. Cash needs at Hughes include a disputed cash purchase price adjustment stemming from the sale of Hughes' former satellite manufacturing business. Funds could also be used to potentially redeem a portion of General Motors Corp.'s ownership interest in Hughes, as well as for other corporate needs.

The ratings on the existing debt of Hughes and its 81% owned subsidiary PanAmSat Corp. remain on CreditWatch with developing implications, where they were placed on Dec. 11, 2002, based on the likelihood that a stronger company will acquire Hughes, offset by concern about refinancing risk on Hughes' existing credit facility that expires in August 2003, S&P added. Upon completion of the proposed debt offerings at DirecTV Holdings, the CreditWatch implications of Hughes and PanAmSat will likely be revised to positive, based on potential credit improvement in the event of a change in ownership.

In addition to addressing its refinancing risk, Hughes is dealing with operating weakness at certain cash-draining operations, S&P said. The company is closing its digital subscriber line business, which generated an EBITDA loss of $220 million in 2002. Hughes also announced a restructuring plan for its DirecTV Latin America unit, which last year produced $202 million negative EBITDA. In light of economic weakness and currency devaluation in Latin America, key objectives for DirecTV Latin America include renegotiating U.S. dollar-denominated programming contracts and reducing a $195 million cash put obligation in November 2003.

Hughes Network Systems has made progress controlling costs and pared its EBITDA loss to $87 million in 2002, S&P noted. Although Hughes Network Systems expects to spend an additional $400 million to launch its Spaceway broadband communications platform in 2004, the company is planning to focus on providing the service to existing network customers in order to minimize subscriber acquisition spending and accelerate the time frame for generating positive EBITDA.

S&P cuts Ryerson Tull

Standard & Poor's downgraded Ryerson Tull Inc. including lowering its $100 million senior notes due 2006 to B from B+. The outlook is stable.

S&P said the downgrade reflects its assessment that the challenging operating environment Ryerson has faced will continue over the intermediate term and that poor credit protection measures will continue.

The economy has remained sluggish and demand from Ryerson's key end markets, including machinery manufacturers, metal fabricators, and construction-related purchasers remains substantially below historical levels, S&P noted. Ryerson's shipments for the quarter ended Dec. 31, 2002, were down approximately 25% to 609,000 tons from the peak fourth-quarter level of 818,000 tons reached in Dec. 31, 1999.

The company incurred an operating loss of $16 per ton in the fourth quarter of 2002 as the impact of declining volumes more than offset savings generated by management's cost cutting actions, S&P added. In fact, the company has incurred an operating loss for five of its last six quarters and with demand from its key markets unlikely to improve in the next few quarters, the company is expected to continue to generate operating losses.

Although credit measures have been extremely poor, the company has preserved its liquidity throughout the protracted downturn through its working capital management, S&P said. In addition, Ryerson recently completed a new $450 million borrowing based revolving credit facility due 2006 that increased its availability by $80 million to $163 million at Dec. 31, 2002.

S&P cuts Maxxim Medical

Standard & Poor's downgraded Maxxim Medical Group Inc. to D including its $131.4 million senior subordinated discount notes due 2009 previously at CCC and its $50 million senior secured revolving bank loan due 2005, $80 million senior secured term loan A due 2005, $90 million senior secured term loan B due 2007 and $90 million senior secured term loan C due 2008, all previously at B-.

S&P said the downgrade follows Maxxim's Chapter 11 filing.

S&P cuts Fairfax

Standard & Poor's downgraded Fairfax Financial Holdings Ltd. including cutting its $100 million 7.75% notes due 2003, $100 million 8.25% notes due 2015, $125 million 7.75% notes due 2037, $125 million 8.3% notes due 2026, $225 million 7.375% senior notes due 2018 and $275 million 7.325% notes due 2006 to BB from BB+, TIG Holdings Inc.'s $100 million 8.125% notes due 2005 to BB- from BB and TIG Capital Trust I's $125 million 8.597% capital securities to B from B+. The outlook is negative.

S&P said the downgrade is because of concerns about Fairfax's ability to maintain adequate liquidity at the holding company.

These rating actions follow Fairfax's earnings announcement for the fourth quarter of 2002. The results for the quarter were mixed: underwriting results (excluding run-off operations) improved significantly, but there is the potential for liquidity strain in 2003, S&P said.

Historically, the counterparty credit and senior debt ratings on Fairfax enjoyed nonstandard notching because of the significant cash balances held at the holding company, S&P noted. In the case of Fairfax, the nonstandard notching resulted in a two-notch differential between the ratings on the insurance operations and the holding company. S&P said it has a negative view on the announcement that the company will repay, using the internal cash resources of the holding company, the C$207 million of redeemable hybrid income overnight shares (Rhinos) maturing Feb. 24, 2003. The subsequent reduction in holding company liquidity in a year when the company has more than C$400 million of maturing obligations (excluding the RHINOS) is a concern, especially because access to the public capital markets appears to be limited for Fairfax at this time.

Fitch changes TNK watch to evolving

Fitch Ratings changed its Rating Watch on TNK International Ltd. to Evolving from Negative. Ratings affected include the $700 million fixed-rate loan participation notes due 2007 issued by Salomon Brothers AG to finance a loan to OAO Tyumen Oil Co. at B+.

Fitch said the rating action follows the announcement by BP plc and the shareholders in TNK, Alfa Group and Access-Renova of an agreement in principle to combine their interests in Russia.

As part of the plan, TNK will merge with Sidanco, a Russian oil and gas company currently controlled by Access-Renova and BP.

Rating Watch Evolving implies that the rating may be upgraded, affirmed or downgraded based on clarification of the transaction characteristics and final agreement. Fitch said its view on a potential positive rating action would be primarily driven by: 1) the degree of implicit or explicit support from BP, a higher-rated entity with extensive access to capital markets, and incentives to ensure continued investment in its Russian operations; 2) anticipation of improved operational efficiency resulting from BP's industrial expertise and stronger financial profile following the TNK - Sidanco merger, and 3) improvements in corporate governance and corporate structure.

Against that Fitch said it continues to follow any developments with regards to TNK's joint acquisition with OAO Sibneft of OAO Slavneft, which is expected to be closed by the end of February and which is not part of the outlined plans for the merger with Sidanco. The Slavneft transaction led to TNK's ratings being placed on Rating Watch Negative on Dec. 20, 2002.

Moody's cuts Mohawk River

Moody's Investors Service downgraded Mohawk River Funding I, LLC's $174 million 7.09% senior secured notes to Caa1.

Moody's said the downgrade is a consequence of its recent downgrade of El Paso Corp.

The notes' rating is based on the margin created by the relationship between the swap agreements entered into between Niagara Mohawk Power Corp. and LG&E Westmoreland Rensselaer and Fulton Cogeneration Associates, LP as swap counterparties that were assigned to Mohawk River Funding I, LLC and the swap agreements between Mohawk River Funding I, LLC and El Paso Merchant Energy LP.

The rating is also based on El Paso's guarantee of El Paso Merchant Energy LP's obligations under the two swaps.

S&P rates Banco Vontorantim notes B

Standard & Poor's assigned a B rating to Banco Votorantim SA's new €50 million 6.75% euro bonds due Aug. 19, 2003. The outlook is negative.

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

Moody's cuts East Coast Power to junk

Moody's Investors Service downgraded East Coast Power LLC's senior secured rating to Ba2 from Baa3. The outlook is developing.

Moody's said the action follows the downgrade of El Paso Corp. including its senior unsecured debt, now Caa1.

While the relationship between El Paso and East Coast Power suggests that substantive consolidation of East Coast Power under a bankruptcy scenario for El Paso may be quite unlikely, this event also can not be ruled out with certainty, and the Ba2 rating incorporates this possibility, Moody's said.

The developing outlook reflects El Paso's announced intention to sell its ownership.

The underlying operations and financial situation of the project would support a higher rating in the absence of the concerns about ownership, Moody's said. A reduction in debt in January due to a buy-out of contracts has improved financial protection measures.

In addition to various structural protections, liquidity is further enhanced by a $ 24 million debt service reserve account that is supported by an irrevocable standby letter of credit.

Moody's cuts Cedar Brakes

Moody's Investors Service downgraded Cedar Brakes I and Cedar Brakes II's debt to Caa1 from Ba2. The outlook is negative.

Moody's said the downgrade follows the downgrade of El Paso Corp., which guarantees the performance of its subsidiary, El Paso Merchant Energy, the power supplier to the two Cedar Brakes structures.

The downgrade reflects the tight coverage ratios for the two transactions and reliance on El Paso to make liquidated damage payments in the event of El Paso Merchant Energy's failure to deliver power, Moody's said.

The negative outlook reflects the negative outlook on El Paso's debt ratings.

Fitch puts Rica Foods on watch

Fitch Ratings put Rica Foods Inc. on Rating Watch Negative including its BB foreign and local currency ratings. Debt affected includes Corporacion Pipasa's senior notes due 2005 and Corporacion As de Oros' senior notes due 2005, jointly and severally guaranteed by Rica Foods.

The action follows the disclosure by Rica Foods in its Form 8-K filed Jan. 30 that the financial statements included in its Form 10-K filed Jan. 13 contained financial errors and that its client-auditor relationship with Deloitte & Touche SA had ceased, Fitch said.

Although the financial errors listed by Rica Foods in its Form 8-K appear to be mainly related to the classification of balance sheet items and do not appear to trigger debt covenants or materially affect the cash flow generation of the company, Fitch will maintain the ratings on Rating Watch Negative until Rica Foods' financial statements are audited and will subsequently review the ratings.

Moody's lowers Veritas DGC outlook, rates loan Ba3

Moody's Investors Service lowered its outlook on Veritas DGC, Inc., assigned a Ba3 rating to its new $40 million second priority term loan maturing 2008, lowered its unsecured issuer rating to B1 from Ba3 and confirmed its other ratings including its $55 million senior secured revolver maturing 2006 and $155 million senior secured term loan maturing 2007 at Ba2 and $130 million 9¾% senior unsecured notes due 2003 at Ba3.

Moody's said the lower outlook is pending the resolution of a number of trends, which if not corrected may prevent the company from reducing debt over the next 12-24 months. These trends include continued softness in the seismic sector; the uncertain degree of increase in 2003 exploration spending by E&P companies; over-capacity in the seismic industry and Veritas' library spending patterns which has exceeded cash from operations and Veritas' decreased backlog of business.

The second priority term loan was not part of the credit facilities rated by Moody's in November 2002.

Proceeds from the credit facilities will retire $130 million of 9.75% senior unsecured notes due October 2003 and replace existing $100 million credit facilities (roughly $81 million now outstanding).

The new loan is rated lower because of its effective subordination behind the first security positions of the revolver and first priority term loan lenders secured by all of the tangible and intangible assets of the company. The adjustment of the senior unsecured rating reflects the inclusion of the second priority term loan.

Veritas will have pro forma debt of $195 million after closing of the credit facilities, 1.5x EBITDA for the 12 months to Oct. 31, 2002. Adjusting for operating leases, pro forma debt would represent approximately 2.8x for the 12 months to Oct. 31, 2002.

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