Moody's downgrades Hughes Electronics to junk, cuts PanAmSat, confirms Echostar

Moody's Investors Service downgraded Hughes Electronics Corp.'s senior unsecured long-term debt to junk, cutting the ratings to Ba1 from Baa2. Moody's also reduced PanAmSat Corp.'s senior unsecured long-term debt to Baa3 from Baa2 and its short-term rating to Prime-3 from Prime-2. All the ratings are on review for further possible downgrade.

Moody's also confirmed its developing outlook on EchoStar Communications Corp.'s ratings, including its B3 senior unsecured issuer rating and its Caa1 subordinated debt rating, and the ratings of its subsidiaries, EchoStar Broadband Corp. and EchoStar DBS Corp., both with B1 senior unsecured debt ratings.

The announcement affects $8 billion of securities.

Moody's said the action follows the announced spin-off of Hughes from General Motors Corp. and the merger of Hughes with EchoStar. The PanAmSat actions also result from its recent announcement that it will raise approximately $1.8 billion in bank debt and long-term notes to repay a $1.725 billion subordinated term loan due to its parent company, Hughes, and provide liquidity for growth.

Moody's said it reduced Hughes ratings because of "the rising debt leverage of the enterprise, its weak operating performance, and the extreme unlikelihood under any scenario that it can maintain an investment-grade rating over the intermediate-term."

The rating agency's review for further downgrade will focus on the legal and capital structure and long-term business plan objectives following its combination with EchoStar. It will also consider the longer-term opportunities for operating performance improvement coming from cost reduction synergies between the two platforms, as well as improving DirecTV operating profit margins closer to EchoStar's Dish Network.

For PanAmSat, the downgrade is a result of the refinancing which will reposition some or all of what was previously $1.725 billion of junior capital to a level pari passu with the outstanding $750 million senior notes. Moody's anticipates senior debt will increase to at least $2.25 billion.

Satellite launch delays and capital investment have limited the company's financial flexibility and increased operating pressures, Moody's added.

For EchoStar said there are "several lingering uncertainties" leading to the developing outlook, "first and foremost" the required regulatory approvals to acquire Hughes. Moody's believes that is the case even though it anticipates the combined company would "almost certainly constitute a more formidable competitor to the incumbent domestic cable television industry than either entity would on its own, particularly over the medium-to-longer term."

Moody's also sees "a fair amount of risk and uncertainty" over the ultimate financing and organizational structure of the combined entity and management's ability to integrate the two systems, realize synergies and reduce costs.

Moody's puts Loral Space & Communications on review for downgrade

Moody's Investors Service put Loral Space & Communications Ltd. on review for possible downgrade. Affected ratings include Loral Space & Communications' 9½% senior notes due 2006, rated B3, its 6% series C and series D preferred stock, rated Ca, and Loral Cyberstar, Inc.'s 11¼% senior notes, rated Ca, and its 12½% senior discount notes, also rated Ca.

The rating agency said it is responding to the announced debt-for-debt exchange at the company's 100% owned Loral Cyberstar subsidiary.

Moody's noted its downgrade of both companies in February assumed the Loral Cyberstar bonds would be restructured.

The current review will look at the impact of the exchange offer on Loral's financial flexibility, should it be accepted by bondholders.

Moody's added: "We understand that the company is in negotiations with its senior secured lenders to refinance its two credit facilities totaling approximately $1.1 billion dollars that currently mature in 2002 and 2003. We expect to conclude our review after meeting with management to discuss the benefits of the proposed exchange offer as well as the current business outlook for Loral, and after reviewing the terms and conditions of the proposed bank debt refinancing."

Moody's rates Land O'Lakes upcoming $300 mln notes at Ba3

Moody's assigned its Ba3 rating to Land O'Lakes' planned $300 million senior unsecured notes due 2011. The company's unsecured debt is rated one notch lower than its Ba2 senior implied rating and Ba2 senior secured bank facility ratings, reflecting the weaker position unsecured creditors have in the capital structure, Moody's added.

"Land O'Lakes' ratings were recently downgraded to reflect weaker debt protection measures resulting from higher leverage following its recent acquisition of Purina Mills, as well as other acquisitions in recent years, and poor earnings due to cyclical downturns in many of its agricultural related businesses," Moody's stated.

The dairy food and agricultural supply company is based in Arden Hills, Minn.

S&P downgrades Xerox-related synthetic deal to B from BB

Standard & Poor's downgraded CorTS Trust for Xerox Capital Trust I due to the Oct. 23 downgrade of Xerox Corp. and its related entities in response to S&P's expectation that non-finance revenue and operating income will be significantly less than expected for both 2001 and 2002.

CorTS Trust for Xerox Capital Trust I was cut to B from BB.

S&P downgrades Young Broadcasting, rates new deal B

Standard & Poor's downgraded Young Broadcasting Inc. and removed it from CreditWatch where it was placed with negative implications on Aug. 24, 2001. The outlook is stable. S&P also rated Young's planned $250 million note offering at B. For existing debt, S&P's actions include cutting the senior secured bank loan rating to BB- from BB and subordinated debt to B- from B.

S&P said the downgrade reflects "concern about credit measure weakness from sharply reduced revenue and cash flow, and the likelihood that Young's key credit measures could remain depressed for an extended time, particularly given increased economic uncertainty following the Sept. 11 terrorist attacks and U.S. military action."

Credit facility amendments and bank debt refinancing to eliminate all significant maturities until 2006 are offset by concern about extended weakness in advertising, S&P said.

S&P downgrades Milacron

Standard & Poor's downgraded Milacron Inc.'s debt, including its $115 million of 8 3/8% notes due 2004 to B from BB+ and its $375 million revolving credit facility to BB- from BB+ and Milacron Capital Holdings BV's €115 million 7 5/8% bonds due 2005 to B from BB+. The ratings are removed from CreditWatch with negative implications where they were placed on July 2, 2001. The outlook is negative.

S&P said the action on the public debt issues follows recent subordination to bank borrowings, which have become secured under an amended loan agreement.

The rating agency also noted Milacron's profitability has "declined materially because of the sharp downturn in North American demand for plastics machinery and metalworking tools; the timing and extent of market recovery remains highly uncertain."

While management has reduced staffing, cut production in some areas and is working down inventories and scaling back capital expenditures, S&P said Milacron entered this downturn with "a somewhat aggressive financial posture and debt to total capital was in the high-50% area at June 30, 2001, constraining financial flexibility."

S&P downgrades Exide

Standard & Poor's said it downgrade Exide Technologies Inc.'s ratings.

Affected debt includes: Exide Technologies' $300 million 10% senior notes due 2005 and its $205 million 2.9% convertible senior subordinated discount notes due 2005, both cut to CCC from B-; its various bank loans, cut to B- from B+; and Exide Holding Europe SA's DEM150 million 9 1/8% notes due 2004, cut to CCC from B-. All ratings remain on negative watch.

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