Moody's lowers Preem outlook to negative

Moody's Investors Service lowered its outlook on Preem Holdings AB to negative from stable. Affected ratings include Preem's senior secured debt at Ba3 and its senior implied rating at Ba2.

Moody's said the action is in response to "significantly and persistently lower than anticipated European refining margins in 2001, and to date in 2002, as a result of the weakening of the regional economy."

That change, Moody's added, has made worse the ongoing imbalance between refining capacity and product demand.

Those weak industry trends have adversely impacted Preem's key operating metrics and financial flexibility, Moody's added.

Although the rating agency noted Preem has adequate supporting liquidity and a diversified bank lending group it said the company has little cushion above its debt incurrence test of 2.25:1 times for EBITDA to total interest.

Fitch upgrades Edison Funding

Fitch Ratings upgraded Edison Funding Co.'s senior debt to B from CC and removed it from Rating Watch. The outlook is positive.

Fitch said its action follows similar rating changes to Edison Funding's parent, Edison International and Edison International's principal operating company, Southern California Edison Co. Their senior rating were upgraded to B and BB respectively.

S&P rates Coast Hotels add on B

Standard & Poor's assigned a B rating to Coast Hotel & Casinos Inc.'s add-on to its existing 9.5% senior subordinated notes due 2009 and affirmed its corporate credit and subordinated debt ratings on the company.

S&P said its assessment of Coast Hotels reflects the company's good operating and development track record, its growing cash flow base, and its solid market position in the Las Vegas "locals" market.

The Orleans (Tropicana Avenue) and The Gold Coast (Flamingo Road), both located west of the Las Vegas Strip, continue to perform well, although added competition in the locals market during 2001 (including from The Suncoast), and some disruption associated with construction projects had a modest negative affect on performance at The Orleans, and a more significant impact to The Gold Coast, S&P said.

The rating agency expects performance at these properties to begin to stabilize in 2002 and to experience growth again in 2003.

The cash flow contribution from The Barbary Coast on the Las Vegas Strip remains small, S&P continued. Performance in 2001 was affected by less foot traffic on the Strip in the third and fourth quarters but The Barbary has significant asset value due to its central Strip location.

Fitch downgrades Navistar

Fitch Ratings downgraded Navistar International Corp.'s senior unsecured debt to BB+ from BBB- and its senior subordinated debt to BB- from BB. The outlook remains negative. Fitch also cut Navistar Financial Corp.'s senior unsecured debt to BB+ from BBB- and its senior subordinated debt to BB- from BB and maintained its negative outlook.

Fitch said it lowered Navistar's ratings because of the ongoing downturn in its core medium and heavy-duty truck markets in North America.

After hitting a peak in fiscal 1999 at 431.6 thousand units in Class 5-8 trucks, industry demand fell a precipitous 34% over the next two years to 284.8 thousand units in fiscal 2001, Fitch noted.

Navistar positioned for the cyclical downturn by building up liquidity from new debt issuances allowing for a manufacturing operations cash balance of $806 million at the end of fiscal 2001 on Oct. 31, 2001, Fitch said. Moreover, in preparation for the downturn and to better position the business, various steps had been taken to enhance the operating flexibility and efficiency of the company.

However, the severity and the protracted nature of the current downturn, capital expenditure requirements, cash funding requirements for pension funding and other factors are expected to absorb a sizable amount of cash into the business this year, Fitch warned. For the year, capital expenditures of $250 million ($65 million in excess of depreciation and amortization), working capital requirements for the start-up of new engine lines, cash funding requirement for pensions, and cash usage by the manufacturing operations are anticipated to work through about $200-$300 million of liquidity before any additional funding.

Moody's rates Coast Hotels add-on B2

Moody's Investors Service assigned a B2 rating to Coast Hotel & Casino's add-on to its 9.5% senior subordinated notes due 2009 and confirmed its existing ratings including its $188 million senior secured reducing revolving bank credit facility at Ba2. The outlook is stable.

Moody's said that despite increased competition and an expected near-term increase in leverage, Coast's debt protection measures will remain at a level appropriate for its Ba3 senior implied rating level.

Coast's upgrade potential is limited by its expansion activities and current EBITDA performance at the Orleans, Gold Coast and Barbary Coast, Moody's added. Any upgrade would require successful completion of all construction activities, improving and sustainable operating cash flow performance at the Orleans, Gold Coast and Barbary Coast, a demonstrated ability to generate operating cash surpluses over the long-term, and debt/EBITDA at 3.0 times or less.

Moody's cuts Bausch & Lomb to junk

Moody's Investors Service downgraded Bausch & Lomb to junk, affecting $800 million of debt including its senior ratings, lowered to Ba1 from Baa3.

Moody's said that despite new management it expects Bausch & Lomb will continue to face external challenges in reversing its lagging operating performance.

Since the middle of 2000, Bausch & Lomb has been attempting to stem declining revenues and operating margins through a variety of restructuring initiatives including a major staff reduction announced in late 2000 and another, announced more recently, following the arrival of a new CEO in late 2001, Moody's said.

"While we note that the presence of new senior management brings a new opportunity for the company to execute a turnaround and we recognize that vendor inventory levels have normalized to some degree, we believe that external constraints including strong competition and underlying industry trends will continue to present significant challenges in invigorating the company's performance," the rating agency added. "For instance, within the lens care and surgical businesses, Moody's believes it may be difficult for the company to regain market share lost in 2001. Although recent results in the pharmaceutical division have been positive, we believe that products in certain markets may continue to face potential pricing pressure, as evidenced by past volatility."

S&P downgrades MasTec

Standard & Poor's downgraded MasTec Inc. and removed the company from CreditWatch with negative implications. The outlook is stable.

Ratings affected included MasTec's $200 million 7.75% senior subordinated notes due 2008, lowered to BB+ from BBB-.

S&P downgrades Broadwing

Standard & Poor's downgraded Broadwing Inc. The outlook is stable.

Ratings affected include Broadwing's $50 million 7.25% secured notes due 2023, lowered to BB from BB+, its $135 million 6.75% cumulative convertible preferred stock, lowered to B from B+, its $900 million five-year revolving credit facility, $750 million five-year term loan A and $450 million term loan B, all jointly issued with IXC Communications Services Inc. and all lowered to BB from BB+, its $200 million senior secured tranche C revolving credit facility due 2007, lowered to BB from BB+, and its $400 million 6.75% convertible subordinated notes due 2009, lowered to B+ from BB-; Broadwing Communications Inc.'s $300 million 12.5% junior exchangeable preferred stock, lowered to B from B+ and its $450 million 9% senior subordinated notes due 2008, lowered to B+ from BB-; and Cincinnati Bell Telephone Co.'s $120 million 7.2% medium-term notes due 2023, 4.375% debentures due 2002 and $150 million 6.3% guaranteed debenture due 2028, all lowered to BB from BB+.

S&P rates new Von Hoffmann notes, loan

Standard & Poor's assigned a B rating to Von Hoffmann Corp.'s planned $200 million senior notes due 2009 and a BB- rating to its $75 million senior secured revolving credit facility due 2006.

Moody's confirms American Trans Air

Moody's Investors Service confirmed its ratings on American Trans Air, Inc. and its parent company Amtran, Inc., affecting $1 billion of debt. The outlook is negative. Ratings affected include American Trans Air's senior secured revolving credit facility at B3, its enhanced equipment trust certificates series 1996-1A at Baa1, series 1996-1B at Baa3, series 1996-1C at B1, series 1997-1A at Baa1, series 1997-1B at Baa3, series 1997-1C at B1 and series 2000-1C at B1, and Amtran's senior unsecured notes at Caa1.

The action concludes a review begun after the Sept. 11 terrorist attacks.

Moody's said its confirmation reflects "balanced revenue provided by the company's military and commercial charter operations and scheduled passenger businesses and its relatively low cost of operations, both of which should lead to a recovery of earnings that is at least in line with the recovery of the industry in general."

American Trans Air currently has weak cash flow and limited financial flexibility in the face of a "highly challenging business environment," Moody's said.

The negative outlook reflects the airline industry's continued susceptibility to shock risk and the company's need to enhance its operating and financial profile in order the sustain its competitive position, the rating agency added.

Moody's rates Arch Coal loans Ba1, cuts outlook

Moody's Investors Service assigned a Ba1 rating to Arch Coal, Inc. and Arch Western Resources, LLC's new credit facilities, including Arch Coal's $350 million senior secured revolving credit facility and Arch Western Resources' $150 million senior secured term loan A due 2007 and $525 million senior secured term loan B due 2008. Moody's confirmed Arch Coal's Ba1 senior implied and Ba2 senior unsecured issuer ratings and lowered the outlook to stable from positive.

Moody's said the outlook change reflects a revised estimation of Arch's operating cash flow given the decline in spot coal prices over the last several months. That decline also reduces the likelihood of sufficient debt reductions for an upgrade within the next 12-18 months.

Moody's noted that after 2002 Arch Coal becomes increasingly exposed to spot coal prices in the Powder River Basin and Central Appalachia.

Current spot prices for these coals are back to their levels of early 2001 as a result of a warm winter, the soft U.S. economy, reduced coal demand and higher coal inventories, Moody's said.

However, Arch Coal will benefit in 2002 and 2003 from the sales contracts it negotiated last year, so there is no downward rating pressure at this time.

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