Moody's cuts Qwest

Moody's Investors Service downgraded Qwest Communications International and its subsidiaries and kept the company on review for possible further downgrade, affecting $26.1 billion of debt. Ratings lowered include Qwest Communications International and Qwest Capital Funding's senior unsecured debt, cut to B2 from Ba2, and Qwest Corp.'s senior unsecured debt, cut to Ba3 from Baa3.

Moody's said the downgrade follows Qwest's announcement that the Denver based U.S. Attorney has launched a criminal investigation of the company. While details of the investigation have not been disclosed, Moody's said it is concerned about possible adverse consequences on the company's near-term liquidity should asset sales or planned accounts receivable securitizations suffer any setbacks resulting from today's announcement.

Moody's said it is also concerned about the deleterious long-term affects such an investigation might have on the company's ability to grow and retain customers.

Moody's added that its review will continue to focus on Qwest's ability to sell DEX in the near-term for reasonable cash proceeds; Qwest's ability to complete a proposed $300 million asset securitization program in the very near term; an analysis of the effects of the SEC and Department of Justice investigations on Qwest's ability to retain and grow customers and suppliers ; Qwest's operating performance in light of uncertain industry trends; some resolution or clear direction resulting from the SEC investigation into the company's accounting practices and the Department of Justices criminal probe, and Qwest's ability to repay or extend its $3.4 billion May 2003 bank facilities.

Fitch cuts Qwest to junk

Fitch Ratings downgraded Qwest Communications International, Inc. and its subsidiaries and put the ratings on Rating Watch Negative. Ratings lowered include Qwest Communications International, Qwest Capital Funding, Inc. and LCI International's senior unsecured debt, cut to B from BBB- and Qwest Corp.'s senior unsecured debt, cut to B from BBB. The commercial paper ratings of Qwest Capital Funding and Qwest Corp. were cut to B from F.

Fitch said the downgrade follows Qwest's announcement that the U.S. Attorney's office in Denver has launched a criminal investigation of Qwest.

Given the current industry climate, Fitch said it believes the company's financial flexibility, including access to capital markets, will be limited.

As part of the company's plan to de-lever its balance sheet and increase financial flexibility, Qwest had been in the midst of evaluating bids for the proposed sale of its directory and wireless businesses, Fitch noted.

While Qwest has no additional information on the investigation or its impact on the asset sales, Fitch said it believes that the criminal investigation coupled with ongoing SEC investigations will significantly diminish the company's ability to sell assets in the timeframe previously contemplated.

Absent assets sales, Fitch said it anticipates that the 4.0 times debt to EBITDA covenant for the fourth quarter of 2002 contained in the company's $4.0 billion bank facility could be violated.

The company, at the end of the first quarter, appeared to have adequate liquidity to meet 2002 debt maturities totaling $1.15 billion. Moreover, the lack of asset sales coupled with limited financial options could pressure the company's liquidity position entering 2003 as approximately $4.6 billion of debt (including $1.2 billion of bond debt and $3.4 billion of bank debt) is scheduled to mature, Fitch said.

S&P keeps Qwest on watch

Standard & Poor's said Qwest Communications International Inc. remains on CreditWatch with negative implications following the company's announcement that it has been notified of a criminal investigation being conducted by the U.S. Attorney General's office.

Ratings remaining on watch include Qwest Communications International's senior unsecured debt at BB, Qwest Corp.'s senior unsecured debt at BB+ and Qwest Capital Funding Inc.'s senior unsecured debt at BB.

S&P said the criminal investigation is a new development that could potentially materially weaken the company's financial and business profile and increase the likelihood that the ratings will be lowered.

This investigation also increases concerns about the timing of sales of the company's directory business, which is key to the company's ability to meet the year-end 2002 total debt to EBITDA covenant of 4 times contained in its $3.4 billion bank facility, S&P said.

S&P keeps Pilgrim's Pride unchanged

Standard & Poor's said there is no impact on the ratings or outlook of Pilgrim's Pride Corp. from the company's revised expectations for third quarter fiscal 2003 earnings. S&P gives Pilgirm's Pride a BB corporate credit rating with a negative outlook.

The earnings revision is based on both an outbreak of low-pathogenic avian influenza among turkeys in the company's eastern operations and on currency translation devaluation losses that affected operations in Mexico, S&P noted.

The negative outlook continues to reflect the firm's weak credit measures following the 2001 WLR Foods Inc. acquisition and lower commodity prices of poultry. The company's inability to improve credit measures in the intermediate term could lead to a lower rating, S&P commented.

S&P keeps United on watch developing

Standard & Poor's said United Air Lines Inc. and UAL Corp. remain on CreditWatch with developing implications after the International Association of Machinists formally rejected management's proposal for a 10% wage reduction. S&P gives the company a corporate credit rating of B.

The IAM action represents a serious setback for United's effort to cut its operating costs and seek a $1.8 billion federal loan guaranty, S&P said.

Although United, the second-largest airline in the world, has reached a tentative concessionary agreement with its pilots union, that agreement is contingent on a pilot member vote, receiving a federal loan guaranty, "equitable and meaningful participation... by UAL's other labor groups," and other conditions, the rating agency noted.

Although non-contract employees are to make concessions as part of the cost-cutting program, it appears that the pilots would expect one or both of the two employee groups (mechanics and ground service employees) represented by the IAM to participate in wage concessions, as well (the flight attendants have, from the beginning, indicated no willingness to discuss concessions). The IAM stated that it was "unwise to begin discussions" with outgoing interim CEO Jack Creighton, implying a further, possibly lengthy, delay in addressing this part of United's operating cost problem.

The IAM position provides further evidence that the ownership and governance structure put in place with UAL's 1994 employee buyout (which established majority employee ownership, with all groups except the flight attendants participating) has not solved longstanding labor relations problems, nor tensions between labor groups, S&P said.

Although UAL has adequate near-term liquidity with $2.9 billion of cash at March 31, 2002, it also faces large upcoming debt payments of about $1.5 billion through March 31, 2003; it has not raised any debt or equity in the public capital markets since Sept. 11, 2001; and it continues to incur heavy, albeit narrowing, losses, S&P said.

S&P confirms Nortek

Standard & Poor's confirmed Nortek Inc.'s ratings following the definitive agreement for Kelso & Co. LP to acquire the company for $46 per share. Ratings affirmed include the B+ corporate credit rating, the B+ senior unsecured debt rating and the B- subordinated debt rating. The outlook is stable.

The ratings on Nortek reflect the company's significant portfolio of building products with leading market shares, offset by competitive, cyclical markets and weak cash flow protection measures primarily because of aggressive use of debt, S&P said.

The company's funds from operations to total debt ratio is in the area of 10%, with total debt to EBIDTA at about 4.5 times.

S&P confirms Parker Drilling, off watch

Standard & Poor's confirmed Parker Drilling Co.'s ratings and removed them from CreditWatch with negative implications. The outlook is stable. Ratings affected include Parker Drilling's $275 million 9.75% senior notes due 2006, $150 million 9.75% senior notes series C due 2006 and $235.612 million 10.125% senior unsecured notes due 2009, all at B+, its $100 million senior secured term loan due 2002 at BB and its $175 million convertible subordinated notes at B-.

S&P said the action follows Parker Drilling's termination of its bid to acquire Australian Oil & Gas Corp. Ltd.

S&P cuts Song Networks

Standard & Poor's downgraded Song Networks NV and kept the company on CreditWatch with negative implications.

Ratings lowered include Song's $150 million 13% with-warrants notes due 2009, €100 million 13% with-warrants notes due 2009, €150 million 11.875% notes due 2009 and €175 million 12.375% notes due 2008, all cut to C from CC.

S&P withdraws Brush ratings

Standard & Poor's withdrew its ratings on Brush Engineered Materials Inc. at the company's request. It had rating Brush's senior unsecured debt at B+.

S&P lowers ISP outlook

Standard & Poor's lowered its outlook on International Specialty Products, Inc. to negative from stable, affecting $900 million of debt. S&P confirmed International Specialty Products' senior unsecured debt at B+, ISP Chemco Inc.'s senior subordinated debt at BB- and bank loan at BB+ and International Specialty Holdings Inc.'s senior secured debt at B+.

S&P said the outlook change reflects the increased credit risk following an offer by the majority shareholder to take ISP private.

Samuel Heyman, who currently owns about 80% of ISP's outstanding shares and is chairman of the board of directors, proposed a transaction in which the remaining shareholders receive $10 a share, which would value the offer at about $120 million, S&P noted.

The offer raises concerns that financial management of the company has become more aggressive, S&P said. In addition, completion of the offer would weaken cash flow protection measures already at substandard levels and could meaningfully reduce the financial flexibility currently supported by the company's high levels of cash and securities.

Moody's cuts CSN outlook

Moody's Investors Service lowered its outlook on Companhia Siderurgica Nacional to negative from stable and confirmed its ratings including CSN Iron, SA's senior unsecured debt at B1 and CSN Islands Corp.'s senior unsecured debt at B1.

Moody's said it changed the outlook to reflect its change in Brazil's rating outlook to negative in light of bearish investor sentiment.

This change in outlook reflects the real and potentially lasting impact on the government debt dynamics that can result from a sharply negative change in investor sentiment that has emerged in recent weeks, Moody's said.

This discernible shift in sentiment has resulted in deterioration in the capacity of Brazilian borrowers, including the government, to access financial markets except on less favorable terms, Moody's said.

Moody's cuts Uruguayan banks

Moody's Investors Service downgraded Uruguayan banks' ratings following a downgrade of the Republic of Uruguay's foreign currency country ceilings for bank deposits to B3 from B1, with a negative outlook.

Ratings lowered and put on negative outlook include Banco de Montevideo SA's long-term foreign currency deposits, cut to B3 from B1 and long-term foreign currency senior debt cut to B1 from Ba2; Banco Comercial SA's long-term foreign currency deposits, cut to B3 from B1, long-term foreign currency senior debt cut to B1 from Ba3 and long-term foreign currency subordinated debt downgraded to B2 from B1; and ABN AMRO Bank NV, Montevideo Branch, Banca Nazionale del Lavoro SA (Uruguay), Banco Santander SA (Uruguay), BankBoston, NA (Uruguay), Lloyds TSB bank plc (Uruguay), Banco ACAC SA and Banco Surinvest SA which all saw their long-term foreign currency deposits downgraded to B3 from B1.

Moody's sees Vivendi's new bank facility as a positive step

Moody's Investors Service acknowledged Vivendi Universal's recent additional €1 billion unsecured credit facility from a group of international banks to provide incremental short term liquidity as an important step in the right direction to shore up pressured short term liquidity and evidences the support of its banks.

Moody's noted, however, that while the facility is unsecured its availability is subject to very stringent terms and conditions leaving the company highly dependent on the banks' support.

The company is working with the banks on putting in place a refinancing to address longer term financing requirements. Moody's said it believes a comprehensive refinancing in the very near term remains absolutely essential for to secure liquidity for the medium term and to regain a degree of financial flexibility.

This should allow the company to review its strategy and to execute potential asset sales in an orderly fashion.

Against this background, Vivendi's ratings remain under review for possible downgrade, reflecting liquidity concerns but also uncertainties about the further development of its credit fundamentals.

Moody's cuts Elan to B2

Moody's Investors Service lowered Elan Corp. plc's senior guaranteed debt ratings to B2 from Ba2.

The downgrade reflects concern over the fall in value of Elan's balance sheet investments, risks associated with implementing the recovery plan, anticipated disruption from departure of senior management and expected depletion of cash due to nearing debt maturities and contingent obligations, Moodoy's said.

The ratings remain under review for possible further downgrade, awaiting further details on balance sheet valuation and management guidance for 2002, as well as the continuing uncertainties associated with the SEC investigation into Elan's accounting practices, Moody's said.

Moody's said its concerns about the valuation of Elan's balance sheet investments are heightened by the recent announcement that it expects a non-cash impairment charge of about $600 million.

In addition, Moody's noted that along with $160 million of EPIL III debt repayment, Elan guaranteed a loan to a purchaser of EPIL III assets that may be called in three months.

Moody's believes these developments indicate difficulty Elan in disposing of financial investments, many of which are in privately held biotech and pharmaceutical companies, as it attempts to simplify its balance sheet.

Moody's is concerned that further erosion of Elan's book equity could result from potential additional write-offs of Elan's financial assets, intangible assets or restructuring charges related to its business recovery plan.

Moody's noted, however, that in addition to financial assets Elan has significant non-core assets it may sell as part of its business recovery plan.

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