Moody's downgrades Level 3

Moody's Investors Service downgraded Level 3 Communications, Inc., affecting $6.4 billion of debt. Ratings affected include Level 3's senior secured debt, lowered to Caa1 from B2, and its senior unsecured debt, lowered to Caa3 from Caa1, and its convertible subordinated debt, lowered to Ca from Caa2. The outlook remains negative.

Moody's said the downgrade reflects the "tempered growth of the company's fundamental business plan that has been compressed from its original scope by conditions largely outside of management's control. The dot-com meltdown has dashed the original expectations of the emerging telecommunications sector that considerable revenue growth would be generated from an exponential growth in internet-related traffic; instead, the financial collapse of the ISP and ASP sectors has straddled carriers, including Level 3 with a significant exposure to 'at-risk' customers."

Although Level 3 has shifted it sales focus to large data-centric end-users, its competitors have done the same, Moody's said.

Robust dark fiber revenues earlier in the year have dropped off markedly, reflecting the current excess of global capacity and the growth in service revenues from the shift in sales strategy has yet to compensate, the rating agency added.

Adjusted EBITDA declined 69% sequentially in the third quarter of 2001, Moody's noted, adding it sees no substantial rebound into next year.

"If the company is unable to revitalize cash revenues, we consider it likely that current bank covenants could be tripped in the intermediate term, unless waived," Moody's added.

Moody's downgrades Continental

Moody's Investors Service downgraded Continental Airlines, Inc., affecting $16.3 billion of debt. The outlook is negative. Ratings affected include: Continental's senior implied rating, cut to B2 from B1, its preferred stock, lowered to Ca from Caa1, and its enhanced equipment trust certificates, all lowered one notch.

The action completes the review begun after the Sept. 11 terrorist attacks.

Moody's said the downgrade reflects "the more difficult business environment facing Continental due to the weak economy, potential weakness in the Houston market stemming from energy concerns, and the specific effects on the airline industry of the Sept. 11 terrorist attacks. While Continental's operating performance exceeded that of many industry peers during the third quarter of 2001, the intermediate term outlook for the company's earnings and debt protective measures has deteriorated. Moreover, cash losses since September 11 have eroded Continental's financial profile.

"These concerns are balanced against the company's lower than average cost structure, the effectiveness of its aggressive cost cutting efforts and its well established position in certain markets. The rating agency also noted that the airline industry is fragile and highly vulnerable to shock risk. The negative rating outlook considers the risk that in the current environment any adverse development, that might otherwise have been easily tolerated, could have more devastating implications for a carrier."

Moody's downgrades United Air Lines

Moody's Investors Service downgraded United Air Lines, Inc., affecting $13.8 billion of debt. The outlook is negative. Ratings affected include United's senior implied, cut to B3 from B1, its senior unsecured debt, cut to Caa1 from B2, UAL Corp.'s preferred and trust preferred stock, cut to Caa3 from Caa1, and UAL's convertible preferred stock and its cumulative preferred stock, cut to Ca from Caa2.

Moody's said the downgrade reflects its view that the outlook for United's cash flow has deteriorated and that "large cash losses from operations of the last several months have sharply eroded United's financial profile."

A high cost base will limit recovery of adequate levels of cash flow, Moody's said.

Although United currently has adequate liquidity, it also has one of the highest levels of cash burn in the industry, "leaving it more vulnerable to a prolonged period of business weakness," Moody's said.

"These concerns are balanced against the company's business franchise, and the potential benefits of restructuring and cash conservation initiatives including deferral of capital expenditures. The current ratings anticipate a measurable recovery in operating cash flow over the next year or the ratings could be further pressured."

Fitch cuts Netia to D

Fitch downgraded Netia Holdings' senior unsecured corporate credit rating to D from C following a default on cross-currency swap obligations on Dec. 17 and the prospect of default on overdue interest payments on some of its bonds.

Fitch added that the D rating reflects its estimation that bondholder recoveries are likely to be less than 50% and that Netia will have a capital restructuring.

Moody's downgrades EOTT

Moody's Investors Service downgraded EOTT Energy Partners, LP including lowering its $235 million of 11% senior unsecured notes due 2009 to B1 from Ba3. The outlook is stable.

But Moody's also warned the outlook could change if EOTT does not complete early next year a committed multi-year bank credit facility "of sufficient scale to support business levels compatible with the new rating and current leverage" or if first half 2002 business, financial structure and cash flow trends do not support a stable outlook.

Moody's said EOTT's interim $150 million letter of credit capacity is not incompatible with a Ba3 rating, given EOTT's midstream business and conditions in the trade, banking, and capital markets.

The downgrade reflects "financial and business uncertainties both before and after EOTT arranges its permanent credit facility," Moody's added.

Moody's raises Impress outlook to stable

Moody's Investors Service raised its outlook on Impress Metal Packaging Holdings BV to stable from negative. Ratings affected include the company's DEM 200 million 9.875% senior subordinated notes due 2007 at B3.

Moody's said it changed the outlook after Impress resolved negotiations with Heinz, receiving compensation from Heinz for restructuring costs, obtained covenant amendments to its senior secured credit facility and made continued progress in restructuring and cost-cutting plans and substantial improvements in working capital management.

Although EBITDA (earnings before interest, taxation, depreciation and amortization) and cash flow generation has been challenged in 2001 by factors including a poor fruit and vegetable season, increased tinplate prices and underperformance in the DPF business, Moody's said it expects recent management initiatives and market developments should contribute to improved performance in 2002.

Moody's puts Granite on review for upgrade

Moody's Investors Service put Granite Broadcasting Corp. on review for possible upgrade, Ratings affected include its $198 million of senior subordinated notes rated Ca, and its $263 million of preferred stock rated C.

Moody's said the review was prompted by Granite's announcement that it will sell its San Francisco/San Jose station KNTV to NBC for $230 million plus working capital and the company's pro rata portion of the first installment of its affiliation payments. Proceeds will be used to repay bank debt.

Granite will eliminate a $37 million payment due to NBC in January 2003 and will substantially reduce its bullet term loan payment due December 2003.

"In Moody's opinion, the combination of these obligations had previously left Granite in a financially fragile position and likely in need of restructuring resulting in impairment of its debt. Granite's ability to realize substantial cash value for KNTV, relative to the company's immediate need, has likely reduced the degree of impairment that noteholders may experience," the rating agency commented.

However Moody's still has concerns about the soft advertising environment and Granite's margin performance which remains below that of its peers. Further cash flow erosion could cause liquidity concerns towards the latter portion of next year, Moody's added.

Moody's puts Caraustar on review for downgrade to junk

Moody's Investors Service put Caraustar Industries, Inc. on review for possible downgrade to junk. Affected ratings include the company's guaranteed senior unsecured notes at Baa3 and its senior subordinated notes at Ba1, with debt securities totaling $400 million.

Moody's said it began the review in response to "continued low volumes and declining pricing in the company's core recycled paperboard business, and their negative effect on earnings, cash generation, and debt protection measurements. The ratings review will assess the company's plans for dealing with the current downturn, and the potential for a restoration in volumes over the long term."

Caraustar's current ratings include expectations that volumes will begin to return to normal in 2002 and that pricing for recycled paperboard products will remain relatively stable, Moody's said. "However, weakness in the current economy has prevented volume improvement, and there is growing pressure on pricing."

Moody's puts Magnum Hunter on review for upgrade

Moody's Investors Service put Magnum Hunter Resources, Inc. on review for possible upgrade. Affected ratings include the company's $129.5 million of 10% senior notes due 2007 at B2.

Moody's said its review follows Magnum Hunter's agreement to merge with Prize Energy Corp.

An upgrade will depend on both companies' pro forma year-end 2001 reserve bookings, which will reflect the productivity of their investment spending during the year and could include some revisions due to currently lower commodity prices.

Moody's review will consider leverage on reserves, future capital spending requirements and plans, combined unit economics and the combined production and reserve profiles of the companies.

Moody's confirms Premcor Refining, Port Arthur Coker

Moody's Investors Service confirmed its ratings and kept the negative outlook on Premcor Inc. and its units, affecting $1.6 billion of debt. Ratings affected include Premcor Refining, including its Ba3 senior unsecured and B2 subordinated ratings, Premcor USA's B3 senior unsecured rating and Port Arthur Finance's Ba3 senior unsecured rating.

Moody's noted The Blackstone Group controls 81% of Premcor, Inc., the parent of Premcor USA and Port Arthur Coker Corp. Premcor USA owns Premcor Refining, Port Arthur Finance finances Port Arthur Coker, and Premcor Refining operates Port Arthur Coker. Port Arthur Coker is strategic to Premcor Refining and to the Blackstone Group's exit strategy for its Premcor investment, Moody's said.

Moody's said the ratings outlook and possibly ratings could be favorably adjusted if Premcor executes its previously announced initial public offering, raises substantial net proceeds and if Blackstone downstreams all net IPO proceeds to Premcor Refining and Port Arthur Coker for debt reduction.

"In the meantime, the negative ratings outlook reflects the combination of high leverage, expected very weak margins for the fourth quarter of 2001 and weak first quarter 2002 margins, seasonal working capital needs, naturally highly volatile refining margins over time, and potentially very high burden of environmental capex needs over the next five years," Moody's said.

Moody's revises Young outlook to negative from developing

Moody's Investors Service revised its outlook on Young Broadcasting to negative from developing, affecting $1.8 billion of debt including Young's $800 million bank credit facilities rated Ba3, $250 million senior unsecured notes rated B2 and $750 million senior subordinated notes rated B3.

Moody's said the revision was prompted by NBC's announcement that it will acquire Granite Broadcasting's KNTV station to reach the San Francisco market, ending negotiations over a potential sale of Young's KRON station in San Francisco to NBC or an extension of KRON's affiliation agreement with the network.

On Nov. 6, Moody's cut Young's ratings and changed the outlook to developing.

"The negative outlook incorporates the challenges Young is expected to face as a result of KRON's switch to independence from network affiliation including achieving adequate ratings performance without the benefit of network programming, acquiring desirable syndicated programming, and managing the costs of promoting the change and expanding the company's news coverage in a competitive market," Moody's said.

Moody's downgrades Dynea

Moody's Investors Service downgraded Dynea International Oy, a 100%-owned subsidiary of Dynea Oy, and changed the rating outlook to negative. Ratings affected include Dynea's €250 million of 12.25% senior notes, cut to Caa1 from B3.

Moody's said the downgrade reflects Dynea's "continuous financial under-performance compared to Moody's original expectations," concerns about liquidity in a prolonged period of low demand for the group's resins products; a competitive European market for low-end formaldehyde-based resins and uncertainties in North America linked to the economic slowdown.

Fitch puts Empresas ICA on negative watch

Fitch put Empresas ICA SA de CV on Rating Watch Negative, affecting its senior unsecured long-term foreign currency and senior unsecured local currency debt ratings of BB-.

Fitch said its action reflects ICA's "continued low financial flexibility and stressed credit protection measures."

Despite withdrawing from non-performing projects, identifying non-core assets for divestment, aggressively reducing headcount, focusing on debt reduction and selectively bidding on new projects, ICA's cash generation and credit protection indicators remain weak for the rating category, Fitch said.

Moody's downgrades Acindar

Moody's Investors Service downgraded Acindar Industria Argentina de Aceros SA after the company said it is suspending principal and interest payments on its debt.

Affected ratings include Acindar's $100 million of 11.25% senior notes due 2004, cut to C from Caa3.

Moody's downgrades Argentinean corporations

Moody's Investors Service downgraded various Argentinean issuers after Argentina's foreign currency ceiling was cut to Ca from Caa3.

Affected ratings include Mastellone Hermanos SA's $225 million senior unsecured notes due 2008 cut to Ca from Caa3; Compania de Alimentos Fargo SA $120 million senior unsecured notes due 2008 cut to Ca from Caa3; IMASAC SA's $80 million senior unsecured global bonds due 2005 cut to Ca from Caa3; Industrias Metalurgicas Pescaroma SAIC's $150 million of 9.5% senior unsecured global notes due 2002 cut to Ca from Caa3; CableVision SA's $250 million senior unsecured notes, $275 million senior unsecured bonds and $425 million global MTNs, all cut to Ca from Caa3; Multicanal SA's MTN program and $687.5 million of senior unsecured notes cut to Ca from Caa3; Disco SA's $100 million of 9.125% senior notes due 2003 and $250 million 9.875% senior notes due 2008, both cut to Ca from Caa3; Coto Centro Integral de Comercializacion SA's $300 million global medium term note program to Ca from Caa3; Supermercados Norte SA's 10.875% senior notes due 2004 cut to Ca from Caa3.

Fitch downgrades Consumer Portfolio Services

Fitch downgraded Consumer Portfolio Services Inc.'s subordinated debt to CCC- from CCC. The Rating Outlook remains Negative.

Fitch said its action follows a review of management's plan for financing and integrating the pending acquisition of MFN Financial Corp. to be funded entirely with debt.

Fitch said it is concerned about CPS' weak capitalization position, especially in the current economic environment, the acquired risk profile of MFN's balance sheet, and the dependence on secured financing to fund its operation.

S&P cuts Banco Comercial to junk

Standard & Poor's downgraded Banco Comercial SA to junk, including lowering its $100 million of 8.25% bonds due 2007 and $100 million of 8.875% bonds due 2009 to BB+ from BBB-.

S&P downgrades Insilco

Standard & Poor's downgraded Insilco. Ratings lowered include Insilco Holding Co.'s $105 million of 14% senior discount notes due 2008 to CC from CCC+ and Insilco Technologies Inc.'s $120 million 12% senior subordinated notes due 2007 to CC from CCC+ and its credit facilities to CCC from B.

S&P downgrades Guitar Center

Standard & Poor's downgraded Guitar Center Inc.'s $66.7 million of 11% senior notes due 2006 to B from B+.

S&P downgrades Hudson Respiratory Care

Standard & Poor's downgraded Hudson Respiratory Care Inc.'s $115 million of 9.125% senior subordinated notes due 2008 to CCC- from CCC+ and its credit facilities to CCC+ from B. Ratings were removed from CreditWatch with negative implications.

S&P cuts Lodgian to D

Standard & Poor's downgraded Lodgian Inc. and Lodgian Financing Corp. to D.

Ratings affected include Lodgian Financing Corp.'s $200 million of 12.25% senior subordinated notes due 2009 previously rated C and its bank debt previously rated CC.

S&P downgrades Micro Warehouse

Standard & Poor's downgraded Micro Warehouse Inc., cutting its bank facilities to B- from B+. The ratings remain on CreditWatch with negative implications.

S&P downgrades Metromedia

Standard & Poor's downgraded Metromedia Fiber Network Inc.'s debt, keeping its corporate credit rating at CCC but changing the CreditWatch to developing from negative.

Ratings lowered include Metromedia's $650 million 10% senior unsecured notes due 2008, its $750 million 10% senior notes due 2009 and its €250 million 10% senior notes due 2009, all cut to CC from CCC-.

S&P downgrades eKabel Hessen

Standard & Poor's downgraded eKabel Hessen GmbH & Co. KG, cutting its €850 million bank loan due 2009 to B from B+ and its €465 million 14.5% notes due 2010, its €385 million 14.5% notes due 2010 and its $175 million 14.5% notes due 2010 to CCC+ from B-.

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