Moody's downgrades United Pan-Europe

Moody's Investors Service downgraded United Pan-Europe Communications NV and its subsidiaries, affecting $9.1 billion of debt securities. Among the reductions, Moody's cut UPC's senior unsecured notes to Ca from Caa3 and its subsidiary bank debt to B3 from B2. It also cut UPC Polska's senior unsecured bonds to Caa3 from Caa2. The outlook is negative. Moody's previously downgraded the company on Oct. 2, 2001.

Moody's said the most recent downgrade reflects the "increased certainty of a restructuring, as explicitly acknowledged by the company, and Moody's expectation that recovery prospects for senior noteholders will be minimal, as reflected in the company's adjusted ratings."

Moody's said the B3 senior bank facility rating reflects its belief that the collateral still provides an "adequate level" of asset coverage for senior lenders. UPC Polska's senior note rating reflects the "relatively stronger asset coverage."

S&P cuts ACT Manufacturing sub debt rating to CCC from B-

Standard & Poor's lowered its corporate credit and bank loan ratings on ACT Manufacturing Inc. to B-s from B+ and its subordinated note rating to CCC from B-. At the same time, the ratings were placed on watch with negative implications. The ratings action reflects the company's limited financial flexibility due to violation of bank loan covenants and operating losses that are likely to persist in the near term, resulting in deteriorating credit measures. Hudson, Mass.-based ACT provides electronic manufacturing services, primarily to the telecommunications and networking markets, S&P said.

On Nov. 9, 2001, the company entered into a limited waiver to the credit agreement with its lenders, waiving non-compliance by ACT of certain borrowing restrictions and reduces the revolving loan availability. S&P said it would review the financial effect of near-term financing plans to enhance liquidity, restructuring efforts, and operating performance prior to resolving the watch placement.

S&P downgrades Cherokee International

Standard & Poor's downgraded Cherokee International LLC, including cuttings its bank loan rating to CCC+ from B and its subordinated debt to CCC- from CCC+. The outlook is negative.

S&P said it took the action because of "significantly lower sales and profitability, resulting in very weak credit measures."

It added that the ratings reflect Cherokee's "niche market position and highly leveraged financial profile that leave the company susceptible to weaker economic environment and a downturn in demand."

S&P noted most of Cherokee's sales are from the communications market segment, particularly the networking and telecommunications sectors.

Sales decreased by almost 40% to $26.0 million for the three months ended Sept. 30, 2001, from the same period in the previous year, S&P added.

S&P downgrades Heafner Tire

Standard & Poor's lowered its ratings on Heafner Tire Group, affecting $288 million of debt including its bank loan, cut to B- from B, and its senior unsecured debt, cut to CCC+ from B-. S&P also put the ratings on CreditWatch with negative implications.

S&P said the downgrade reflects Heafner's "weaker-than-expected operating results, high debt leverage, constrained liquidity, and Standard & Poor's concerns that financial measures will remain below expected levels for the near to intermediate term."

The rating agency said the weak results are because of reduced demand for consumer and commercial replacement tires and high expense levels.

"Demand has declined due to the soft U.S. economy," S&P commented. "In addition, the Firestone tire recall during 2000 led to the early replacement of some consumer tires, which has depressed demand in 2001. Ford Motor Company's 2001 recall of certain Firestone tires is not benefiting Heafner because the replacement tires are being shipped directly to Ford's dealers, bypassing the wholesale distribution channel."

S&P puts Integrated Electrical on negative watch

Standard & Poor's put Integrated Electrical Services Inc. on CreditWatch with negative implications, affecting $280 million in outstanding debt. Ratings affected include the senior seucred bank loan at BBB- and the subordinated debt at BB-.

S&P said its action follows Integrated Electrical's announcement that as a result of deteriorating market fundamentals in the commercial, industrial, and technology markets, EBITDA in 2002 will be in the $93 million to $99 million range; and earnings, excluding any goodwill adjustments, will be in the low-to-mid $20 million range, implying total debt to EBITDA in the 3.0x-3.5x area, all well below prior expectations.

S&P said the company's forecast suggests it "will be close" to breaking bank covenants in the next 12 months.

In addition, weakened profitability, low market capitalization and expected adoption of SFAS 142, mean the company will need to write off essentially all of its goodwill in its first quarter (ending in December), which will increase debt to capital to the high-80% area from about 39%.

S&P downgrades Ineos Acrylics

Standard & Poor's downgraded Ineos Acrylics Group Holdings Ltd., including reducing the subordinated debt of its Ineos Acrylics Finance plc unit to B from B+. The outlook is stable.

S&P said it downgraded Ineos because it believes the company is "unlikely in the near term to improve its financial profile to levels commensurate with its previous rating, given the current economic downturn. Nevertheless, the ratings continue to acknowledge Ineos Acrylics' leading global positions in the cyclical but steadily growing acrylics business."

Operating performance has been hurt by weak demand worldwide for methyl methacrylate and "high, albeit continually decreasing" raw materials costs, S&P said.

Ineos already had weak credit ratios for its category and the tough business conditions have delayed improvement.

S&P said it does not expect the industry to rebound before mid-2002.

S&P affirms Chesapeake Corp., removes from watch

Standard & Poor's affirmed its ratings on Chesapeake Corp. and removed them from CreditWatch were they were placed on Nov. 1, 2001. Ratings affirmed include Chesapeake Corp.'s senior unsecured debt at BB and its subordinated debt at B+. The outlook is stable.

S&P said proceeds from Chesapeake's recent £115 million subordinated debt issue were used to reduce borrowings under its fully utilized $250 million revolving credit facility, "eliminating the near-term liquidity concerns that prompted the CreditWatch placement."

S&P added that the ratings reflect "Chesapeake Corp.'s slightly below-average business position within specialty packaging, a growth by debt-financed acquisition strategy, and aggressive financial policies."

S&P downgrades Encompass Services, still on negative watch

Standard & Poor's downgraded Encompass Services Corp., affecting $1 billion of debt. Among the ratings cut are Encompass' senior secured debt at BB- and its subordinated debt at B. The ratings remain on CreditWatch with negative implications where they were placed Sept. 26, 2001.

S&P said it took the action because of Encompass' "continued deterioration of profitability and cash flow generation, which have eroded the financial profile and financial flexibility."

For the nine months to Sept. 30, 2001, EBIT declined 41% from the previous year period, excluding the losses generated from Encompass Global Technologies, which has been classified as a discontinued operation, S&P said.

The rating agency added: "The drop in earnings generation is a result of challenges in integrating operations, poor project management and process disciplines, a weaker domestic economy, and intensified pricing pressures in some end markets."

S&P keeps Enron debt on watch, negative

Standard & Poor's said Tuesday that its ratings on Enron Corp. (BBB-/A-3) will remain on watch with negative implications following the filing of the company's third-quarter SEC Form 10-Q report. The 10-Q contained information on a ratings trigger event involving an existing minority interest on Enron's balance sheet held by Citibank and a group of other banks that have the right to accelerate the sale of underlying assets, including a $690 million Enron note, to Nov. 26, 2001 from 2003, S&P said. At this time, the trigger event does not constitute an event of default. However, S&P said it does raise liquidity issues for Enron. Standard & Poor's believes, given the alignment of interests between Enron and the banks, that the company's efforts to renegotiate and extend the maturity of the obligation will be successful.

An expected additional infusion of $500 million of new private equity and around $800 million of imminent asset sale proceeds will further enhance liquidity in the relatively short term. As Enron's credit situation continues to stabilize, S&P said it also expects future maturing obligations to be extended and margin requirements to ease, which will improve the company's liquidity even further. Enron's ratings remain on watch, negative, because of the near-term refinancing risk and Dynegy deal risk, but an update of the watch listing to positive is possible in the first quarter of 2002 if the resolution of those risks becomes clearer, S&P said.

Moody's lifts Packard Bioscience to investment grade

Moody's Investors Service upgraded Packard BioScience Co.'s senior subordinated notes to investment grade, raising them to Baa3 from B3. The outlook is negative.

The action follows the closing of Packard's merger into PerkinElmer, Inc.

Moody's said that although PerkinElmer has not legally assumed or guaranteed Packard's debt, bondholder protection measures should be enhanced by Packard's merger into the financially stronger company.

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