S&P downgrades Lucent

Standard & Poor's downgraded Lucent Technologies Inc. Ratings lowered include Lucent's $750 million 7.25% notes due 2006, $300 million 6.5% senior debentures due 2028, $500 million 5.5% senior notes due 2008, $1.36 billion 6.45% debentures due 2029. $25 million 8% senior unsecured notes due 2015, $2 billion 364-day secured revolving credit facility due 2002 and $2 billion five-year secured revolving credit facility due 2006, all lowered to B+ from BB-, and Lucent's $1 billion 8% redeemable convertible preferred stock, lowered to CCC+ from B-. The outlook is stable.

S&P said its action on Lucent reflects challenging market conditions, as the company's core customer base continues to defer purchases of new communications equipment.

Lucent lowered its revenue forecast to modest-to-10% growth from the depressed December quarter level compared to 10%-15% growth previously expected, S&P said.

Although net losses will likely decrease from the December quarter, the company no longer expects to achieve positive "bank EBITDA" in the March quarter, S&P noted. Therefore, the company does not expect to spin off its Agere Systems Inc. unit on the original schedule although it believes it will be able to meet the requirements with the June quarter's results.

Moody's puts Lucent on downgrade review

Moody's Investors Service put Lucent Technologies Inc. on review for possible downgrade, affecting $5 billion of securities including its senior unsecured debt at Ba3 and preferred stock at B3.

Moody's said its action is in response to "continued deterioration in telecom carrier capital spending plans which will likely have a material impact on Lucent's operating performance."

Lucent's already weak operating performance may deteriorate further, Moody's said.

The rating agency said Lucent is not expected to be able to reach "a number" of its near-term financial targets, including becoming EBITDA positive in the current quarter to permit the spin off of Agere and returning to bottom line profitability and positive cash flow during fiscal 2002.

Moody's said its review will look at Lucent's financial performance, the likelihood of reaching its breakeven revenue target, its relative market position and the ability to materially improve its cost structure and reduce its cash burn rate in the near term. The rating agency will also examine the financial flexibility developed, primarily through the divestiture of non-core assets.

Fitch affirms Lucent, negative outlook

Fitch Ratings affirmed Lucent Technologies Inc.'s senior secured credit facility at BB, senior unsecured debt at BB- and convertible preferred stock at B. The Rating Outlook is negative.

Fitch said its negative outlook reflects the operational issues and the execution risks surrounding the company's second phase restructuring strategy which includes significant headcount reductions and major changes to its organizational structure.

"The uncertain capital expenditure patterns of the company's customer base and the risk of further reductions will continue to pressure Lucent's revenues," the rating agency added.

However, Fitch said it expects Lucent will take additional actions, if necessary, to align its cost structure in order to improve profitability and cash flow sequentially. It also expects Lucent will spin off the remainder of Agere Systems, Inc. as soon as certain profitability levels are met, as defined in the company's bank agreement.

But Fitch warned: "If Lucent's operating targets are not achieved in the near term further negative rating actions are likely."

S&P puts Calpine on negative watch

Standard & Poor's put Calpine Corp. on CreditWatch with negative implications. Ratings affected include Calpine's senior unsecured debt at BB+ and its convertible preferred stock at B+.

S&P said its action follows Calpine's decision to secure approximately $2 billion ahead of the company's unsecured bondholders.

Calpine plans to pledge all of its 1.7 trillion cubic feet of U.S. and Canadian gas assets, as well as its Saltend power plant and its equity investment in nine U.S. power plants to three credit facilities, S&P noted.

"Over a compressed time frame, Standard & Poor's will evaluate whether the additional debt, its covenants, and its security sufficiently impair Calpine's BB+ corporate credit rating to warrant a downgrade," the rating agency said.

"The magnitude of the offering and its attendant security relative to Calpine's total capitalization, however, indicate that a downgrade is possible.

"While the $2 billion debt issuance may improve Calpine's short-term liquidity position, the additional debt will likely increase interest expense, refinancing risk, and interest rate risk, and limit financial flexibility."

Fitch downgrades Calpine

Fitch Ratings lowered Calpine Corp.'s senior unsecured debt to BB from BB+ and its convertible trust preferred to B from BB-. Fitch also removed Calpine from Rating Watch Negative and gave it a stable outlook.

Fitch said its action follows Calpine's announcement it has pledged its U.S. and Canadian natural gas reserves, United Kingdom Saltend power plant, and equity investment in nine U.S. power plants to the financial institutions providing $2 billion of funding, under a new secured debt financing arrangement.

Fitch said the rating downgrades reflects that the assets are pledged to $2 billion of term debt and borrowing capacity that is structurally senior to Calpine's unsecured debt, which also reduces the asset protection available to unsecured bondholders.

Fitch noted Calpine management recently valued its natural gas reserves at around $2.7 billion, and they had been considered a viable source of near-term liquidity either through a direct sale or reserve base financing.

However, the transaction improves Calpine's near-term liquidity position and stabilizes the rating outlook.

The new loans and cash on hand will provide funds to pay off $685 million of zero-coupon convertible debentures due 2021, putable in April 2002, and satisfy working capital and construction funding requirements for the remainder of 2002, Fitch added.

Moody's rates Entravision new notes at B3

Moody's Investors Service assigned a B3 rating to Entravision Communications Corp. proposed $200 million guaranteed senior subordinated notes due 2009. The outlook is stable.

Moody's said its assessment reflects the risks posed by Entravision's high leverage and thin cash flow coverage, which may be further weakened if, as Moody's expects, management continues to pursue its acquisition strategy, likely financed by incremental debt.

"History, and expansion of the company's maintenance financial leverage covenant as presently contemplated, supports this premise and also suggests a potentially higher financial risk tolerance level by management going forward than that under which it has operated historically," Moody's commented.

There are also broader risks to the company's business strategy, which entails reformatting stations upon acquisition, resulting in revenue effectively being built from scratch, Moody's added.

Moody's also noted that Entravision is dependent on Univision, leading to a lack of television network diversification, and also has a lack of geographic diversity in its outdoor advertising portfolio, which continues to be negatively impacted by the weak economic environment in the New York metropolitan area in particular.

On the positive side, Entravision's geographically diverse station portfolio has substantial underlying asset value, its stations are prominent in its niche, and it is helped by the growth prospects of Spanish-language media more broadly.

Moody's downgrades Energis, see default

Moody's Investors Service downgraded Energis plc, including lowering its £125 million senior unsecured notes due 2009, $200 million senior unsecured notes due 2009 and £300 million global bonds due 2010 to Ca from Caa2 and Energis Holdings Ltd.'s £725 million senior secured revolving and term credit facilities due 2008 to B3 from B2. The outlook is negative.

Moody's said it cut Energis because it expects an imminent default on Energis' senior unsecured debt, specifically Moody's sees a strong likelihood Energis will fail to make its £13.5 million interest payment due March 15 on its £125 million 9.5% senior unsecured notes due 2009.

The ratings also reflect the high expected loss to bondholders in a default situation, Moody's added.

The most recent covenant waiver from its bank lenders provides short-term liquidity to Energis' UK business but also severely restricts the company's ability to upstream cash to the plc level to service unsecured debt obligations, Moody's said.

Fitch downgrades Edelnor, sees default

Fitch Ratings downgraded the local and foreign currency ratings of Empresa Electrica del Norte Grande SA (Edelnor) to C from CCC and kept it on Rating Watch Negative, affecting $340 million of debt.

A C indicates that default is imminent in the near future, Fitch said.

Fitch said Edelnor is expected to default on completion of a renegotiation of terms of its international debt with a majority of its bondholders in the near term.

The next debt payment of $9.687 million is due March 15.

While a renegotiation may avoid a potential bankruptcy, it will be considered a default on the current bonds, Fitch added.

Failing that, Edelnor does not have sufficient cash balances to meet debt service and is unlikely to generate enough cash in the first quarter from operations, Fitch said.

Fitch downgrades Tricon to junk

Fitch Ratings downgraded Tricon Global Restaurants, Inc. to junk, cutting its ratings to BB+ from BBB-. The outlook is stable.

Fitch said its action follows Tricon's announcement that it will acquire the Yorkshire Group, owner of the A&W and Long John Silver restaurant chains. Tricon will pay $270 million in cash and assume $50 million of debt.

Fitch said the new rating reflects a higher level of leverage than had been anticipated due to the acquisition financing as well as incremental capital expenditures to develop the acquired brands and ongoing share repurchases.

While there is risk associated with transitioning the new concepts into Tricon, the company has already multibranded 83 A&W's and 9 Long John Silver restaurants with Tricon concepts with favorable results, Fitch noted. The acquisition of the A&W and Long John Silver brands will add burgers, seafood and desert food categories to Tricon's assortment of brands and will increase Tricon's in-house flexibility for future multibranding opportunities.

Moody's confirms Tricon

Moody's Investors Service confirmed Tricon Global Restaurants' ratings, affecting $2.2 billion of debt, including its senior unsecured guaranteed bank facility at Baa3 and its senior unsecured notes at Ba1. The outlook is stable.

Moody's said its action follows Tricon's announcement it will acquire Long John Silver's and A&W All American Food Restaurants, owned by Yorkshire Global Restaurants for approximately $320 million in cash.

Moody's said the addition of these brands and food categories will enable Tricon to expand its multi-branding program and drive incremental sales and profits for the company. The rating agency also described the pro forma credit statistics as adequate.

The stable outlook reflects that the turnaround at Taco Bell continues to gain momentum, that KFC and Pizza Hut are experiencing increases in same store sales and Moody's expectation the company will manage its share repurchase program in a manner that is supportive of current ratings, the rating agency said.

Fitch downgrades Broadwing

Fitch Ratings downgraded Broadwing, Inc. Ratings lowered include its senior secured credit facility and senior secured notes due 2023, cut to BB from BB+, its subordinated notes and subordinated convertible notes, lowered to B+ from BB- and its preferred stock lowered to B from B+. Cincinnati Bell Telephone's debentures were cut to BB+ from BBB+. The outlook is stable.

Fitch said its action reflects concern over Broadwing's slower than anticipated revenue ramp-up, EBITDA generation and improvement in credit protection metrics.

Revenue growth, particularly in the broadband segment, slowed materially in the second half of 2001 and has been hampered by sluggish demand for broadband services, exposure to the struggling emerging carrier customer segment, and traffic migrating off Broadwing's network, Fitch said.

Fitch said it does not foresee the demand for broadband services improving during 2002, which along with ongoing pricing pressure will continue to temper consolidated revenue growth during 2002.

Reflecting trends in the wireless telecom industry, Fitch expects subscriber growth in the company's wireless segment, Cincinnati Bell Wireless will also slow during 2002.

Moody's assigns B2 to Magnum Hunter $250 million

Moody's Investors Service confirmed Magnum Hunter Resources, Inc. and assigned a B2 rating to its upcoming $250 million offering of 10-year senior notes.

Noting that the rating action affects $380 million of debt securities, Moody's commented that the outlook is positive, assuming Magnum Hunter's completion of the merger with Prize Energy, for which the bond deal's proceeds are earmarked.

In addition to the B2 rating on Magnum Hunter's new notes, Moody's confirmed the B2 rating on its $129.5 million of 10% guaranteed senior unsecured notes due 2007

"The unsecured notes, which are guaranteed by subsidiaries, are notched down from the senior implied rating to reflect their effective subordination to a material amount outstanding under Magnum Hunter's senior secured credit facility (approximately $200 million pro forma at 1/01/02) and about $105 million of additional availability under the secured credit facility," Moody's stated. "Also, the note indenture would permit a significant increase in secured debt. The secured credit facility is governed by a borrowing base related to the company's oil and gas reserves and is secured by substantially all the company's assets."

Moody's raises outlook on Zale

Moody's Investors Service lifted its outlook on Zale Corp. to stable from negative and confirmed the company's ratings including its senior unsecured bank debt and senior unsecured notes at Ba1, affecting $325 million of debt.

Moody's said its action follows Zale's announcement of better-than-expected operating results and satisfactory inventory position for the important holiday periods.

Moody's said Zale management has had success at refining Zale's inventory position and conserving cash during a difficult economic period. The company also benefits from the stability provided by its bridal business, which has offset a falloff in traffic for luxury goods, and the competitive advantages provided by Zale's leading market position and liquid financial position, which have allowed it to gain market share during a period when a number of competitors are struggling.

However Zale also has high effective leverage for its rating category due to substantial rent obligations, suffers from sensitivity to economic conditions for high-end luxury and entry-price point fashion jewelry, has excess inventory at its high end Bailey Banks & Biddle concept, and is expected to continue moderate stock buybacks, Moody's said.

Moody's upgrades Jones Lang LaSalle

Moody's Investors Service upgraded the senior unsecured debt of Jones Lang LaSalle, Inc. unit Jones Lang LaSalle BV to Ba1 from Ba2. The outlook is stable.

Moody's said its action reflects "material improvement" in Jones Lang LaSalle's credit fundamentals over the past year, evident in a notable reduction in leverage, and the company's demonstration of the diversification benefits afforded by its global real estate services platform.

"Despite a challenging operating environment in 2001, Jones Lang LaSalle has been able to maintain relatively stable operating results, slightly improve its operating margins, and reduce amounts outstanding under its bank credit facility," Moody's noted.

Interest coverage and debt/EBITDA ratios have improved to 6.8 times and 1.6 times respectively at the end of 2001 from 5.0 times and 1.8 times a year earlier, Moody's noted.

S&P puts Mission Resources on negative watch

Standard & Poor's put Mission Resources Corp. on CreditWatch with negative implications. The company had previously had a positive outlook.

Ratings affected include Mission Resource's senior subordinated notes at B- and senior secured revolving credit facility at BB.

Moody's downgrades CB Richard Ellis

Moody's Investors Service downgraded CB Richard Ellis Services, Inc. and changed the outlook to negative from stable. Ratings affected include CB Richard Ellis' senior secured bank debt, cut to B1 from Ba3, and senior subordinated debt, cut to B3 form B2.

Moody's said the downgrade reflects CB Richard Ellis' high leverage and declining profitability at a time when leasing and sales activity in the US commercial property sector has slowed.

"Weakening real estate fundamentals exacerbated by the rapid deterioration in the economy, came on the heels of CB Richard Ellis' highly levered management buy-out in July 2001," Moody's added.

Although CB Richard Ellis is globally diversified, U.S. business accounts for approximately 60% of revenue making the company particularly vulnerable to changes in the U.S. economy and real estate cyclicality, as was borne out in 2001, the rating agency said.

S&P removes Maxxam from watch

Standard & Poor's removed Maxxam Group Holdings, Inc. from CreditWatch with negative implications, including its $100 million 12% senior secured notes due 2003 rated CCC+.

S&P rates new Hunstman notes B

Standard & Poor's assigned a B rating to Huntsman International LLC's upcoming offering of $250 million senior notes due 2009.

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