Moody's puts Conseco senior debt on downgrade review

Moody's Investors Service put Conseco Inc.'s senior debt rated B2 on review for possible downgrade and confirmed the company's other ratings. The outlook continues to be negative.

Moody's said its action follows Conseco's announcement of a voluntary debt exchange for six series of senior notes.

The rating agency said its review will look at the outcome of the exchange offer and the continued uncertainty associated with the timing and amount of sources of cash.

The restructuring, if completed, should give Conseco added financial flexibility and additional time to improve its core operations, Moody's said. However it also highlights the fragility of the company's financial position.

If the restructuring goes ahead as initially announced, Moody's said it anticipates downgrading the old senior notes to B3 from B2 and assigning a B2 rating to the new notes, both with a negative outlook. That change will reflect the subordination of the old notes to the new securities.

S&P lowers Conseco outlook

Standard & Poor's confirmed Conseco, Inc.'s ratings including its senior debt at B and lowered the outlook to negative from stable. S&P said it anticipates any senior securities issued Conseco Inc. and guaranteed by CIHC Inc. would receive a rating of B.

S&P said it believes Conseco's management will experience increased pressure to maximize cash flow from the insurance operations for the benefit of the parent company and to the potential detriment of the policyholders.

"This is evident from the continued payment of trust-preferred dividends even though the terms of those securities permit the company to defer such dividends," S&P commented.

Conseco's proposed debt refinancing will benefit its overall credit profile but S&P said the action signals continuing pressure on the company to seek additional sources of cash which may, in turn, place further reliance on the remaining insurance operations for parental support.

Fitch puts Conseco on negative watch

Fitch Ratings put the ratings of Conseco, Inc. and its units on Rating Watch Negative. Affected ratings include Conseco's senior debt at B- and trust preferreds at CCC.

Fitch said its action follows Conseco's announcement of a debt exchange for substantially all of its public debt issues.

When the exchange is completed, Fitch said it expects to downgrade the existing senior debt to reflect its structural subordination to the new notes.

For other securities, resolution of the Rating Watch depends on Conseco receiving unqualified audit opinions and the rating agency's review of Conseco's and Conseco Finance's 10K filings.

For this year, the debt maturities of Conseco and Conseco Finance exceed expected cash flow from operations and cash on hand by approximately $350 million, Fitch said. The company is currently pursuing cash raising alternatives such as assets sales, reinsurance and refinancing to meet these maturities.

"Fitch believes these efforts will be challenging given the difficult economic environment and the company's limited financial flexibility," the rating agency added.

Moody's downgrades Western Wireless

Moody's Investors Service downgraded Western Wireless Corp., including its $2.1 billion in secured credit facilities, lowered to B1 from Ba2, and its $200 million of 10.5% senior subordinated notes due 2006 and $200 million 10.5% senior subordinated notes due 2007, both lowered to B3 from B1. The action concludes a review begun Jan. 8, 2002. The outlook is stable.

Moody's said its downgrade reflects the significant shortfall in profitability from Moody's expectations and the consequent lack of improvement in credit metrics.

The profitability of Western Wireless' domestic operations has declined sharply over the last two quarters as the company has lost high margin roaming revenues due to wholesale pricing pressures, Moody's said.

Further, subscriber growth has been weak and the cost of acquiring those new subscribers has increased, all of which have led to sequential declines in domestic EBITDA of 10% in the third quarter of 2001 and 14% in the fourth quarter of 2001, the rating agency added.

At the same time, capital expenditures have grown dramatically as the company upgrades its networks with multiple digital technologies.

Leverage was more than six times at the end of 2001. While still better than most of its peers, Moody's said the previous ratings had assumed the company would be able to reduce leverage in 2000 and 2001.

Moody's rates new Globe Telecom notes Ba3, raises outlook

Moody's Investors Service assigned a Ba3 rating to Globe Telecom, Inc.'s planned issue of $175 million senior notes due 2012 and raised the outlook to positive from stable.

Moody's said it lifted Globe's outlook because of improvements in the company's profile and less uncertainty in its operating environment.

The rating agency said its assessment recognizes the progress Globe has made in establishing a strong and profitable GSM business, its measured approach to funding this growth and the benefits of strong support from effective owners, including Ayala Corp., Singapore Telecom and Deutsche Telekom.

Ayala, SingTel and DT have injected significant capital and technical expertise into the company with Globe forming an important part of both companies' strategic direction, Moody's said. Increasing barriers to entry into the cellular market given the growth of the two major operators provides more certainty going forward as to cash flows.

However Moody's also pointed out that Globe is exposed to an inherently volatile regional economy and faces the challenges of servicing foreign currency debt obligations with cash flow primarily denominated in a weakening peso, continued lack of regulatory certainty, particularly with licensing and the underlying political and economic uncertainty in the Philippines.

Moody's puts Centennial Cellular on downgrade review

Moody's Investors Service put Centennial Cellular Operating Co. on review for possible downgrade, affecting $1.6 billion of debt. Ratings covered by the action include Centennial Cellular's senior secured credit facility at B1 and 10.75% subordinated notes due 2008 at B3.

Moody's said its review will focus on Centennial's ability to increase EBITDA in the near term and the prospects and timeline for the achievement of free cash flow.

Recent results have demonstrated weak wireless subscriber growth both for its domestic operations and its Caribbean properties and declining contributions from roaming on the company's domestic networks, Moody's added.

S&P keeps Elizabeth Arden on CreditWatch with negative implications

Standard & Poor's said it is keeping Elizabeth Arden Inc. on CreditWatch with negative implications due to poor sales and significant debt. The ratings have been on negative watch since Jan. 31, 2002.

Negotiations with the company's lenders on an amendment to the credit facility have recently been completed. Financial covenants for the fourth quarter in fiscal year 2002 were waived and related covenants for fiscal year 2003 and the first three quarters of 2004 were loosened.

"The company's performance was impacted by the challenging conditions in the retail cosmetics industry, which was especially hard hit following the Sept. 11, 2001 terrorist attacks," said Lori Harris, credit analyst, in the rating announcement.

Obstacles faced by the company include, "the soft 2001 holiday selling season, intense competition, destocking by retailers, and reduced store traffic." Additionally, the company's acquisition of some Unilever operations in January 2001 added a significant amount of debt to the balance sheet.

According to the S&P release, Standard and Poor's will meet with Elizabeth Arden senior management to discuss ongoing business and financial strategies.

Dobson CC LP and Bank of America agree on loan extension

Dobson CC LP (DCCLP), a majority shareholder in Dobson Communications Corp., and Bank of America have agreed to extend the company's loan to March 31, 2003.

Default provisions, under the agreement, will no longer be connected to Dobson Communications' common stock market price, but rather to existing financial ratios in primary credit agreements. DCCLP has no mandatory payments except upon the sale of collateral. The company, under SEC Rule 10b5-1, has adopted a sales plan stating that up to $1.5 million shares may be sold per quarter at a price which is not required to be at current price levels. Proceeds from these sales would be used to pay interest, principal and other loan expenses.

The 2003 maturity may be extended for an additional year "under certain conditions", according to a press release, including the payment by DCCLP of $75 million against the loan's principal and interest.

Moody's confirms Extended Stay, lowers outlook

Moody's Investors Service confirmed the ratings of Extended Stay America, Inc. but lowered its outlook to negative from stable. Ratings affected include Extended Stay America's $200 million revolving credit facility due 2007 at Ba3, $50 million A-1 facility term loan due 2007 at Ba3, $50 million A-2 facility delayed draw term loan due 2007 at Ba3, $100 million A-3 facility delayed draw term loan due 2007 at Ba3 and $500 million facility term loan due 2008, all at Ba3, and its $200 million 9.15% senior subordinated notes due 2008 and $300 million 9.87% senior subordinated notes due 2011, both at B2.

The action completes a review for possible downgrade begun on Oct. 3, 2001 after the Sept. 11 terrorist attacks.

Moody's said the confirmation of Extended Stay's ratings is primarily the result of the company's decision to temporarily scale back its development program until more favorable business and economic conditions return.

Extended Stay has spent over $2 billion during the past five years building and developing extended stay properties, and as a result, has reported significant operating cash flow deficits each year since its inception, Moody's said.

The negative outlook reflects continued uncertainty regarding the company's RevPar performance. Extended Stay has reported significant RevPar declines since Sept 11 in addition to an increase in leverage. At Dec. 31, 2001 debt/EBITDA was 4.3 times compared to 3.7 times at Dec. 31, 2000, Moody's said. Although not out of range for a Ba3 senior implied rating, the current rating is dependent primarily on Extended Stay's ability to manage debt/EBITDA back down towards 4.0 times within the next 12-18 months.

Fitch confirms Potlatch

Fitch Ratings confirmed its ratings on Potlatch Corp. including its senior subordinated notes at BB+, its senior secured debt at BBB and its senior unsecured debt at BBB-.

Fitch said its action follows Potlatch's announcement it is selling its printing paper assets in Cloquet, Minn. for $480 million, which will be used to reduce the company's debt.

The sale will take Potlatch out of coated papers, an action that Fitch expects will lead to improved earnings from continuing operations in 2002 and improved credit statistics, with EBITDA/interest near or north of 3.0 times.

Moody's rates new Hockey Co. notes B2

Moody's Investors Service assigned a B2 rating to The Hockey Co.'s planned offering of $125 million senior secured notes due 2009. The outlook is stable.

Moody's said the ratings reflect the risks The Hockey Co. faces by operating in a competitive and relatively low-growth segment of the sporting goods and licensed apparel industry.

In order to maintain market share, the company must consistently develop innovative new products, and incur significant marketing expenditures for the promotion and professional endorsement of these items, the rating agency said.

Sales of hockey equipment, which comprise nearly two-thirds of The Hockey Co.'s revenue, are largely concentrated in northern geographic regions and, therefore, are also highly seasonal and weather sensitive, Moody's added. "Moreover, as a result of gaining exclusive licensing rights to sell NHL jerseys, apparel sales have become an increasing portion of THC's total revenue. These sales are somewhat riskier than player-driven equipment sales, as they are subject to fashion trends, to the volatility of fan interest in the NHL in general, and to the varying success of individual teams."

The company also has high leverage and modest interest coverage but on the positive side it benefits from strong brand names and market share, exclusive licensing and endorsement agreements with the NHL and certain players, its product innovation capability, and its customer diversity, Moody's said.

Moody's downgrades Tokheim term loans

Moody's Investors Service downgraded Tokheim Corp.'s senior secured bank term loans but confirmed its senior secured revolving credit facility. The outlook is negative. Ratings affected include Tokheim's $33 million guaranteed senior secured tranche A term loan due September 2005, which ranks second among the bank facilities, to Caa2 from Caa1; Tokheim's $100.7 million guaranteed senior secured tranche B term loan due September 2005, which ranks third among the bank facilities, to Caa3 from Caa2; Tokheim's $120 million (including PIK interest notes) guaranteed senior secured special term loans due September 2005, which ranks fourth among the bank facilities, to Ca from Caa3; and confirmed at B3 Tokheim's $40 million senior secured reducing revolving credit facility due September 2005, which ranks first among the bank facilities.

Moody's said Tokheim's performance since its emergence from Chapter 11 on Oct. 20, 2000 has fallen well behind pro forma estimates provided within the disclosure statement.

Moody's warned that Tokheim's ratings could be further lowered if the company fails to negotiate a bank waiver and amendment on a timely basis that preserves liquidity along with the ability of the company to satisfy near-term debt service requirements and additionally provides realistic prospects for achievement of future financial covenant compliance; if there are clear signs that end market demand will not rebound during 2002; and if it suffers increased pricing compression due to customer or competitive pressures, or unfavorable mix factors.

On the other hand a favorable bank amendment, reduction of outstanding debt balances through asset sales or an equity infusion, a rebound in sales to key groups within the company's existing customer base or significant new business wins would benefit ratings.

The most recent action reflects poor performance and weak liquidity, Moody's said.

Tokheim was unable to file its annual report for the year ended Nov. 30, 2001 on time because it was still in discussions with its auditor and bank lenders over issues that could affect Tokheim's financial results and EBITDA covenant compliance for the period, Moody's said.

Tokheim has indicated that it is also negotiating with its bank lenders for a desired post-reorganization credit agreement amendment to assure compliance with future financial covenants and also to extend provisions for deferral of cash interest payments and principal amortization of the special term loan that are otherwise scheduled to begin in 2003.

"Even in the absence of compliance issues, Tokheim would likely face severe liquidity pressures unless market conditions improve in the near-term," Moody's added.

Moody's puts Rogers on downgrade review

Moody's Investors Service put of Rogers Wireless Inc. on review for possible downgrade, affecting $1.5 billion of debt including Rogers' senior secured rating at Baa3 and its senior subordinated rating at Ba1.

Moody's said it is concerned that Rogers' leverage has risen substantially over the last year and may increase further in 2002 as the company will continue to be free cash flow negative.

While existing unused bank lines should be sufficient to fund the company's business plan, Moody's said it will confirm this with management as part of the review process.

S&P puts AMC on positive watch

Standard & Poor's put AMC Entertainment Inc. on CreditWatch with positive implications. Ratings affected include AMC's $200 million 9.5% senior subordinated notes due 2009, $225 million 9.5% senior subordinated notes due 2011 and $175 million 9.875% senior subordinated notes due 2012, all rated CCC.

S&P said its action is based on evidence of positive developments in the company's financial policy.

Although AMC is actively looking for acquisitions, it has reduced the financial risk somewhat by using equity as part of its funding strategy, S&P said. Its sale of $94.5 million in common stock is part of its effort to "maintain a more moderate capital structure."

"In addition, the use of equity to partially finance its purchase of GC Cos., Inc. will help preserve key credit measures, while the acquisition modestly increases its geographic reach and diversity," the rating agency said.

S&P downgrades Doe Run

Standard & Poor's downgraded Doe Run Resources Corp. to D. Ratings affected include Doe Run's $180 million 11.25% senior notes due 2005 and $75 million floating-rate senior notes due 2003, both previously rated C, and its $50 million 11.25% notes due 2005, previously rated CC.

S&P said its action follows Doe Run's announcement it missed its scheduled interest payments.

S&P lowers Fairchild

Standard & Poor's downgraded Fairchild Corp. and removed the company from CreditWatch with negative implications. The outlook is negative. Ratings affected include Fairchild's $225 million 10.75% senior subordinated notes due 2009, lowered to CCC+ from B- and its $100 million revolver due 2005 and $225 million term loan due 2006, both cut to B+ from BB-.

S&P said the downgrade reflects significantly weaker intermediate-term business prospects for commercial aerospace, Fairchild's largest market, and the likelihood that the company's financial profile will not be appropriate for the previous rating.

Orders and deliveries on new jetliners are expected to be substantially lower in 2002 and 2003 in the wake of the Sept. 11 terrorist attacks and a softer global economy, S&P said, adding that because the downturn is only in an early stage there are considerable uncertainties as to its duration and timing and strength of a recovery.

"Consequently, despite cost reduction efforts, Fairchild's financial performance will be adversely affected, thus putting pressure on already somewhat subpar credit protection measures," S&P said.

It noted liquidity is tight, although the company is in compliance with bank covenants.

S&P cuts Metromedia to D

Standard & Poor's downgraded Metromedia Fiber Network Inc. including cutting its corporate credit to D. Other ratings affected include Metromedia's $650 million 10% senior unsecured notes due 2008, its $750 million 10% senior notes due 2009 and €250 million 10% senior notes due 2009, all lowered to C from CC. The notes were also put on CreditWatch with negative implications.

S&P said its action follows Metromedia's missed interest payment due March 15 on its $975 million 6.15% subordinated convertible notes issued to Verizon Communications Inc.

Metromedia said it may seek Chapter 11 bankruptcy protection if it is unable to restructure its debt, S&P noted.

S&P lowers Arch outlook, rates new bank debt

Standard & Poor's lowered its outlook on Arch Coal Inc. to stable from positive and rated the company's new bank facility at BB+ including Arch Coal's $350 million senior secured bank loan due 2007 and Arch Western Resources LLC's $150 million senior secured tranche A due 2007 and $525 million senior secured tranche B due 2008.

Moody's downgrades Metromedia

Moody's Investors Service downgraded Metromedia Fiber Networks, Inc. Ratings affected include Metromedia's $650 million senior notes due 2009, $750 million senior notes due 2009 and €250 million senior notes due 2009, all lowered to C from Caa3.

Moody's said the downgrade reflects its expectation that a restructuring or possible bankruptcy will result in poor recovery prospects to Metromedia debtholders.

Moody's noted that Metromedia said as of Feb. 28 it had unrestricted cash equivalents of $37 million to support $3.3 billion of debt. Net capital assets totaled $4.0 billion at the end of September 2001, but only $2.8 billion were completed, the rest being construction in progress.

Moody's said it attributes a heavily discounted recovery value to Metromedia's fiber optic network assets, with a book value of $1.7 billion. Other assets, including data centers and equipment assets would likely provide for very poor recovery prospects to debt-holders, given currently depressed telecom market valuations, Moody's added.

Moody's upgrades Telecorp, Tritel to investment grade

Moody's Investors Service upgraded TeleCorp Wireless and Tritel PCS following the closing of their acquisition by AT&T Wireless, Inc.

Ratings affected include TeleCorp Wireless, Inc.'s $575 million 11.625% senior subordinated discount notes due 2009 and $450 million 10.625% senior subordinated notes due 2010, both raised to Baa3 from B3; and Tritel PCS, Inc.'s $372 million 12.75% senior subordinated discount notes due 2009 and $450 million 10.375% senior subordinated notes due 2011, both also upgraded to Baa3 from B3.

S&P puts Alestra on negative watch

Standard & Poor's put Alestra S de RL de CV on CreditWatch with negative implications. Ratings affected include Alestra's $270 million 12.125% notes due 2006 and $300 million 12.625% notes due 2009, both rated BB-.

S&P downgrades Energis

Standard & Poor's downgraded Energis plc including cutting its $200 million 9.75% notes due 2009, £125 million 9.5% notes due 2009 and £300 million 9.125% notes due 2010 to D from C.

S&P rates new Globe Telecom notes BB

Standard & Poor's assigned a BB rating to Globe Telecom Inc.'s planned offering of $175 million notes due 2012.

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