Moody's cuts Solutia to junk

Moody's Investors Service lowered the long-term debt ratings of Solutia Inc. to Ba1 from Baa3 and lowered the company's commercial paper rating to Not Prime from Prime-3, and assigned a Ba1 senior implied rating and a Ba1 senior unsecured issuer rating. The actions, Moody's said, were due to concerns over the company's ability to return debt to appropriate levels and the potential for subordination of senior unsecured bondholders to the company's new secured credit facility.

The downgrade reflects the company's high debt level and limited ability to improve its credit profile in the current economic environment. Moody's believes that it will take Solutia a year or two to return debt protection measurements to levels that would fully support an investment grade rating.

Solutia's rating outlook is stable, due to Moody's belief that the company will remain cash flow positive in 2002. If the company can significantly increase free cash flow and reduce debt below $900 million, Moody's would reconsider the appropriateness of an investment grade rating. In the unlikely event that debt would rise above $1.5 billion in the near-term, Moody's may consider further negative rating actions.

Moody's puts Vintage on review for downgrade

Moody's Investors Service put Vintage Petroleum on review for possible downgrade. Ratings affected include Vintage's Ba1 senior unsecured issuer rating and the Ba3 senior subordinated rating on its $200 million of 7.875% notes due 2011, $150 million of 9.75% notes due 2009, $150 million of 9.0% notes due 2005 and $100 million of 8.625% notes due 2009.

Moody's said it started the review to examine the impact on Vintage of the developing situation in Argentina. The rating agency will also look at the company's expected 2002 performance, the size of its liquidity cushion given lower oil and gas prices, upcoming year-end results and reserve bookings.

Vintage has about 56% of its reserves and 41% of its production in South America, Moody's said. Most of those reserves and cash flows are exposed to Argentina and its reserves in Ecuador are restricted by export pipeline capacity until completion of a new link in 2003.

S&P rates American Achievement new notes B+

Standard & Poor's assigned a B+ rating to American Achievement Corp.'s planned offering of $175 million senior unsecured notes due 2007, a BB- rating to its planned $40 million revolving credit facility due 2006 and put the ratings of its unit Commemorative Brands Inc. on CreditWatch with positive implications. Ratings affected include Commemorative Brands' $90 million 11% senior subordinated notes due 2007, rated CCC+.

S&P said it put Commemorative Brands on positive watch because its holding company American Achievement Corp. plans to refinance a significant portion of Commemorative Brands' existing indebtedness.

S&P expects to raise Commemorative Brands' subordinated debt to B- on closing of the refinancing transaction.

If the refinancing is completed as planned, "the note offering will relieve Commemorative Brands from onerous debt service requirements and bank financial covenants during the next few years," S&P said.

S&P noted American Achievement has high leverage and a narrow business focus but said these negatives are partially offset by the company's well-recognized brand names, broad distribution network, and the non-deferrable nature of demand in the mature domestic class ring and yearbook market.

S&P rates New World's planned notes B-

Standard & Poor's assigned a B- rating to New World Restaurant Group Inc.'s planned $155 million senior secured note offering due 2009. The outlook is negative.

S&P said the new note issue improves New World's financial flexibility by replacing the existing $140 million notes due in June 2003. Financial flexibility is further improved by a $15 million revolving credit facility, which will be undrawn at the time of closing. The company owns $61.5 million of subordinated convertible debentures from the Einstein/Noah Bagel Corp. bankruptcy. S&P said it is unclear if the proceeds from the Einstein bonds will be sufficient to repay the unpaid portion of the $36 million bridge loan due on June 15, 2002.

S&P said its rating on New World reflects the risks associated with the company's participation in the intensely competitive quick-service segment of the restaurant industry, its relatively small size and EBITDA base, and the challenges of integrating Einstein/Noah Bagel Corp.

Moody's rates New World planned notes B3, raises outlook

Moody's Investors Service assigned a B3 rating to New World Restaurant Group, Inc.'s planned offering of $155 million senior secured notes and confirmed its existing ratings, including its $140 million increasing rate senior secured notes due 2003 at B3. The latter rating will likely be withdrawn once the new issue is sold and proceeds used to redeem the old notes. Moody's also raised the outlook to positive from stable.

Moody's said the outlook change is contingent on completion of the refinancing and noted that the transaction will ameliorate the substantial financing risk that the company faced in 2003.

Operating and cash flow improvements leading to increased financial and operational flexibility could lead to a ratings upgrade over the intermediate term, Moody's said.

Moody's also noted New World is exposed to the intense competition in the highly fragmented quick-service bagel restaurant industry segment, integration challenges in combining the Einstein and New World systems, and the risk of shifting consumer tastes. Potential exposure to the volatile commodities of butter, coffee, and flour also impacts the ratings, Moody's said, even though the company has taken steps to lock in prices. New World also has substantial leverage and relies on continued cost cutting to reduce post-merger adjusted leverage.

However, Moody's also said New World has potential scale advantages from its position as the clear leader in the bagel segment, potential operating advantages as a vertically integrated producer and seller of bagels, and the progress that management has made at achieving certain post-merger cost savings.

Fitch downgrades Park Place

Fitch Ratings downgraded Park Place Entertainment's $1.75 billion of senior unsecured notes to BB+ from BBB- and its $1.65 billion of senior subordinated notes have been lowered to BB- from BB+. The outlook is stable.

Fitch said it cut the ratings because of Park Place's reduced cash flow generation, principally at its Western region properties, as a result of the events of Sept. 11 and the economic downturn. Fitch also noted the company's high leverage for its rating category and said cash flow from operations to total debt remains weak and is expected to stay that way.

Park Place's Western region generates one-third of its cash flow, Fitch said. It noted EBITDA declined by 42% to $60 million and by 24% to $405 million during the fourth quarter and full year 2001, respectively, versus the comparable periods last year.

Fitch also noted month on month improvements and said it expects a moderate recovery over the next 18 months, resulting in a gradual improvement in Park Place's credit profile.

"Recovery in Las Vegas has been slow to date due to a reliance on fly-in visitors and convention business," Fitch added.

S&P upgrades CKE

Standard & Poor's upgraded CKE Restaurants Inc. The outlook is stable. Ratings affected include CKE's $150 million 4.25% convertible subordinated notes due 2004 and its $200 million 9.125% senior subordinated notes due 2009, raised to CCC+ from CCC and its $500 million revolving credit facility 2004, raised to B from B-.

S&P said it raised CKE's ratings to reflect the company's restored financial flexibility after closing on its amended $100 million senior secured revolving credit facility. The facility replaces the $120 million revolving facility which matured on Feb. 1, 2002.

S&P added that CKE's ratings reflect the company's participation in the highly competitive quick-service sector of the restaurant industry, its highly leveraged capital structure and weak credit protection measures. They also take into account the poor operating performance at its Hardee's restaurants, despite major efforts to revitalize the brand. These risks are mitigated, somewhat, by the strength of the company's established Carl's Jr. concept.

Moody's confirms Boca Resorts

Moody's Investors Service ended its review of Boca Resorts, Inc. by confirming the company's ratings and assigning a stable outlook. Ratings affected include its $222 million 9.875% senior subordinated notes due 2009 rated B2 and its $146 million senior secured revolver due 2003 rated Ba2.

Moody's said it began its review in response to an expected deterioration in credit quality resulting from the Sept. 11, 2001 tragedy.

Although Boca Resorts has seen a decline in operating cash flow, improving occupancy and RevPar trends combined with the recent completion of a major multi-year capital expenditure program should improve the company's free cash flow performance, Moody's said.

The rating agency anticipates Boca Resorts' leverage remaining at a level appropriate for a Ba3 senior implied rating - debt/EBITDA was 3.0 times for the 12 months to Dec 31. 2001 - and said debt is approaching its lowest level in the company's history.

Moody's upgrades Alfa Laval

Moody's Investors Service upgraded Alfa Laval International AB and its subsidiaries. The outlook is stable. Ratings affected include its €816 million senior secured credit facilities, raised to Ba2 from Ba3 and its €220 million 12.125% senior notes due 2010, raised to B1 from B2.

Moody's said it upgraded Alfa Laval because of its continued progress in rationalizing its cost base and de-leveraging its business using improved internal cash flow generation. "Over the past few quarters, the company's strong performance has reflected the positive impact of the change program outlined by management at the time of the initial rating in October 2000," Moody's commented.

The rating agency added that it believes the actions will result in sustainable positive results going forward.

S&P downgrades Orius

Standard & Poor's downgraded Orius Corp.

S&P said its action follows Orius' failure to make its Feb. 2 interest payment on its $150 million 12.75% subordinated notes. The SD corporate credit rating and CC secured bank loan rating will be lowered to D on Feb. 28, when the fifth amendment to the firm's secured bank credit agreement expires, which will likely lead to a default under that financial obligation, S&P said.

Ratings affected include Orius' corporate credit rating, cut to SD from CC, and its $150 million 12.75% senior subordinated notes due 2010, cut to D from C.

Fitch cuts Metris outlook to negative

Fitch Ratings lowered Metris Cos. Inc.'s outlook to negative from stable and confirmed the company's ratings, including its secured bank credit facility at BB+ and senior debt at BB.

Fitch said it lowered the outlook because it believes Metris "will be challenged to manage credit quality and profitability throughout 2002."

Metris forecast its loss rate for 2002 will be between 12.7%-13.3% of average managed receivables, up from 11% during 2001, Fitch noted. Part of this is due to a change in charge-off policy for accounts in consumer credit counseling and slower expected receivable growth, but Fitch said it believes the uncertain economy could cause credit losses to exceed the forecast range, which could hurt profitability if not offset through cost reductions.

S&P rates Agricore BB+

Standard & Poor's assigned BB+ long-term corporate credit and senior secured debt ratings to Agricore United. The outlook is stable.

S&P said its assessment reflects Agricore's "leading business position in the Canadian agricultural economy, resulting in a company with C$5 billion in pro forma revenues. The ratings also reflect Agricore United's high market shares in both grain handling and crop-production services, its modern infrastructure, and relatively high barriers to entry."

On the negative side are high leverage from the merger between United Grain Growers Ltd. and Agricore Cooperative Ltd. and the low-growth nature of grain handling and crop production, S&P said.

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