S&P cuts Reliant Resources

Standard & Poor's downgraded Reliant Resources Inc. and subsidiaries and changed the CreditWatch to developing from negative. Ratings affected include Reliant Resources Inc.'s corporate credit rating, cut to B+ from BB+, Orion Power Holdings Inc.'s $200 million 4.5% convertible senior notes due 2008 and $375 million 12% senior notes due 2010, cut to B- from BB-, and Reliant Energy Mid-Atlantic Power Holdings LLC's $210 million 8.554% passthrough certificates series A due 2005, $220 million 9.681% passthrough certificates series C due 2026 and $421 million 9.237% passthrough certificates series B due 2017, cut to B+ from BB+.

S&P said the action is pending the refinancing of holding company debt and credit facilities of $5.9 billion, including a $1.4 billion synthetic lease.

While S&P said it continues to believe that Reliant Resources has a strong likelihood of executing its refinancing plans, its lack of ability to cite strong commitments from its banks prior to the maturity of the $2.9 billion bank facility in February 2003 puts heightened stress on the company's rating.

The CreditWatch Developing means the ratings could go either up or down, potentially to D, if Reliant cannot renew at a minimum, the $2.9 billion facility, S&P said.

Reliant does not have sufficient cash on hand to repay the facilities and thus, is dependent on its lenders to renegotiate the debt, S&P said. Reliant expects to pay a higher rate, provide collateral, and be required to meet greater cash restrictions under the renewed facilities.

However, Reliant hopes to gain an extension of the facilities, which would provide an opportunity to refinance in the capital markets over time and also pay down debt.

If the refinancing is accomplished, ratings for Reliant Resources, Reliant Energy Mid-Atlantic and Orion Power will be immediately upgraded to the BB range pending a review of the terms.

Moody's cuts USEC notes

Moody's Investors Service downgraded USEC including lowering its $350 million 6.625% senior unsecured notes due 2006 and $150 million 6.75% senior unsecured notes due 2009 to Ba2 from Ba1. The outlook is negative. Moody's assigned a Ba1 senior implied rating.

Moody's said the downgrade reflects the weakened position of the senior unsecured bonds in USEC's capital structure as a result of the creation of a new $150 million secured guaranteed bank facility at United States Enrichment Corp., USEC's principal operating subsidiary.

The Ba1 senior implied rating reflects USEC's strong position in the uranium enrichment market and the improving fundamentals in the SWU and uranium markets, Moody's said. A further consideration in the rating is USEC's continuation as the exclusive agent for the United States under the Megatons to Megawatts program with Russia, the new market-based terms of this agreement for USEC's purchase of SWU from Russia, and the agreements reached with the DOE concerning contaminated uranium, which includes disposition of depleted uranium over a certain time period and under certain conditions.

However USEC continues to have a high production-cost base and needs to develop an alternative, low-cost production process, Moody's said.

Moody's puts New World Pasta on review

Moody's Investors Service put New World Pasta Co. on review for possible downgrade. Ratings affected include New World Pasta's $20 million senior secured revolving credit maturing 2005 and $134 million term loan B maturing 2008 at B1 and $160 million senior subordinated notes due 2009 at Caa1.

Moody's said it began the review in response to New World Pasta's announcement that its internal financial statements were incorrectly stated, primarily with respect to accounts receivable and inventory balances, it was unable to complete its Sept. 30, 2002 financial statements and file its Quarterly Report on Form 10-Q with the Securities and Exchange Commission, and it is not in compliance with certain covenants under its senior secured credit facility.

Moody's confirms Grant Prideco, rates notes Ba3

Moody's Investors Service confirmed Grant Prideco's ratings and assigned a Ba3 rating to its planned $175 million of senior unsecured notes. The action concludes a review for downgrade. The outlook is stable. Ratings confirmed include Grant Prideco's $200 million of 9.625% 7-year senior unsecured notes at Ba3.

Moody's began the review after Grant Prideco said it would acquire the Reed-Hycalog drill bit design, manufacturing, and marketing business from Schlumberger for $350 million.

Grant Prideco is buying an important franchise, roughly $50 million in EBITDA, $50 million in receivables, $109 million in inventory, and a small $44 million in book fixed assets, Moody's noted. It will pay $255 million in cash, issue $90 million in equity to Schlumberger, and assume $5 million in liabilities.

While modest, the equity issue takes a meaningful degree of pressure off the capital structure, Moody's added.

The stable outlook assumes 2003 performance translates into higher pro-forma cash flow and debt reduction, Moody's said. To retain the ratings, Grant Prideco must reduce debt substantially in 2003, a year still favored to be at least flat-to-moderately higher. This is probably sensitive to 2003 international oil and gas drilling being at least flat and North American natural gas drilling having at least a gradual recovery.

Moody's cuts Presidential Life

Moody's Investors Service downgraded Presidential Life Corp.'s senior unsecured rating to B1 from Ba1, affecting $100 million of debt. The outlook is negative. The action concludes a review begun on Nov. 12.

Moody's said the downgrade is in response to Presidential Life's sizable credit losses in its fixed income portfolio during the third quarter of 2002. For the three months ending Sept. 30, 2002, Presidential Life incurred approximately $90 million of net realized capital losses.

In addition, Moody's said that these realized losses, coupled with the statutory strain associated with the rapid growth of the company's fixed annuity portfolio, have resulted in a significant decline in statutory capitalization at Presidential Life Insurance Co. In the third quarter, the company lost approximately $75 million of its statutory capital so that at Sept. 30 Presidential Life Insurance Co.'s statutory capital was about $206 million, down approximately 27% from the end of the second quarter. The company's statutory capitalization ratio had declined to 5.1%.

S&P keeps ATA on watch

Standard & Poor's said ATA Holdings Corp. and its subsidiary American Trans Air Inc. remain on CreditWatch with negative implications. Both have a B- corporate credit rating.

S&P made its comments in response to news that ATA has received a federal loan guarantee for 90% ($148.5 million) of a new $165 million loan that closed on Nov. 20.

Resolution of ATA's CreditWatch status will focus on the company's liquidity position now that it has received the new funding, S&P said.

Moody's confirms Rotech

Moody's Investors Service confirmed Rotech Healthcare, Inc., concluding a review begun on July 3. The outlook remains stable. Ratings confirmed include Rotech's $275 million senior secured credit facilities due 2008 at Ba2 and $300 million senior subordinated notes due 2012 at B2.

Moody's began the review after Rotech said it had uncovered fraudulent activities related to an independent contractor fabricating documentation for nonexistent bulk sales of medical equipment to the Department of Veterans Affairs. In September, the company announced a modest restatement of its financial results from 1999 through the first quarter of 2002.

Since the impact was modest and no other material issues were uncovered during the third party investigations of the incident, the ratings are being confirmed, Moody's said.

Also incorporated in the confirmation is Rotech's disappointing third quarter results, Moody's added. Third quarter revenue and EBITDA were below Moody's expectations. This was attributable to several factors, including a decline in the DME business, which the company had recently been de-emphasizing, distractions due to third party investigations of the fraudulent activities and lack of a permanent CEO.

Moody's notes that recent developments, including the company's decision to refocus on its DME business and its recent hiring of Philip Carter as its new president and CEO, partly mitigate the rating agency's concerns over the company's future performance.

Moody's cuts Caiua

Moody's Investors Service downgraded Caiua (Caiua Servicos de Eletricidade) including cutting its senior unsecured medium-term notes to Caa1 from B2. The outlook is negative.

Moody's said it downgraded Caiua because of the company's weak financial performance, cash flow that has been meager in relation to its high debt level and its tight liquidity position.

The company's financial condition and the limited availability of funding alternatives in the Brazilian market have made refinancing of Caiua's short-term debt maturities more difficult, Moody's said.

Caiua's liquidity stress has been evidenced by the recent notice to its euro MTN noteholders, proposing an amendment to the original terms and conditions of the $55 senior unsecured million euro medium-term notes due Nov. 29, 2002.

S&P says Concentra unchanged

Standard & Poor's said its rating on Concentra Inc. are unchanged including its corporate credit rating of B+ and negative outlook.

S&P's comment follows Concentra's announcement it has completed its sale of $25 million in equity and successfully amended its senior credit agreement. The company will use the proceeds from the equity investment to repay some senior unsecured debt. The senior credit agreement allows the company to obtain necessary covenant revisions to avoid possible future violations.

Nevertheless, S&P said it believes the relatively small debt reduction and still-slim cushion under the revised covenants (particularly when considering the expected negative effect of two new acquisitions on earnings) have no material impact on the ratings.

Moreover, recently weak business trends for Concentra's health care services, network services, and care management businesses are important factors in the rating and outlook, S&P said.

Liquidity remains adequate for the rating, as the company will have access to about half of its $100 million revolving credit facility based on the revised bank covenants, S&P added.

S&P cuts Better Minerals

Standard & Poor's downgraded Better Minerals & Aggregates Co. including cutting its $150 million 13% senior subordinated notes due 2009 to CCC- from B- and $230 million senior secured bank facility to CCC+ from B+. The outlook is negative.

S&P said the action is in response to an unexpected decline in liquidity, expected covenant violations, weak performance in its aggregates business, and increasing silica product liability claims.

Liquidity, consisting of $0.6 million in cash and $5.8 million available on its revolving credit facility, has deteriorated faster than expected to $6.4 million as of Sept. 30, 2002, S&P said.

S&P added that it had expected liquidity to improve from the June 30, 2002, balance of $10.6 million because of the seasonal nature of the business that would have led to improved earnings in the aggregates business and an improvement in liquidity.

However, operating losses of $2.4 million for the nine month period ending Sept. 30, 2002 (compared with a $2.4 million operating income for the same period in 2001) in the aggregates business have caused liquidity to fall below expectations.

Although S&P expects liquidity to improve as working capital contracts in the fourth quarter, the seasonal weakness in the first quarter combined with capital expenditures, term loan amortization of $2.6 million, and a $10 million subordinated note interest payment on March 15, 2003, will result in limited liquidity, heightening the likelihood of a default.

In addition, after violating the bank credit covenants of 5.5 times leverage and 1.7x interest coverage during the third quarter and obtaining waivers, Better Minerals will likely violate covenants again in the fourth quarter, S&P said.

S&P takes AES Red Oak off watch

Standard & Poor's confirmed AES Red Oak LLC and removed it from CreditWatch with developing implications. The outlook is negative. Ratings affected include AES Red Oak's $160 million 9.2% senior secured bonds due 2029 and $224 million 8.54% senior secured bonds due 2019 at BB-.

S&P said the action reflects the recent letter agreement between AES Red Oak and Williams Cos. Inc. related to Williams' compliance with the guarantee requirements of the tolling agreement. Williams is the guarantor of the payment and performance obligations of Williams Energy Marketing and Trading Company under the long-term tolling agreement with AES Red Oak.

Under the agreement, Williams will make a $10 million prepayment within five days of the letter agreement and post a $35 million standby letter of credit or provide the same amount of cash or U.S. government securities by Jan 6, 2003. Once the LOC is in place, AES Red Oak will reimburse the $10 million prepayment by June 2003. AES Red Oak has accepted the letter agreement as meeting the requirement of alternate additional security under the tolling agreement.

S&P said the additional security provided by this LOC and the agreement as enough to change the project's rating. Mainly, the project is exposed to Williams' payment risk, since Williams is the sole off taker of the entire output of the facility.

Fitch rates MDM notes B

Fitch Ratings assigned a B rating to the loan participation notes to be issued by Credit Suisse First Boston International Ltd. to finance a loan to MDM Bank OAO. The loan will be guaranteed by MDM Holding GmbH.

At the end of 2001, MDM Financial Group, of which MDM Bank is the lead operating entity, ranked among the 10 largest Russian banking groups in terms of IAS assets, Fitch noted.

MDM's main activities are commercial and investment banking. The group's key corporate clients are in the metals, oil and gas, mining and energy sectors. MDM's sole ultimate shareholder also owns 50% of MDM Industrial Group, an industrial holding which includes large coal extraction, fertilizer and other manufacturing companies, with combined sales in 2001 of over $2 billion.

Moody's puts Antenna on review

Moody's Investors Service put Antenna SA on review for possible downgrade including its $115 million 9% senior unsecured notes due 20007 and €150 million 9.75% senior unsecured notes due 2008 at Ba3.

Moody's said the review is in response to continued weakness in Antenna's financial performance.

While Antenna demonstrated a small year-over-year improvement in EDITDA (all references to EBITDA are after programming amortization) for the third quarter of 2002, EBITDA for the full-year is expected to be materially below Moody's previous expectations. Moody's noted this was the case even though fourth quarter 2002 EBIT is expected to more than double year-over-year (from a relatively low base of €4.5 million in the fourth quarter of 2001) based on management's public guidance.

The company's weakened financial position is largely attributed to increased competition in both TV broadcasting and publishing (which has resulted in higher programming and marketing costs) combined with a weakened Greek advertising market, Moody's said.

However Antenna's liquidity is strong, with approximately €77.5 million in cash at the end of September 2002, Moody's noted. The company's success in reducing cash burn in 2002 through reduced capital spending and working capital improvements (the company expects to generate positive operating cash flow in 2002); and Antenna's strong position in the Greek media market.

S&P puts Entertainment Publications on positive watch

Standard & Poor's put Entertainment Publications Inc. on CreditWatch with positive implications. Ratings affected include Entertainment Publications' $38.5 million 14% senior PIK notes due 2007 at B- and Entertainment Publications Operating Co. Inc.'s $100 million term loan B due 2005, $55 million term loan A due 2004 and $85 million revolving credit facility due 2004 at B+.

S&P said the watch placement follows USA Interactive Inc.'s announcement that it will purchase Entertainment Publications Inc. from a group of investors led by the Carlyle Group for approximately $370 million.

In resolving the CreditWatch, S&P said it will review the terms of the transaction, in particular, USA Interactive's intentions for Entertainment Publications' debt.

S&P takes Crown Cork & Seal off watch

Standard & Poor's confirmed Crown Cork & Seal Co. including its senior unsecured debt at CCC and took its ratings off CreditWatch with negative implications. The outlook is negative.

S&P said the action follows completion of Crown Cork & Seal's sale of 10.5 million shares of common stock of its Constar International Inc. division.

Crown Cork & Seal received approximately $476 million in total proceeds from the stock sale and additional distributions from Constar, which Crown used to repay part of its outstanding debt.

Crown Cork & Seal's ratings reflect its aggressive financial profile and near-term refinancing risk, which overshadow its average business risk profile, S&P said.

In the 12 months ended Sept. 30, 2002, Crown Cork & Seal reduced its debt by more than $1.0 billion to $4.6 billion (not including the Constar proceeds), using proceeds from asset sales, debt-for-equity exchanges, and its free cash flow, S&P noted.

Nevertheless, Crown Cork & Seal still faces an onerous debt maturity profile, S&P said. Although the Constar proceeds provided additional assurance of repayment of Crown's $195 million notes due April 2003, the company still needs to refinance its $2.3 billion senior secured revolving credit facility due December 2003 and almost $1.4 billion of debt maturing in the following three years.

S&P said it considers completion of the Constar transaction to be a significant step toward positioning the company to refinance near-term debt maturities. Nevertheless, concerns remain about the state of the capital markets and the company's ability to access them to further reduce its exposure with its banks.

S&P keeps Gemstar-TV Guide on watch

Standard & Poor's said Gemstar-TV Guide International Inc. remains on CreditWatch with negative implications including its bank debt at BB.

S&P said the Securities and Exchange Commission's formal investigation into the company's internal accounting practices, and possible action by the U.S. Department of Justice, including the potential imposition of fines and certain other conditions/restrictions, have heightened its concerns about Gemstar's business and financial risks.

Furthermore, Gemstar's access to capital markets remains at risk if the company cannot meet Nasdaq's requirements for continual listing on the exchange, which include filing amended financial statements with the SEC and Nasdaq before certain specific deadlines, S&P noted.

The possible imposition of fines and other restrictions by the SEC and the DOJ could negatively influence the company's cash cushion and earnings prospects, and escalate investor uncertainty, S&P said. The delays in issuing reliable financials also intensify the investor risk.

S&P cuts Bayou Steel

Standard & Poor's downgraded Bayou Steel Corp. including cutting its $120 million 9.5% first mortgage notes due 2008 to D from CCC+.

S&P said the downgrade follows Bayou Steel's announcement it has missed the $5.7 million interest payment due Nov. 15 on its $120 million first mortgage notes maturing 2008.

S&P said it is unlikely that the company will make the interest payment before the end of the grace period.

Bayou Steel has had recurring losses as a result of persistently challenging conditions in its markets, which has impaired its liquidity and prohibited it from making the interest payment, S&P said.

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