Moody's warns on wireline telecom sector

Moody's Investors Service warned that the worsening economy is likely to put further downward pressure on the "constrained liquidity and fragile business prospects" of many new wireline telecom operators. The rating agency put a series of issuers on review for downgrade and change the outlook to negative on others.

Moody's said its review will compare company projections to recent operating performance and examine the liquidity and funding assumptions for a fully funded business plan.

The rating agency put the following ratings on review for possible downgrade:

--FLAG Ltd.'s Ba3 senior unsecured and issuer ratings and Ba2 senior implied and senior secured debt ratings, FLAG Telecom Holdings Ltd.'s B2 senior unsecured and issuer ratings and Ba3 senior implied rating;

--Fairpoint Communications Inc.'s B1 senior implied rating, B2 issuer rating, B1 senior secured rating and subordinated debt rated B3;

--ITC^DeltaCom's B2 senior unsecured and issuer ratings, B1 senior implied rating, and subordinated debt rated B3; Interstate Fibernet, Inc.'s Ba3 senior secured rating;

--Asia Global Crossing, Inc.'s B2 senior unsecured rating;

--Allegiance Telecom, Inc.'s B3 senior unsecured and issuer ratings and B2 senior implied and senior secured ratings;

--Madison River Capital, LLC's Caa1 senior unsecured and issuer ratings and B2 senior implied rating;

--McLeodUSA Inc.'s B3 senior unsecured and issuer ratings, B2 senior implied and senior secured ratings, and preferred stock rated Caa2;

--GT Group Telecom Inc.'s Caa1 senior unsecured and issuer ratings and B2 senior implied and senior secured ratings;

--Level3 Communications, Inc.'s Caa1 senior unsecured and issuer ratings, B3 senior secured and senior implied ratings, B2 senior secured rating and subordinated debt rated Caa2;

--Williams Communications Group, Inc.'s Caa1 senior unsecured and issuer ratings, B3 senior implied rating, B2 senior secured rating, and preferred stock rated Caa3 (Williams Communications Group Note Trust's Baa3 senior secured rating is confirmed and unaffected by this rating action);

--XO Communications, Inc.'s Caa1 senior unsecured and issuer ratings, B3 senior implied and senior secured ratings, Caa2 subordinated debt rating and preferred stock rated Caa3;

--Pac-West Telecomm, Inc.'s Caa1 senior unsecured and issuer ratings and B3 senior implied rating;

--Choice One Communications, Inc.'s Caa2 issuer rating and B3 senior implied and senior secured ratings;

--KMC Telecom Holdings, Inc.'s Caa2 senior unsecured and issuer ratings and B3 senior implied and senior secured ratings,;

--Primus Telecommunications Group, Inc.'s Caa2 senior unsecured and issuer ratings, Caa1 senior implied rating and Caa3 subordinated debt rating;

--Focal Communications Corp.'s Caa3 senior unsecured and issuer ratings and Caa2 senior implied rating; and

--IMPSAT Fiber Networks, Inc.'s Caa3 senior unsecured rating and Caa2 guaranteed senior unsecured rating.

Moody's changed the outlook to negative and confirmed the ratings of the following companies, saying they were "in a stronger position to survive a potentially more severe and protracted economic downturn":

--Broadwing Inc.'s Ba2 senior unsecured and issuer ratings, Ba1 senior implied and senior secured ratings, Ba3 subordinated debt rating and preferred stock rated B1; Broadwing Communications, Inc.'s B1 subordinated debt and junior preferred ratings (Cincinnati Bell Telephone Company's Baa3 senior unsecured rating is confirmed and unaffected by this rating action);

--GCI Inc.'s B2 senior unsecured and issuer ratings, Ba3 senior implied rating and Ba2 senior secured rating;

--Time Warner Telecommunications, Inc.'s B2 senior unsecured and issuer ratings, B1 senior implied rating and Ba3 senior secured rating;

--Valor Telecommunications, Inc.'s B2 issuer rating, B1 senior implied rating and Ba3 senior secured rating;

--Alaska Communications System Holdings, Inc.'s B2 issuer rating, B1 senior implied and senior secured ratings and subordinated debt rated B3.

Moody's noted several operators have announced capital restructuring plans, largely focusing on bond repurchases. The rating agency said this can provide attractive short-term capital returns and deleverage balance sheets but cautioned they deplete scarce cash.

It commented: "On balance, we consider that bond buy-back programs are generally ratings negative to these issuers prior to the attainment of positive free cash flow. Moreover, these discounted debt buy-back plans serve to confirm explicit recognition, on the part issuers, of the sub-par recovery prospects of unsecured debt-holders."

Moody's puts lodging, leisure and gaming companies on review for downgrade

Moody's Investors Service said it put 15 lodging- and leisure-related companies on review for possible downgrade, four gaming-related issuers on review for possible downgrade, and revised the rating outlook on three gaming-related issuers to negative from stable. Moody's overall outlook for the lodging, leisure and gaming industry is now negative, cut from stable.

The rating agency said its action is in response to the expected deterioration in credit quality resulting from the terrorist attack on Sept. 11. Last week, Moody's put five lodging and four gaming companies on review for possible downgrade.

Moody's said there is still a high degree of uncertainty about the impact of the Sept. 11 tragedy it believes a significant number of ratings are at immediate risk. Companies put on review for possible downgrade include those with debt levels that are already high for their current rating, those required to sell assets and/or restructure operations in the near-term to improve their liquidity profile, those with a heavy reliance on airlines and cruise ships to bring customers to their destination locations and those that pursue material share repurchase programs at the expense of credit quality.

Moody's put the following lodging companies on review for possible downgrade: Extended Stay of America, Inc. (Ba3 senior implied), John Q. Hammons Hotels, LP (B2 senior implied), Lodgian, Inc. (B3 senior implied), Prime Hospitality Corporation (Ba2 senior implied), ShoLodge Inc. (B3 senior implied), MOA Hospitality, Inc. (Caa2 senior implied) and Sunburst Hospitality Corp. (Ba3 senior implied).

Moody's put the following leisure companies on review for possible downgrade: Sun International Hotels Ltd. (Ba2 senior implied), Boca Resorts, Inc. (Ba3 senior implied), American Skiing Co. (B3 senior implied), Vail Resorts, Inc. (Ba2 senior implied), Booth Creek Ski Holdings, Inc. (B3 senior implied), Intrawest Corp. (Ba3 senior implied), KSL Recreation Group, Inc. (Ba3 senior implied), and Bluegreen Corp. (B2 senior implied).

Moody's put the following gaming companies on review for possible downgrade: Boyd Gaming Corp. (Ba2 senior implied), Eldorado Resorts LLC (Ba3 senior implied), Isle of Capri Casinos, Inc. (Ba3 senior implied) and Venetian Casino Resorts, LLC (B3 senior implied).

Moody's revised to negative outlook from stable the following gaming-related companies: Alliance Gaming Corp. (B1 senior implied), Mikohn Gaming Corp. (B2 senior implied) and Herbst Gaming, Inc. (B2 senior implied).

S&P downgrades Nextel International, still on negative watch

Standard & Poor's downgraded Nextel International Inc., cutting its senior unsecured debt to CCC- from B-, and kept the company's ratings on CreditWatch with negative implications.

The rating agency said the downgrade is based on "heightened concerns over liquidity" because S&P now views Nextel International on a stand-alone basis. It noted that Nextel Communications Inc. has indicated that it does not plan to provide additional support to Nextel International, at least in cash form, beyond the $250 million committed by year-end.

S&P said Nextel Communications, which owns 99% of Nextel International, had previously acknowledged that Nextel International was strategic to its business plan.

With $212 million in cash and available credit at the end of the second quarter of 2001 and no additional cash support from Nextel Communications beyond what has been committed, S&P said Nextel International will likely run out of cash by the end of 2001 based on its current cash depletion rate of about $200 million per quarter.

S&P downgrades Conseco to B+

Standard & Poor's downgraded Conseco Inc., lowering its counterparty credit and senior debt ratings to B+ from BB-. It also lowered its counterparty credit and financial strength ratings on Conseco Inc.'s insurance subsidiaries to BBB- from BBB and affirmed its B commercial paper rating on Conseco Inc. The outlook is stable.

S&P left Conseco Finance Corp. ratings unchanged at B- for its senior debt.

The rating agency said it cut the ratings following Conseco's announcement of $475 million after tax in special charges for write-downs of interest-only securities, realized losses in its bond portfolio, , special charges from the discontinuation of the major medical lines, the marking to market of its Telecorp investments, and a charge related to the company's potential liability for guaranteeing bank loans to certain directors and officers. Conseco Finance's ratings were unaffected because the charges for IO securities were already factored into the rating.

S&P commented: "Although Conseco has made significant progress in a debt-restructuring plan providing for the retirement of more than $2 billion of debt, the most recent round of special charges suggests that the quality of capital is inconsistent with original expectations. Standard & Poor's now believes Conseco's recovery will take longer than originally expected and that additional special charges could arise in upcoming quarters, depressing earnings."

Fitch puts SoCalED, Edison International on watch positive

Fitch changed its rating watch on Southern California Edison and its parent Edison International to positive from negative following the announcement that the California Public Utilities Commission reached a settlement resolving Southern California Edison's Filed Rate Doctrine lawsuit.

Fitch said: "The settlement agreement provides price certainty for SCE through at least 2003. That together with lower power supply costs is expected to provide surplus revenue for the repayment of unpaid SCE debt resulting from unrecovered power procurement costs."

However the rating agency added that there are still uncertainties. Nonetheless, a favorable resolution could provide "a basis for a significant improvement in the company's credit quality over time."

Fitch rates SoCalEd's senior secured and subordinated debt CCC, its senior unsecured debt CC except the 5 7/8% series which is rated D. It rates Edison International's senior unsecured debt CC and its trust preferreds C.

Fitch affirms AES ratings but revises outlook to negative

Fitch on Wednesday affirmed the ratings of AES Corp.'s senior unsecured debt at BB+ but changed the rating outlook from stable to negative. The ratings of the remarketable or redeemable securities (ROARs) and corporate revolving facility were also affirmed at BB+, senior subordinated notes at BB, convertible junior debentures and term convertible preferred securities (TECONs) at B+, all with a negative outlook. Fitch also said the rating outlooks of IPALCO Enterprises and Indianapolis Power and Light Co. were changed from stable to negative.

The ratings are based on AES' substantial upstream cash flow in the form of dividend income from a diverse list of projects and subsidiaries, Fitch said, noting that parent cash flows are supported by ownership of assets and businesses totaling around $31 billion at yearend 2000. The outlook revision, Fitch said, reflects the increase over the past two years in AES' parent leverage in the form of recourse debt plus non-recourse loans enhanced by collateral of parent company stock. Also, Fitch noted that AES has increased its investment concentration in countries in which non-recourse financing and currency hedges are not readily available. And, Fitch noted that on Sept. 26, AES reduced its earnings guidance for the year 2001 based on lower Brazilian currency valuation; reduced near-term earnings expectation in the U.K. and the absence of additional earnings from expected new business acquisitions that did not occur.

Fitch upgrades Juniper Generation to BB

Fitch upgraded Juniper Generation LLC's $105 million senior secured bonds due 2012 to BB from CC and put them on rating watch evolving.

Fitch said its action followed the "significant restructuring" of operating and financing agreements at the project and portfolio level.

It added that its rating is based on "the level and seniority of expected payments to Juniper from its portfolio of power projects, El Paso's willingness to take a subordinate but secured position on outstanding invoices, and the plan of reorganization recently filed by Pacific Gas & Electric."

Moody's downgrades Hylsa senior unsecured notes to Caa3.

Moody's Investors Service downgraded Hylsa SA de CV's $300 million of 9¼% senior unsecured notes due 2007 to Caa3 from B3. The outlook remains negative.

Moody's said its downgrade was in response to "Hylsa's deteriorating credit measures in the midst of a worsening North American economy and its diminished options for refinancing its outstanding and maturing debt, much of which has already been subjected to temporary amendments and waivers to cure covenant violations."

The rating agency said it believes debt restructuring is "quite likely" as Hylsa does not have sufficient liquidity to fund near-term anticipated losses. In the event of a restructuring, losses are likely to be high, Moody's added.

Moody's puts Worldwide Flight Services on review for upgrade

Moody's Investors Service said it put the B3 rating on Worldwide Flight Services' $130 million of 12¼% senior notes due Aug. 15, 2007 and the B1 rating on its $75 million senior secured revolving credit facility on review for possible upgrade.

The rating agency said its action was prompted by the announcement that Vinci S.A. will purchase Worldwide from Castle Harlan, Inc.

Moody's described the purchase as a "favorable outcome" given Vinci's "significantly greater financial resources." It also noted the change of control provision requiring the senior notes be repurchased at 101.

But the rating agency said that if the transaction fails to close it will likely downgrade Worldwide Flight Services given the industry environment following the recent terrorist attacks.

S&P raises King Pharmaceuticals sub debt to BB-, outlook stable

Standard & Poor's raised the corporate credit and bank loan ratings for King Pharmaceuticals Inc. to BB+ from BB, on Wednesday. S&P also raised the its subordinated debt rating for the company to BB- from B+. The preliminary senior unsecured/subordinated debt ratings on the company's $1.5 billion shelf registration for the sale of equity, preferred stock, debt securities, and debt warrants also were raised to BB+/BB- from BB/B+. The outlook is stable, according to the report.

S&P said the actions indicate the continued success of the company's lead product, the cardiovascular drug Altace, as well as the company's increasing sales diversity, growing financial flexibility, and improved financial profile.

S&P assigns B rating to American Restaurant Group $165 mln senior secureds

Standard & Poor's cited American Restaurant Group, Inc.'s "small size in the highly competitive restaurant industry," as well as the company's weak cash flow protection measures, and significant debt burden, in assigning both the company and its proposed $165 million senior secured notes due 2006 ratings of B. The outlook is negative.

Proceeds will be used to refinance the company's $150 million senior secured notes due 2003, and for general corporate purposes, according to the report.

S&P keeps Radnor Holdings on negative watch

Standard & Poor's said Radnor Holdings Corp. is still on CreditWatch with negative implications where it was placed May 11, 2001.

S&P made its comment after Radnor released second quarter results. The rating agency said they indicated that "significant concerns regarding its very weak liquidity and strained financial flexibility remain."

The company had only $4 million of availability (including cash on hand) under its revolving credit facility as of June 30, 2001 and faces "significant refinancing risk" since its $50 million revolving credit facility matures in October 2002 and its $161 million senior notes in December 2003.

S&P commented: "Absent a meaningful improvement in business fundamentals and financial performance, Radnor will be challenged to meet these refinancing requirements."

S&P cuts Aladdin Gaming Holdings to D

Standard & Poor's cut Aladdin Gaming Holdings LLC's corporate credit rating to D from CCC- and its senior unsecured debt to D from CC. It also lowered the senior discount notes issued by Aladdin Gaming Holdings and Aladdin Capital Corp. to D from CC.

The action follows the Chapter 11 bankruptcy filing by Aladdin Gaming LLC.

Fitch downgrades Federal Mogul's debt to D

Responding to Federal Mogul Corp.'s voluntary Chapter 11 filing for itself and a similar filing for its U.K. subsidiaries, Fitch downgraded the company's senior unsecured and secured bank debt to D from CCC and B- respectively. Fitch stated that the company had $1.9 billion in secured bank debt outstanding in addition to $2.1 billion of unsecured debt.

In addition to the bankruptcy filings, Fitch said, the company faces liabilities related to asbestos claims.

The Southfield, Mich.-headquartered company produces parts for cars and trucks.

S&P keeps Metromedia on negative watch

Standard & Poor's said its ratings for Metromedia Fiber Network Inc. remain on CreditWatch with negative implications following the company's announcement that it completed a $611 million financing package.

S&P commented: "While the funding alleviates Standard & Poor's near-term concerns about the company's liquidity, Standard & Poor's will review management's revised business and financial plans before resolving the CreditWatch listing."

S&P rates Metromedia's senior unsecured debt CCC-.

S&P downgrades Spalding sub debt to C, still on watch

Standard & Poor's said it downgraded Spalding Holdings Corp. to CC from B- and its subordinated debt to C from CCC. The company's senior secured rating was lowered to CC from B-. The ratings remain on CreditWatch where they were placed with negative implications on May 31, 2001.

S&P said the downgrade follows Spalding's announcement that it elected not to make its October 1 interest payment on its senior subordinated notes.

S&P commented: "Spalding will take advantage of the 30-day grace period on the indenture while it negotiates an exchange of the notes for other securities with its largest bondholder as part of a recapitalization of the company. The subordinated debt ratings have not been lowered to default at this time, as the company has indicated they currently have the liquidity to make the payment."

Moody's affirms Cable Satisfaction Caa2 rating, outlook now stable

Moody's Investors Service said it affirmed its Caa3 rating on Cable Satisfaction International, Inc.'s $150 million of 12 ¾% senior unsecured notes due 2010 and changed the outlook to stable from negative.

Moody's said the outlook change reflects improved liquidity from the company's recent public and private equity offering which raised €55 million, its recent €100 million bridge facility and its amended €260 million senior bank facility.

The rating agency added that the affirmation of Cable Satisfaction's ratings reflects that the company's operating and financial performance which has been "broadly in line with Moody's expectations; notwithstanding the fact that earlier deviations of the company's business plan were sufficient to require amendments to their bank facility and presented the potential liquidity issues that were largely responsible for the previously negative outlook."

S&P downgrades Land O'Lakes

Standard & Poor's downgraded Land O'Lakes corporate credit rating to BB+ from BBB+ and cut Land O'Lakes Capital Trust I preferred stock to B+ from BBB-. The ratings are removed from CreditWatch and have a stable outlook.

S&P assigned a BBB- rating to the company's $1.075 billion senior secured credit facility and put it on CreditWatch with negative implications.

S&P said its actions are based on an anticipated early October closing of the company's acquisition of Purina Mills Inc. for $380 million.

The rating agency noted Land O'Lakes will be number one in the U.S. animal feed industry with a strong portfolio of national, regional and local brands and opportunities for cost saving.

It added: "These factors are offset by an aggressive financial profile, modest discretionary cash flow, and a sizable debt amortization schedule. The rating also incorporates the operating risk associated with integrating the two firm's operations. In addition, Land O'Lakes' recent operating performance has been impacted by the cyclical downturn in many areas of the cooperative's agricultural-based businesses as well as by a series of acquisitions."

S&P revises CNET outlook to negative

Standard & Poor's revised its outlook on CNET Networks Inc. to negative from stable and affirmed the company's ratings, including its CCC subordinated debt rating.

S&P said the revision reflects "an increasingly difficult advertising environment that is limiting the company's prospects for revenue growth. In addition, business fundamentals that were already challenged are being negatively affected by the terrorist attacks in the U.S. on Sept. 11, 2001, that are intensifying concerns about an economic slowdown and a further downturn in advertising spending. CNET is particularly vulnerable given that it receives a significant portion of its revenue from high-tech related advertising, an especially weak sector amid a general retrenchment in online advertising."

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