S&P rates new Waste Connections convertible floater at B+

Standard & Poor's assigned a B+ rating to Waste Connections Inc.'s $150 million floating-rate convertible subordinated notes due 2022. At the same time, S&P affirmed its BB corporate credit rating and other ratings on the company. The outlook is stable.

The ratings are supported by the major regional solid waste management firm's 2002 revenues estimated at $475 million to $500 million, efficient operations and generally favorable industry fundamentals," said S&P credit analyst Roman Szuper.

These factors are partially offset by a somewhat below-average financial profile and risks associated with an active growth strategy.

Although the solid waste management industry is mature and competitive, earnings prospects for Waste Connections are enhanced by the essential nature of services, some pricing flexibility and benefits from acquisitions.

Challenges include an acquisition-based growth strategy, continued weakness in commodity prices, lower volume and higher insurance costs. However, the weaker economy has not had a material adverse impact on financial performance, evidencing relatively small exposure to more cyclical industrial markets.

Despite Waste Connections' moderate scale of operations, its operating profit margins of about 36% are impressive and among the highest in the industry, reflecting exclusive contract arrangements, low cost structure and improving integration of services.

Near term, credit protection measures are expected to be appropriate for the rating, with funds from operations to debt about 20%, debt to EBITDA 3.0 times to 3.5 times, EBIT interest coverage 3.0 times to 3.5 times and debt to capital in the 50% to 55% range.

Leading market positions and efficient operations should offset risks associated with the growth strategy and a slower economy, thus maintaining a credit profile consistent with the ratings.

S&P puts Fiat short-term debt on negative watch

Standard & Poor's placed the A-3 short-term corporate credit rating on Italy-based automotive group Fiat SpA on watch with negative implications due to concerns about persisting poor financial performance and uncertainty regarding debt leverage. Fiat has about €33 billion in debt.

The review will focus on planned asset sales and on future cash flow generation of core divisions retained by the group, said S&P credit analyst Virginie Casin.

Fiat has had poor profitability and cash flow in recent years, notwithstanding past efforts to restructure its businesses and asset sales. The group controls Fiat Auto Holdings B.V., the world's seventh-largest carmaker, (BB/negative) and Iveco N.V., Europe's third-largest commercial vehicle producer.

Moody's cuts KPNQwest to Caa3

Moody's lowered the senior implied rating of KPNQwest N.V to Caa3 from Caa1, which includes the €210 million 10% convertible notes due 2012, and unsecured ratings to Ca from Caa3. Moody's also lowered the company's €525 million senior secured credit facility maturing 2006 to Caa1 from B3. The outlook is negative.

The action follows the company's downwardly revised financial guidance in light of severely deteriorating market conditions and news that it hired Bear Stearns to advise on strategic and financial alternatives.

KPNQwest is exploring options to restructure its balance sheet as well as the sale of non-core assets and raising equity.

Moody's believes that a restructuring of the balance sheet in order to maintain the viability of the business may prompt non-payment of interest payable on the unsecured high yield notes.

At this juncture, KPNQwest is not in breach or default under its senior secured credit facility nor is it in default under its high yield indentures. However, that noted, both sets of documentation contain cross-default clauses that would be triggered if a breach was not rectified within specific cure periods unless the cross default clauses are waived in advance.

Moody's also continues to recognize the importance of access to the bank facility, which remains the company's core source of funding.

In the event that KPNQwest opts to restructure the high yield notes, Moody's anticipates material lossess for par bondholders given the uncertainty with respect to the valuation of assets in a downside scenario.

S&P downgrades KPNQwest

Standard & Poor's downgraded KPNQwest NV and put the company on CreditWatch with negative implications.

Ratings lowered include KPNQwest's $450 million 8.125% notes due 2009, €340 million 7.125% notes due 2009, €500 million 8.875% notes due 2008 and €211 million 10% convertible bonds due 2012, all lowered to C from CCC.

Fitch confirms Fleming

Fitch confirmed its rating on Fleming Cos., Inc. including its secured bank credit facilities at BB+, its senior unsecured notes at BB and its senior subordinated notes at B+. The outlook remains negative.

Fitch said the action follows Fleming's announcement it will acquire two convenience store distributors for approximately $430 million in cash (including assumed debt), to be financed with a combination of debt and equity.

Fitch said it is maintaining its negative outlook because of uncertainty about Kmart's sales levels, the ultimate nature of Fleming's agreement with Kmart, as Fleming's contract with Kmart has not yet been confirmed in the bankruptcy process, and the inherent integration risks associated with the acquisitions. Also of concern is the possibility for additional Kmart store closures, beyond those already announced.

The two acquisitions will significantly enhance Fleming's distribution business and solidify its position as the largest food wholesaler in the U.S., Fitch said.

The rating confirmation reflects the significant equity component of the funding of these transactions, Fitch added.

While the pace of improvement in bondholder protection measures in 2002 will slow slightly from previously anticipated levels, leverage (total debt plus eight times rents to EBITDAR) and coverage (EBITDAR to interest and rents) at year-end 2002 are still expected to strengthen from the 4.4 times and 2.4 times respectively at year-end 2001.

S&P cuts TECO Energy to A-

Standard & Poor's lowered the corporate credit rating for TECO Energy Inc. and affiliates to A- from A. The outlook remains negative.

The downgrade reflects S&P's assessment of TECO's business strategy and quality of cash flow weighed against the level of risk undertaken.

TECO has taken positive steps to improve its credit profile in recent months, however continued progress is expected as the company faces challenges with regard to balancing the risk between its regulated and nonregulated businesses, said S&P credit analyst Deborah Kaylo.

Management has demonstrated a commitment to credit quality by strengthening the balance sheet, rationalizing assets and reducing discretionary capital expenditures.

The company's ability and resolve to bolster its financial profile such that consolidated funds flow interest coverage approaches 5 times and debt leverage under 50% are expressly factored into current ratings.

TECO has issued nearly $800 million in equity in 2001 and 2002. Significant reduction in capital expenditures has preserved free cash flow.

Still, TECO is challenged with a growing portfolio of higher-risk, nonregulated power development as well as regulated utility plant-repowering expenditures, which stress the credit profile near term.

While the company has taken steps to delever and rebalance its capital structure, it still has challenges to maintain credit quality at the current rating level.

S&P expects incremental cash flows to continue bolstering the financial profile in 2002 and 2003. Failure to achieve financial protection measures in a timely manner will likely lead to ratings downgrade.

Moody's rates Temple-Inland convertible at Baa3

Moody's has rated Temple-Inland's proposed new $300 million issue of convertible upper DECS at Baa3. While the value of the convertible is derived from both the note and equity contract component of the instrument, the Baa3 rating reflects Moody's view of the credit quality of the underlying senior unsecured note component of the instrument.

The outlook for Temple-Inland's ratings is negative, reflecting concern over the need to access multiple capital markets over the next 12 months to address maturing debt and liquidity needs.

Moody's expects to consider shifting the outlook to stable when the company has refinanced the bridge loan in its entirety, when maturing bank agreements have been refinanced and when liquidity generally improves.

Moody's cuts Tyco convertibles to Baa3

Moody's downgraded the long-term debt ratings of Tyco International Ltd. to Baa2, and the Tyco 0% convertibles to Baa2 from Baa1, following the news that it will no longer pursue plans to breakup into four separate businesses, will not sell its Plastics division and that its earnings and cash flow will be lower than originally planned.

Moody's noted that the revised strategy of an IPO of CIT and applying the proceeds to debt reduction would be a favorable development, however debt reduction will be less than originally anticipated in the breakup plan and cash flow expectations have weakened.

The ratings remain under review for possible downgrade.

The rating agency stated that while Tyco's near-term liquidity position, overall earnings and free cash flow remain strong, weakness in the electronics and telecom businesses is hurting the company's performance and has resulted in a decrease in company guidance in earnings and free cash flow for the year.

Moody's is concerned that the softness in these markets could be protracted, and that confidence issues and competitive pressures in the marketplace could place additional pressure on other Tyco businesses, such as Healthcare.

In addition, the company announced $3.3 billion of charges, which includes asset impairment at TyCom Global Network and write-offs of inventory, investment in FLAG Telecom, reserves for credit losses in Argentina and other restructuring and unusual costs.

The rating agency also noted that Tyco's debt levels are high, and will remain elevated even after the application of the proceeds from the IPO of CIT.

Moody's noted that further debt reduction could be modest because the company intends to utilize up to half of its free cash flow for share repurchase, while the remainder will be absorbed in cash outlays for restructuring and fill-in acquisitions. Moody's is also concerned that Tyco's sizable goodwill that exceeds its book equity, even before charges to equity associated with the IPO of CIT, may be subject to future charges.

Moody's said it will now focus on Tyco's ability to complete the IPO of CIT, as execution risk still exists in such a transaction.

Moody's will also focus on Tyco's liquidity and debt paydown plan going forward, paying particularly close attention to the company's ability to repay or refinance maturing debt over the next 12 to 18 months, as well as its ability to handle two convertible debt issues that could, by their terms, require significant cash calls in calender 2003 due to scheduled puts.

The company's ability to access the capital markets and to restore normal banking relationships will also be evaluated, noting that the term loan under its $3.855 billion 364-day revolver matures in February 2003.

Lastly, Moody's will assess the company's ability to restore profitability to historical levels, especially within the Electronics segment, as well as cash flow generation in a new operating environment where Tyco expects more modest 10-15% growth, stemming from organic, rather than acquisition-driven actions.

Fitch rates Greater Bay convertible at BBB-

Fitch Ratings assigned a BBB- long-term senior rating to Greater Bay Bancorp's new $200 million 0% senior convertible contingent notes. Also, Fitch upgraded the long-term senior ratings for the bank's subsidiaries to BBB- from BB+. The outlook is stable.

The upgrade reflects continued strong financial performance despite the recent market downturn, especially in the localized markets of Northern California. Better-than-peer profitability measures, strong margins, good asset quality and sound operating leverage all support the current ratings.

A heavy concentration in commercial real estate, relatively aggressive capital management and fairly tight holding company liquidity metrics are constraining factors. Asset quality indicators remain favorable when compared to peers, even including the write-down of about $15 million in first quarter primarily related to discontinued syndicated loan portfolio.

Given the stabilizing trends in the Bay Area real estate market and the steady reduction in the syndicated loan portfolio, Fitch expects to see credit quality trends firm in the near term.

Holding company liquidity, while improving, continues to bear close monitoring, as a sizeable debt burden is primarily supported by subsidiary dividends. As current capital plans materialize and solid earnings continue to generate additional capital, Fitch expects to see increased holding company liquidity, a decline in the reliance on trust preferred securities and an even stronger tangible equity ratio.

S&P cuts Corning to BBB-

Standard & Poor's lowered its corporate credit rating on Corning Inc. to BBB- from BBB, citing an expected deferral into 2003 of any meaningful recovery in key telecom optical fiber, cable and photonic segment. Corning's notes and debentures, including its convertible debentures, were also cut to BBB- from BBB while the former Oak Industries convertible subordinated notes were lowered to BB+ from BBB-. The outlook is negative.

Corning currently has adequate liquidity for the near-term with cash and investments of $1.8 billion, an unused $2.0 billion bank facility and no significant debt maturities until 2005. However, failure to make meaningful progress toward profitability in 2003, whether through further cost cuts or a recovery in fiber markets, would lead to a further reduction in the rating, said S&P credit analyst Robert Schulz.

The ratings reflect sharply deteriorated conditions in its key telecom markets with no assured timing as to recovery, offset by adequate liquidity due to significant cash balances and a large unused bank credit facility.

The cash burn rate from operations was about $200 million in first-quarter 2002. Corning's

The rating incorporates an expectation of a modest and gradual recovery in telecom demand in 2003 and return to profitability due to the benefits of extensive cost reductions. Should prospects for a 2003 recovery in the telecom segment diminish during 2002, or liquidity be reduced by worse-than-expected operating performance, ratings would be lowered further.

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