Moody's puts WorldCom on review for possible downgrade

Moody's Investors Service placed the long term ratings of WorldCom (senior unsecured A3) and its subsidiaries, including Intermedia Communications Inc., on review for possible downgrade following the company's announcement that volume and pricing pressures will result in lower revenue and EBITDA growth in 2002 as well as free cash flow at the lower end of its previous guidance. While the degree of adjustment to prior guidance is relatively modest, Moody's said WorldCom has little flexibility in its A3 rating to absorb any disappointments.

The degree of downgrade, if any, following the review is likely to be limited to one notch and as a result Moody's said it confirmed the Prime-2 rating for WorldCom's short-term debt. The review will focus on the ability of WorldCom to address less favorable markets, the resultant impact on operating performance and leverage and its ability to continue to perform at the upper end of industry norms, Moody's said.

Moody's downgrades Metaldyne

Moody's Investors Service downgraded Metaldyne Corp. and its Metaldyne Co. LLC unit. The outlook is stable. Ratings affected include Metaldyne's $305 million 4.5% convertible subordinated debentures due 2003, lowered to B3 from B2, and its $1.3 billion of senior secured credit facilities, lowered to B1 from Ba3.

Moody's said its action was in in response to soft conditions in Metaldyne's end markets, high leverage and declining operating margins.

For the 12 months to Sept. 30, 2001, Metaldyne had a debt to revenues ratio of 79%, Moody's said, adding that it expects upcoming fourth quarter 2001 financial results will show additional stress on operating cash flows caused by the current uncertain economic environment; lower levels of domestic vehicle production; and softness within most of Metaldyne's automotive and industrial end markets.

Moody's also said Metaldyne will be under pressure over the next few years to consistently invest capital well in excess of depreciation in order to increase productivity and capacity; remain state-of-the-art and competitive; and support its growing book of new business scheduled to come on stream over the next several years.

S&P downgrades Pinnacle Holdings, still on watch

Standard & Poor's downgraded Pinnacle Holdings Inc. and its Pinnacle Tower Inc. unit and kept the companies on CreditWatch with negative implications. Ratings affected include Pinnacle Holdings' $325 million 10% senior discount notes due 2008, lowered to C from CCC-, and Pinnacle Towers' $285 million secured revolving credit facility, $125 million secured term loan and $110 million secured term loan, all lowered to CC from CCC+.

S&P said its action follows Pinnacle's statement that it may have to file for bankruptcy protection because its forbearance agreement with senior bank lenders prohibits it from distributing funds to its parent for servicing of interest payments on Pinnacle Holdings' $200 million 5.5% convertible subordinated note issue. Failure to pay interest on the convertible subordinated notes could result in an acceleration of repayment of the notes as well as other debt.

S&P puts Avaya on negative watch

Standard & Poor's put Avaya Inc.'s senior unsecured debt including its LYONS, rated BBB-, on CreditWatch with negative implications. S&P confirmed the company's other ratings, which are not on CreditWatch but have a negative outlook.

S&P said its action follows Avaya's announcement that it has commitments from its lenders to amend its $1.25 billion credit facilities.

The credit facility amendment includes terms that the revolver will become secured by most of the company's domestic assets, excluding real property, should either Standard & Poor's or Moody's lower its ratings on the company's senior unsecured debt to below investment grade, S&P said.

"Notwithstanding the banks' view that the revolving credit facility is only conditionally secured, Standard & Poor's considers such a facility to be effectively secured when the condition is incorporated into a credit agreement, even if no revolving credit is currently in use and regardless of the corporate credit rating at the time," S&P said.

As a result, the rating agency will notch the senior unsecured debt below the corporate credit rating.

Moody's say U.S. life insurer exposure to Kmart "modest"

In a new report, "Kmart and the U.S. Life Insurance Industry: Modest Credit Exposure at Most", Moody's details the Kmart-related securities investment exposures for each of the 79 US life insurance groups that it rates. The U.S. life insurance industry's exposure to Kmart Corp.-related fixed-income investments reported on Schedule D was about $714 million at year-end 2000. That compares with an industry consolidated statutory capital base of around $213 billion as of the same date, according to Moody's. Consequently, Moody's believes that the bankruptcy filing will have very limited credit implications for its rated U.S. life insurance companies. MetLife is among the top three insurance firms with exposure to the situation, Moody's said.

S&P affirms Legal & General convertible at AA

Following receipt of final documentation, Standard & Poor's affirmed its AA senior unsecured debt rating on the £525 million five-year convertible bond issued by Legal & General Group plc. At the same time, S&P its A-1+ short-term rating on Legal & General Finance plc's euro commercial paper program, based on an unconditional and irrevocable guarantee by L&G of the due and punctual payment of all amounts due under the program.

The affirmation of the commercial paper program rating follows the increase in the maximum size of the program to $2 billion from $1 billion. Based on the expected drawings under the program, S&P siad L&G continues to maintain appropriate liquidity backup, including revolving committed bank lines and short-term liquid assets, to meet potential commercial paper refinancing needs.

S&P rates new France Telecom exchangeables BBB+

Standard & Poor's assigned a BBB+ rating to France Telecom's offering of €1.52 billion 1% exchangeable callable bonds due Dec. 17, 2004.

Moody's rates Gabelli convertible Baa2

Moody's Investors Service assigned a Baa2 rating to Gabelli Asset Management Inc.'s senior unsecured debt, including the $90 million in senior unsecured notes that were recently issued in connection with the firm's Feline Prides securities. The outlook is stable.

Moody's said its ratings reflect Gabelli's strong brand name recognition and established position in the investment management industry.

"The firm and its retail mutual fund and separate account products have performed well over the last several years, and the company has embarked on a program to further expand and diversify its offerings," Moody's notes. "Gabelli's performance has helped the firm retain and attract funds under management - the key source of profitability and cash flows for an asset manager."

Moody's also described Gabelli's financial fundamentals as sound, reflecting high operating margins, steady cash flows and good liquidity.

S&P raises Mexican corporates to investment grade

Standard & Poor's upgraded the foreign currency debt ratings of several Mexican corporations including Telefonos de Mexico, SA de CV's $1 billion 4.25% convertible subordinated debentures due 2004, raised to BBB- from BB+.

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