S&P cuts AAR to junk, still on watch

Standard & Poor's downgraded AAR Corp. to junk and kept it on CreditWatch with negative implications. Ratings lowered include AAR's $50 million 7.25% notes due 2003 and $60 million 6.875% notes due 2007, cut to BB- from BBB-.

S&P said the downgrade reflects AAR's weak earnings, with an expectation of continued pressure on revenues, and reduced financial flexibility. As a result, most credit protection measures are poor and likely to remain significantly below those consistent with the prior rating, given a very challenging operating environment in the firm's primary market, the airline industry.

Barring any material deterioration in industry conditions, the ratings are likely to be affirmed and removed from CreditWatch if AAR obtains additional financings to fund $50 million of notes due October 2003 and assure a liquidity cushion, S&P said.

AAR's primary financial objective is to generate cash to meet operating and financing needs. Cash and equivalents ($36 million at Feb. 28, 2003) and modestly positive internal cash flow are main sources of liquidity, S&P said. The new $35 million accounts receivable facility, which replaced other financings, is fully utilized.

Moody's upgrades JDN Realty

Moody's Investors Service upgraded JDN Realty Corp.'s senior unsecured notes to Baa3 from B1.

Moody's said the action follows the completion of the $1 billion merger between JDN and Developers Diversified Realty Corporation and the formal guarantee of the notes by DDR. The rating outlook is negative, as is the outlook on the ratings of Developers Diversified.

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