S&P downgrades Kmart

Standard & Poor's downgraded Kmart Corp.

Ratings affected include the company's debentures, senior notes, notes and medium-term notes and its revolving credit facility, all cut to BB from BB+, and its trust convertible preferreds, cut to B from B+.

Moody's puts Veritas DGC on review for upgrade

Moody's Investors Service put the Ba3 senior unsecured debt rating of Veritas DGC Inc. on review for upgrade and confirmed the Baa3 senior unsecured debt rating of Petroleum Geo-Services ASA with a stable outlook. A total of $2.1 billion of debt securities are affected including Veritas' $135 million 9.75% senior unsecured notes due 2003 currently rated Ba3, Petroleum Geo-Services' Baa3 senior unsecured notes and its Ba1 junior subordinated debt, the Baa2 guaranteed first preferred mortgage notes of Oslo Seismic Services, Inc. and the ba1 guaranteed trust preferred securities of PGS Trust I.

Moody's took the action after the two companies announced plans to merge.

The rating agency said it confirmed Petroleum Geo-Services based on the "strategic benefits of the proposed combination and on management's commitment to reduce the company's financial obligations within a reasonable timeframe following completion of the merger."

Moody's said its review will focus on the corporate structure of the merged company and the position of Veritas' debt within its capital structure.

If completed as currently structured and Veritas' notes remain outstanding, the securities would rank pari passu with Petroleum Geo-Services' senior unsecured notes and be upgraded to Baa3 from Ba3.

S&P puts Veritas DGC on positive watch

Standard & Poor's put its ratings on Veritas DGC Inc. on CreditWatch with positive implications.

Ratings affected include the company's BB+ rated senior notes.

Moody's assigns Ba2 to new Toll Brothers notes

Moody's Investors Service assigned a Ba2 rating to the new senior subordinated notes of Toll Brothers, Inc. and confirmed the company's other ratings. Among the $1.405 billion of debt affected are the outstanding senior subordinated notes rated Ba2 and the revolving credit facility and term loan rated Baa3. The outlook remains stable.

Moody's said the new notes, like the outstanding ones, are rated two notches below the company's senior implied rating of Baa3 because they are not guaranteed by Toll's subsidiaries.

The rating agency said its assessment reflects the company's continued earnings growth, geographic diversification, continued strong backlog, growing equity base, above-industry margins and leadership in its luxury homebuilding niche.

However, Moody's said Toll has large land holdings, equivalent to five years of owned land and nine years of owned and optioned land, its high-end customer base which may tend to weaken more in a recession, risks associated with expansion into new markets and the cyclical nature of the homebuilding industry.

Toll also has one of the more heavily leveraged balance sheets in the industry and the highest debt/capitalization ratio of the investment grade home builders, although this risk is mitigated somewhat by the company's strong cash flow, Moody's said.

Moody's rates new Nextel Partners notes B3, cuts outlook to negative

Moody's Investors Service assigned a B3 rating to the new senior notes due 2009 issued by Nextel Partners, Inc. and confirmed the company's existing ratings. However it cut the outlook to negative from stable. Among the $1.5 billion of affected debt are Nextel Partners, Inc.'s senior notes and senior discount notes rated B3 and Nextel Partners Operating Corp.'s revolving credit facility and term loans rated B1.

Moody's said its rating reflects Nextel Partners' "success in building and launching markets that cover 29.3 million people at the end of September 2001. Nextel Partners has also attracted over 434,000 subscribers to its differentiated wireless service offering. These subscribers generate among the highest monthly revenues and the lowest churn rates in the wireless industry. Nextel Partners has consistently posted strong financial and operating results, exceeding Moody's expectations."

But Moody's said the company is highly levered, still generates negative EBITDA and has large capital expenditure requirements going forward.

Moody's said it cut the outlook to negative because of its concerns about the addition of this incremental debt at this stage of the company's development.

If Nextel Partners fails to continue to meet expectations or fails to achieve the claimed benefits of building into additional territory, the ratings could be lowered in the next 12 to 18 months, Moody's said.

Moody's upgrades US Unwired

Moody's Investors Service upgraded US Unwired. Ratings affected include the company's $130 million senior secured credit facility, upgraded to Ba3 from B1, and its $400 million (face value) 13.375% subordinated discount notes, upgraded to B3 from Caa1.

Moody's said it raised the ratings because of US Unwired's "successful execution of its business plan to date, Moody's expectation that US Unwired will continue to post good operating and financial performance, the achievement of positive EBITDA, and the company's very strong liquidity position."

The rating agency said US Unwired has "substantially completed" its network and now covers almost 70% of its franchise service area. With 235,000 PCS subscribers, it is one of the largest Sprint PCS affiliates by this measure.

It also owns mature cellular telephone operation which has helped it reach positive EBITDA more quickly than its peers, Moody's noted.

With the PCS network nearly complete, capital expenditures should begin to decline.

At the end of September, US Unwired had $129.5 million cash and an undrawn $80 million revolving credit facility, Moody's noted.

S&P downgrades Dan River

Standard & Poor's downgraded Dan River Inc. and put the ratings on CreditWatch with negative implications. Among the ratings lowered is Dan River's subordinated debt, cut to CCC from CCC+.

S&P said it took the actions because of concerns about Dan River's "liquidity, continued difficult operating conditions, and weak financial performance."

The rating agency noted Dan River is negotiating an amendment to its bank facility because of covenant violations. It has a waiver through Dec. 10 but the revolver is currently frozen at $120 million.

S&P cuts Kinetek outlook to negative

Standard & Poor's cut its outlook on Kinetek Inc. (formerly Motors & Gears Inc.) to negative from stable and affirmed the existing ratings. Ratings affected include the senior secured debt at BB- and the senior unsecured debt at B.

S&P said the lower outlook reflects "a further softening in Kinetek's key markets, which has eroded the credit profile and reduced financial flexibility."

Sales declined more than 14% in the third quarter and 9% for the first nine months of 2001 due to weakness across Kinetek's end markets, particularly subfractional refrigeration appliance motors and motors for the bottle and can vending sector, S&P said.

As a result, total debt to EBITDA increased to 5.3 times from 4.6x at the beginning of the year, while EBITDA to interest coverage declined to 1.7x from 2.0x.

S&P expects credit protection measures to decline further in the next couple of quarters given the weak U.S. economy.

S&P raises American Builders & Contractors outlook to stable

Standard & Poor's raised its outlook on American Builders & Contractors Supply Co. Inc. to stable from negative.

S&P said the revision reflects "the strengthening of cash flow measures to satisfactory levels and the moderation of acquisition activity."

The rating agency said its assessment reflects the company's leading position in the wholesale distribution of roofing products and relatively stable product demand, offset by highly competitive and fragmented markets, a narrow product line, low distribution operating margins and aggressive debt leverage.

S&P said total debt at the end of the year could be lower than a year ago. Total debt to EBITDA is now "reasonable" at less than 4 times, while EBITDA interest coverage has strengthened to the "fully appropriate" 3.0x to 3.5x range, helped by the current lower interest rate environment, S&P added.

S&P downgrades Oxford Automotive

Standard & Poor's downgraded Oxford Automotive Inc. and kept the company's ratings on CreditWatch with negative implications.

Ratings affected include the company's senior subordinated notes, cut to CCC- from CCC+ and its bank loan, cut to CCC+ from B.

Moody's confirms Senior Housing's SNH Capital Trust I

Moody's Investors Service said it confirmed the Ba3 rating on trust preferred securities issued by SNH Capital Trust I, a trust organized by Senior Housing Properties Trust. It also confirmed the prospective Ba2 senior debt rating on Senior Housing's shelf registration. The announcement concludes a review of the ratings.

Moody's said the confirmation is based on Senior Housing's solid operating performance, its ability to raise $214 million through two separate equity issuances, and the announcement that it will spin-off Five Star, its healthcare operating subsidiary, into an independent company.

These positives "mitigate much of the risk" associated with Senior Housing's plan to buy a portfolio of 31 senior living communities for $600 million from Crestline, Moody's said.

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