Moody's downgrades Teleglobe

Moody's Investors Service downgraded Teleglobe Inc.'s senior unsecured rating to C from B3.

Moody's said the action follows BCE's announcement it will not provide further long-term funding to Teleglobe.

"Without assured funding from BCE, Teleglobe is not viable," Moody's noted.

Moody's said it believes that in the current depressed state of the long-haul telecom sector, Teleglobe's assets will provide only minimal coverage of its outstanding debt.

BCE has loaned Teleglobe C$550 million in 2002 on a senior unsecured basis, which is therefore pari-passu with the existing US$1.275 million of bank debt and the approximate US$1.2 billion of debentures. Total Teleglobe debt is approximately US$2.8 billion.

S&P cuts Teleglobe

Standard & Poor's downgraded Teleglobe Inc. and kept it on CreditWatch with negative implications.

Ratings affected include Teleglobe's $600 million 7.2% senior unsecured notes due 2009, $400 million 7.7% senior unsecured notes due 2029, $1.25 billion bank loan, C$125 million 8.85% debentures due 2002, C$125 million 8.35% debentures due 2003 and C$100 million 8% debentures due 2006, all cut to CC from B-.

Moody's downgrades Sierra Pacific, Nevada Power

Moody's Investors Service downgraded Sierra Pacific Resources senior unsecured ratings to B2 from Ba2 and its utilities, including Nevada Power Co.'s senior secured rating to Ba2 from Baa3 and commercial paper to Not Prime from Prime-3, and Sierra Pacific Power Co.'s senior secured rating to Ba2 from Baa3 and commercial paper to Not Prime from Prime-3. All ratings remain under review for possible further downgrade. A total of $3.9 billion of debt is affected.

Moody's said its downgrade reflects a myriad of factors since the "very harsh" decision in Nevada Power Company's deferred energy rate case, in which the Public Utility Commission of Nevada ruled on March 29 to disallow the recovery of approximately $438 million of the $922 million in deferred energy costs that had built up on Nevada Power's balance sheet during 2001. The Commission determined that the disallowed costs were not prudently incurred.

At the forefront of Sierra Pacific's challenges is a tight liquidity position, Moody's said.

Although the utility units' bank lines have been confirmed, they are now secured under the respective utility company general and refunding mortgage indentures, consistent with springing lien conditions in the related documents. The utility bank facilities, $200 million for Nevada Power and $150 million for Sierra Pacific Power, expire Nov. 28, 2002. However, the parent's $75 million credit line, which did not have any amounts outstanding, has been terminated.

Sierra Pacific is also taking other aggressive capital and operating and maintenance cost saving initiatives throughout the organization and has received cash from federal tax refund money.

"Notwithstanding these steps, the specter of demands for collateral from the utility company energy suppliers, which have been forestalled to date, looms on the horizon," Moody's said.

"In the event that ongoing efforts to assure suppliers that they will continue to be paid in a timely manner are not successful, the suppliers' willingness to forebear on requests for collateral might end. In this scenario, the utility companies would not be in a position to meet the significant collateral calls, and the suppliers would likely claim a default has occurred under the terms of the contracts."

S&P says AK Steel outlook revision on auto production

Standard & Poor's said it raised its outlook on AK Steel Holding Corp. to stable from negative - as reported Tuesday by Prospect News - in response to the expectation of increased auto production and pricing improvement in its spot cold-rolled product line following the implementation of restrictions on imports. S&P gives AK Steel a BB corporate credit rating.

The displacement of imports and increased auto demand should improve AK Steel's operating rates and financial performance from current weak levels, S&P said. In addition, financial measures should improve because AK Steel locked in low slab costs for 2002.

S&P noted AK Steel has only minimal exposure to commodity steel markets and sells the majority of its product line to automakers and appliance customers who demand high quality and specification for its product mix.

This focus on high quality, high margin steel, somewhat insulates AK from the threat of low cost minimills which have saturated the commodity steel spectrum and have trouble meeting the quality demanded by this customer base, the rating agency added.

Fitch rates Philippine Long Distance BB-

Fitch Ratings assigned a BB- rating to Philippine Long Distance Telephone Co.'s upcoming $350 million issue of unsecured notes due 2007 and 2012. The rating is on Negative Watch.

Fitch said it recognizes that successful completion of PLDT's various refinancing initiatives would be positive for the company. The rating agency is scheduled to meet with PLDT in late May, during which the agency said it will receive progress reports on the various financing initiatives as well as PLDT's plans to remedy its high gearing and other credit metrics.

Fitch expects to resolve the Rating Watch Negative as soon as possible after that meeting.

S&P rates Corrections Corp.' loan B+, notes B-, still on positive watch

Standard & Poor's assigned a B+ rating to Corrections Corp. of America's new credit facility and a B- rating to its new $250 million senior notes due 2009. The ratings remain on CreditWatch with positive implications.

S&P said that once the current refinancing is completed it expects to raise the company's ratings by one notch.

The transaction will relieve the company of onerous near-term debt maturities, S&P said.

The rating agency added that the credit facilities derive strength from their secured position but S&P said it is not clear whether the distressed enterprise value would be sufficient to cover the entire loan balance when fully drawn under the agency's simulated default scenario.

The new senior unsecured notes are two notches below the expected corporate credit rating, reflecting their secondary position relative to the firm's relatively high level of secured bank debt, S&P added.

Moody's lowers Hudson Respiratory ratings

Moody's Investors Service downgraded Hudson Respiratory Care Inc. and gave the ratings a negative outlook. Lowered ratings include Hudson Respiratory's $100 million senior secured credit facilities, cut to Caa1 from B1, $115 million senior subordinated notes due 2008, cut to Ca from B3, senior implied rating, cut to Caa1 from B1, and senior unsecured issuer rating, cut to Caa2 from B2.

The downgrade is in response to the company's default under both its bank loan agreement and senior subordinated note indenture, Moody's said. The company failed to make an amortization payment to its banks on March 31, 2002 and was therefore blocked by its banks from making an interest payment on the notes on April 15.

"Moody's expects that an eventual restructuring of the company's capital structure will be needed as current operating results and cash flow may be inadequate to sufficiently cover the company's debt service," the rating agency said said. "The company currently is in negotiations with its financial stakeholders to determine the best long-term solution to its capital structure."

Fitch confirms JDN Realty, off watch

Fitch Ratings confirmed its BB rating on JDN Realty Corp.'s $235 million of senior unsecured debt, its B+ rating on its $50 million of outstanding preferred stock and removed the ratings from Rating Watch Negative. The outlook is stable.

Fitch said it took JDN's ratings off watch after the settlement of JDN's class action lawsuit and recent resolution to the SEC's investigation of prior management's undisclosed compensation and financial restatement.

"The new management team can now focus on its strategy of incorporating more grocery anchored centers," Fitch commented.

S&P puts HMV on positive watch

Standard & Poor's put HMV Group plc on CreditWatch with positive implications.

Ratings affected include HMV's £440 million senior bank facility rated B+ and its £211 million senior subordinated notes due 2008 at B-.

S&P takes Quezon Power off watch

Standard & Poor's removed Quezon Power (Philippines) Ltd. from CreditWatch with negative implications. The outlook is negative.

Ratings affected include Quezon Power's $215 million senior secured bonds due 2017 rated BB+.

S&P downgrades Delta Mills

Standard & Poor's downgraded Delta Mills, Inc. including lowering its $150 million 9.625% senior notes due 2007 to CCC from B-. The outlook is negative.

S&P said the downgrade reflects Delta Mills' continued weak operating performance and related credit measures for the first nine months of its 2002 fiscal year and the expectation that such measures will continue to be very weak in the near term.

Significant volume and unit declines which continued during the March 2002 quarter led to margin pressures because of unabsorbed fixed costs and resulted in an operating loss for the quarter, the rating agency noted.

On a trailing 12-month basis, EBITDA was insufficient to cover interest expenses, S&P added.

Although Delta Mills expects the fourth quarter ended June 2002 to be a profitable period, S&P said it expects credit protection measures will continue to be very weak in the near term.

S&P downgrades Farmland

Standard & Poor's downgraded Farmland Industries Inc. and put it on CreditWatch with developing implications. Ratings affected include Farmland's $100 million cumulative preferred shares series A, cut to CCC- from B-, and its $350 million revolving credit facility due 2007 and $150 million term loan due 2004, both cut to B from BB.

S&P said it cut Farmland because the company's disclosure that it doesn't expect to be in compliance with the financial covenant of its credit facility on May 31, 2002 could raise significant liquidity concerns.

The CreditWatch developing listing means the ratings could be raised, lowered or affirmed depending upon the outcome of Farmland's negotiations with lenders and S&P's expectations for future operating performance.

While S&P said it recognizes the recent improvement in business conditions, it added that it is concerned about the cooperative's ability to fund its working capital and debt service requirements over the intermediate term.

S&P puts Core-Mark on positive watch

Standard & Poor's put Core-Mark International Inc. on CreditWatch with positive implications.

Ratings affected include its $75 million 11.375% senior subordinated notes due 2003 rated B.

Moody's downgrades Hawk

Moody's Investors Service downgraded Hawk Corp. including cutting its $41 million of guaranteed senior secured bank credit facilities to B1 from Ba3 and $65 million 10.25% guaranteed senior unsecured notes due 2003 to B2 from Ba3. The outlook remains negative.

Moody's said the downgrade and negative outlook reflect Hawk's sharply deteriorated debt protection measures during 2001, attributable to a combination of the weak overall economy; the immediate and prolonged shock to Hawk's aerospace friction business generated by the Sept. 11 terrorist attacks, substantial out-of-pocket costs incurred in connection with several start-up operations including new plants in China and Mexico and Hawk's inability to completely absorb its fixed costs in the face of materially lower volumes, thereby causing 2001 margins to decline at a faster pace than revenues.

Hawk's management has furthermore indicated that while airline traffic during 2002 is expected to show steady improvement throughout the year, aerospace-related revenues will in any event remain at least 10% below 2001 levels, Moody's said.

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