Moody's cuts Allied Waste outlook to negative

Moody's Investors Service cut its outlook on Allied Waste North America, Inc., its parent, Allied Waste Industries, Inc., and its subsidiary, Browning-Ferris Industries, Inc., to negative from stable, affecting $11.5 billion of debt. Moody's rates Allied Waste North America's credit facility and senior secured notes at Ba3 and its subordinated notes at B2, Allied Waste Industries' convertible preferreds at B3 and Browning-Ferris' secured debentures and senior secured notes at Ba3.

Moody's said the negative outlook reflects "the potential for continued diminution in credit protection measures due to the company's high sensitivity to changes in operating margins vis à vis its competitors due to its high leverage."

The rating agency said Allied Waste has a "weak" balance sheet with goodwill comprising 60% of total assets and with debt amounting to 1.7 times last 12 months' revenues.

"Consequently, despite historically strong operating margins, the company has not generated meaningful free cash flow relative to its debt size. The downturn in the economy has negatively impacted Allied's operating margins, return on assets, and debt coverage. In addition, the company's sizable bank debt maturities over the intermediate term may give rise to refinancing pressure, particularly in the next couple of years. (The company is currently addressing this in part with a bond offering.) A further weakening of operating margins, cash generation or debt protection measurements could lead to a downgrade," Moody's added.

Moody's rates International Multifoods credit facility Ba2

Moody's Investors Service assigned a Ba2 rating to a new senior secured bank facility for International Multifoods Corporation and its Canadian subsidiary, Robin Hood Multifoods Inc. Moody's cut International Multifoods medium term note program to B1 from Baa3 and withdrew the ratings as the debt has been retired. It also withdrew a prospective (P)B1 rating for the new $200 million senior unsecured notes being issued by International Multifoods "as these notes will now likely be issued in a modified form."

Moody's said the actions come as International Multifoods prepares to close on the acquisition of Pillsbury assets from General Mills for $305 million in cash.

It said the outlook is positive. Moody's commented that if the company is "successful at integrating this acquisition, obtaining its targeted synergies, and improving its debt protection measures, it could have a positive influence on its ratings."

S&P cuts ANC Rental to D

Standard & Poor's downgraded ANC Rental Corp. to D from CCC+ after it filed for Chapter 11 bankruptcy protection.

S&P downgrades Crown Cork & Seal

Standard & Poor's downgraded Crown Cork & Seal Co. Inc. including cuttings its unsecured debt to CCC from B. It also placed the ratings on CreditWatch with negative implications.

S&P said its actions reflect "heightened concerns regarding Crown's ability to meet or renegotiate its pending debt maturities due to delays in completing planned asset sales and diminished access to capital markets, which have tightened because of uncertainties regarding economic conditions. Crown's access to capital markets has been further impaired by its unfavorable perception due to its ongoing asbestos litigation and its extremely aggressive debt maturity schedule and poor performance."

S&P said it had expected Crown Cork & Seal would dispose of $1.2 billion in assets by early 2002, half of it this year, and use proceeds to redeem its $400 million term loan due February 2002 and its $350 million of unsecured notes due September 2002.

"However, Crown's progress has been slower than expected with respect to asset sales and current economic and credit market conditions may impair the firm's ability to complete a refinancing plan prior to its debt maturities scheduled for 2002," S&P said.

S&P downgrades OCWEN

Standard & Poor's downgraded OCWEN Federal Bank FSB, reducing its $100 million of subordinated debt to B from B+ and cutting OCWEN Financial Corp.'s $125 million of senior notes to B from B+. It cut Ocwen Capital Trust I's $125 million of capital securities to CCC from CCC+.

Fitch rates Allied Waste's proposed notes BB-

Fitch assigned a BB- rating to Allied Waste Industries' proposed $500 million senior secured notes due 2008. The outlook is stable.

Fitch said the ratings reflect the company's "geographically diverse asset base, strong market positions, high EBITDA margins and solid cash flow generating ability. Offsetting factors include AW's very high leverage position and softer industry fundamentals."

It added that a decline in EBITDA by mid-single digits to $1.85-$1.95 billion during 2002 from expected 2001 levels of $1.93-$1.94 is consistent with Fitch's expectation for financial results during a weak economy. "Moreover, reduced capital spending, declining BFI acquisition related expenditures and relatively solid free cash flow generation should allow for debt reduction of more than $300 million during 2002 in spite of softer economic conditions," Fitch added.

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