Moody's puts AES on review for downgrade

Moody's Investors Service placed the long term debt ratings of The AES Corp. on review for possible downgrade, including the Ba1 senior unsecured debt and Ba2 senior and junior subordinated debt, reflecting concerns about the adequacy of cash flow relative to the large debt load of the company as well as the stability and predictability of that cash flow. While the company remains dependent on bank financing, its near term liquidity appears adequate, Moody's said.

The review will focus on first, the company's ability to repatriate cash from its international investments and its sensitivity to exchange rate fluctuations and second, the company's effective leverage apart from the legal non-recourse nature of much of its debt. The review also will scrutinize the company's ability to significantly reduce its capital expenditure plan without impairing its cash flow and the impact of changes in business mix on the risk profile of the company, as well as the timing and use of proceeds of announced asset sales. And, lastly, Moody's said, the review will assess the impact of limited access to the capital markets in the near term and the company's longer term ability to continue to access the commercial bank project finance market.

S&P keeps AES on watch, negative

Standard & Poor's said AES Corp.'s plans to shore up its liquidity position in the short term and to boost credit quality by divesting riskier assets and growing its cash flow cushion in the longer term as positive for the company's credit. AES remains on watch with negative implications due to pressure on the bolivar and the resulting potential impact on parent-level cash flows, S&P said. The successful implementation of AES' plans to boost liquidity would diminish the potential for a downgrade resulting from the Venezuelan situation.

Fitch rates new Ameren convertible at A+

Fitch Ratings assigned an A+ rating to the senior notes embodied in Ameren Corp.'s new mandatory convertible. The outlook remains negative.

The primary credit concern is the pending rate case for AmerenUE. If the state commission lowers tariffs for AmerenUE as recommended in July 2001, by roughly $213 million to $250 million, the company's currently strong financial ratios would be negatively impacted. Testimony will be filed in the spring of 2002 with public hearings scheduled for the summer of 2002. A decision in the pending rate case is expected by the end of this year with any rate changes retroactive to April 1, 2002. The parties involved in the case continue to negotiate for a potential settlement. While capital requirements are rising, the strong capital structure and the continued issuance of common stock and hybrid equity to support the ratings mitigate the credit concern.

S&P lowers SpeedFam-IPEC

Standard & Poor's downgraded SpeedFam-IPEC Inc. including cutting its $115 million 6¼% convertible subordinated notes due 2004 to CCC- from CCC+. The outlook is negative.

S&P said the change reflects the deteriorating financial flexibility of SpeedFam-IPEC following its announced termination of a sale-leaseback of its corporate headquarters.

The rating agency said SpeedFam-IPEC is highly leveraged, with outstanding debt at $115 million. It also noted the company has had operating cash losses since mid-2000 and warned operating losses are likely to continue to drain cash balances over the near term, despite cost-cutting measures to reduce staff and consolidate facilities that are expected to stem the company's cash burn rate.

"Failure to stem operating cash flow losses or secure additional external liquidity over the next few quarters could lead to lower ratings," S&P said.

S&P rated Merrill strides linked to Bed, Bath & Beyond

Standard & Poor's assigned an AA- rating to Merrill Lynch & Co. Inc.'s new issue of $33.230 million 6% Callable STRIDES due 2004 linked to Bed, Bath & Beyond.

S&P lowers ITC DeltaCom, on watch

Standard & Poor's downgraded ITC DeltaCom Inc. and put the company on CreditWatch with negative implications. Ratings affected include ITC DeltaCom's $200 million 11% senior notes due 2007, $160 million 8.875% senior notes due 2008, $100 million 4.5% convertible subordinated notes due 2006 and $125 million 9.75% senior notes due 2008, all cut to CC from CCC-, and Interstate FiberNet Inc.'s $160 million revolving credit facility B guaranteed by ITC DeltaCom, lowered to CCC- from CCC+.

S&P said its action is in response to increased concerns over liquidity.

ITC DeltaCom may be unable to draw down the remaining $70 million on its existing preferred stock agreement with ITC Holding Company Inc., SCANA Corp. and HBK Master Fund LP because it may trigger a change of control under its senior note and senior credit facility indentures, S&P said.

The $70 million availability is the company's only source of liquidity, S&P added.

"Although the company is pursuing alternatives for long-term financing, Standard & Poor's is concerned that the company may face a funding gap in the very near term," the rating agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.