Moody's rates Crown Cork convert at Caa1

Moody's Investors Service assigned ratings to the proposed debt of Crown Cork & Seal Co. Inc., including a Caa1 to the $250 million of five-year convertible notes to be issued by Crown Holdings Inc.

Also, Moody's upgraded Crown Cork and subsidiary ratings (senior unsecured to B3 from Ca), reflecting an improved general financial condition, near-term liquidity from the refinancings and the sale of assets in 2002.

Of the refinancing package, Moody's also rated the proposed first lien $550 million revolver and $500 million term B loans maturing 2006 at Ba3, and the proposed $1.25 billion second lien senior notes due 2010 and $500 million third lien senior notes due 2013 at B1.

In Moody's opinion, pro forma liquidity is adequate, as the proposed debt restructuring should smooth out and push back maturities.

The ratings outlook is stable, and indicates some tolerance for modest fluctuations in cash requirements but any material use of cash outside current expectations would put downward pressure on the ratings, Moody's said.

Material improvement in financial leverage accompanied by consistent increases in profitability and cash flow metrics would likely migrate the outlook to positive.

Pro forma at Dec. 31, financial leverage is high with total debt to EBITDA of about 5.3x with proforma debt 65% of total revenue and proforma EBITDA less capital expenditures coverage of cash interest expense at a moderate 1.8x.

The Caa1 rating for the convertible reflects subordination to debt of non-guarantor subsidiaries of about $2.4 billion, the absence of restrictive covenants and the absence of tangible collateral.

Moody's ups Nextel outlook

Moody's Investors Service raised the rating outlook for Nextel Communications Inc. and Nextel Finance Co. to stable from negative. In addition, Moody's confirmed Nextel's SGL-1 speculative grade liquidity rating.

Nextel's three convertible note issues are rated B3, while the exchangeable and convertible preferreds are rated Caa2.

Moody's said the outlook upgrade reflects remarkably stable performance in the face of an increasingly competitive wireless marketplace and substantial delevering - notionally through better EBITDA and absolutely through the early retirement of $2.6 billion of debt in 2002.

The liquidity rating continues to reflect Nextel's sizable cash balance of $2.4 billion at Sept. 30 and improving cash flows.

Financial risk has been substantially reduced through the repurchase of $2.6 billion of debt and preferred securities for $689 million in cash and 144 million shares of common stock. These retirements will reduce interest and dividend requirements by over $235 million annually, greatly improving flexibility.

Nextel's demonstration of competitive strength in a deteriorating market combined with the substantial reduction in financial risk lead Moody's to view the ratings outlook as stable.

Nevertheless, Moody's said it remains concerned about the wireless industry in general as subscriber growth continues to slow and the general economy remains weak. Further, longer term, Nextel's free cash flow profile is likely to come under pressure.

S&P cuts Duke Energy to A-

Standard & Poor's lowered the ratings of Duke Energy Corp. and subsidiaries, including senior secured debt to A from A+, senior unsecured to A- from A and preferreds to BBB from BBB+.

The downgrade reflects S&P's determination that reductions in capex and planned asset divestitures will not be sufficient to pay down debt and reduce interest expense quickly enough to offset earnings deterioration in 2002 and anticipated in 2003.

Even with estimated asset sales of about $1 billion, 2003 funds from operations interest coverage and FFO to debt are only expected to reach 4x and 16%, respectively, which is weak for the rating.

S&P believes that Duke Energy's financial profile has possibly reached the bottom and that there is potential for better performance over the next several years than indicated by current projections, which are conservative, due to some improvement in operating performance and/or further asset sales.

Duke Energy has negative discretionary cash flow but $2.9 billion of undrawn consolidated bank facilities available, $850 million of cash and equivalents and an additional option to borrow $500 million in February 2003 at Duke Capital. About $1.3 billion of maturities come due in 2003, with about $600 million in the first quarter.

S&P said it will need to review Duke Energy's progress on its divestiture strategy, as well as updated financial projections to determine the likelihood and timing of financial improvement.

Duke Energy will need to improve FFO interest coverage and FFO to debt beyond 4x and 16%, respectively, to maintain current ratings. Investigations of energy traders continue to be an overhang, S&P added.

Moody's rates Lamar bank facilities at Ba2

Moody's Investors Service assigned Lamar Media Corp.'s new secured bank credit facilities a Ba2 rating and confirmed its existing ratings, including the $287 million of 5.25% convertible notes at B2.

The ratings reflect Lamar's sizable share of outdoor advertising, particularly in the small to medium size markets and the consequent asset value. Lamar's strengths are offset, however, by the company's high leverage and aggressive acquisition strategy.

The ratings reflect sizable market share, consistently strong margin performance and the benefits of a mostly local advertiser base.

However, the ratings also consider high financial leverage and mostly debt-financed acquisition strategy, competition with larger and better capitalized companies in certain markets, and exposure to the advertising cycle.

The outlook is stable, incorporating a modest recovery in the advertising environment and the likelihood that Lamar will continue to acquire once valuations are more in keeping with expectations.

If the company can successfully integrate its announced and expected future acquisitions and improve utilization rates thereby reducing its leverage range, positive ratings momentum may be achieved.

If leverage were to continue to increase, a negative outlook would be merited, Moody's said.

S&P puts Continental Airlines aircraft-backed debt on negative watch

Standard & Poor's placed the aircraft-backed debt ratings of Continental Airlines Inc. (B+/negative/) and seven other airlines on negative watch, with a review focused on levels of collateral protection on specific aircraft-backed debt issues rather than the corporate credit profile of Continental Airlines.

The rating on Continental Airlines is based on a heavy debt and lease burden and relatively limited financial flexibility, which outweigh better-than-average operating performance and a modern aircraft fleet.

The relative weak point in Continental's credit profile remains liquidity, with $1.34 billion of cash at Dec. 31 but no bank line availability and no unsecured aircraft. The company did, however, raise $200 million by secured borrowing against spare parts in fourth quarter.

Current maturities of on-balance-sheet debt and capitalized leases total $468 million in 2003. Management forecasts cash of about $1.1 billion at the end of the first quarter of 2003. This should be sufficient if the industry does not worsen further, but may be inadequate if U.S. military action against Iraq triggers a material decline in airline industry traffic.

The outlook for Continental is negative. Ratings could be lowered if U.S. military action against Iraq and/or further substantial terrorist attacks significantly affect revenues and earnings.

Moody's puts Kerr-McGee on review for downgrade

Moody's Investors Service placed the ratings of Kerr-McGee Corp. under review for possible downgrade, including the convertible subordinated debentures at Baa3.

The ratings review was prompted by several factors, including leverage relative to proved developed reserves, the high drill bit cost for the 2002 drilling program, a sharp reduction in proved reserves and high full-cycle costs.

Moody's review is focused on plans to reduce financial leverage in 2003 and 2004, near-term and medium term capital spending plans and the impact on the production profile and total proved reserve base, asset sales and contingent liabilities.

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