Moody's confirms AnnTaylor convertible at Ba3

Moody's Investors Service confirmed the ratings of AnnTaylor Inc., including the $180 million of 0.55% guaranteed convertible subordinated debentures due 2019 at Ba3. The rating outlook remains stable. The ratings are supported by satisfactory levels of cash flow from operations even during a disappointing year and management's plan to finance store growth primarily through internally generated funds. Sale of the credit card portfolio has improved AnnTaylor's current and future liquidity, Moody's also noted.

The ratings also reflect volatility inherent in the fashion-oriented retail business, moderately high lease-adjusted leverage, little cash retention after spending for growth and an increase in the risk profile resulting from the Loft outlet store concept.

The rating outlook is stable. Moody's believes that AnnTaylor has sufficient financial flexibility to withstand reduced levels of sales and profitability for the next 12 to 18 months at current rating levels. Moody's expects AnnTaylor will retain a conservative financial strategy, but notes that changes in strategy or share buybacks could also affect ratings.

AnnTaylor's liquidity is adequate in a normal business environment, but could become stressed if the environment changes quickly. Seasonal liquidity is available under the revolving credit facility, but AnnTaylor has less access to vendor financing than any other retailers because of its sourcing practices. The sale of AnnTaylor's credit card portfolio in February netted about $55 million of cash that boosted liquidity available for the coming year, and Moody's said it does not expect any liquidity problems in the medium term.

In January, Moody's noted, AnnTaylor amended its $175 million credit facility primarily to revise its financial covenants and specifically exclude from covenant calculations a pre-tax charge of $17 million, which was related to assets associated with AnnTaylor.com, discontinuation of AnnTaylor Cosmetics and canceling certain Fall 2001 and Spring 2002 merchandise orders.

Fitch says Williams pipeline sale a positive event

Fitch Ratings said Williams Cos. Inc.'s sale of its Kern River Gas Transmission Co. to Mid American Energy Holdings Co. for about $960 million is basically a positive event for the credit. The sale price includes the assumption of $510 million outstanding senior notes. Fitch also noted that Williams announced fiscal year-end 2001 financial results that included a $1.3 billion after-tax charge related to Williams Communications Group. Fitch currently rates Williams's outstanding senior notes and debentures BBB and its commercial paper F2. The rating outlook is negative.

Fitch believes that the pending sale of KRGT, on balance, has positive credit implications for Williams. In addition to the $450 million of cash proceeds, MEHC is separately buying $275 million of convertible preferred stock from Williams. Thus, Williams will get a total of $725 million additional cash, further bolstering its near term liquidity position. Although the sale will remove both a valuable asset and stable cash flow source from Williams's credit profile, the expected drop in consolidated EBITDA contribution from regulated pipelines should be offset by the associated reduction in debt and capital spending requirements. As a result, targeted year-end 2002 debt to capitalization and interest coverage ratios are expected to improve moderately over prior estimates.

Although the WCG related charge will result in a deterioration of Williams's 2001 equity base, the company has taken appropriate measures to mitigate the impact on consolidated debt leverage, including the $1.1 billion convertible issue in January 2001 and the sale of convertible preferred stock to MEHC. An additional positive development is the restructured $1.4 billion WCG Note Trust in a manner that removes triggers related to Williams's rating and/or the business condition of Williams Communications, plus extends ultimate payment of principal to March 2004 even in the event of a WCG bankruptcy.

Fitch believes that Williams's credit profile and ratings will continue to stabilize over the next six to nine months pending the favorable resolution of other outstanding credit issues including Williams's exposure to WCG.

Moody's revises Barnes & Noble outlook to stable

Moody's Investors Service changed the outlook to stable from negative for Barnes & Noble Inc. and confirmed the retailer's debt ratings, including the $300 million of 5.25% convertible subordinated notes at Ba3, follwoing the sale of about 36% of the common shares of Game Stop in an IPO that netted Barnes & Noble proceeds of $250 million, which the company intends to use to reduce outstanding debt.

The ratings reflect the expectation that Barnes & Noble will continue to meet its normal operating needs and planned growth from operating cash flow, a satisfactory fixed charge coverag, improved market value and liquidity of its stake in Game Stop's retail network.

The ratings also consider Barnes & Noble's moderate leverage and moderate return on assets and the potential for future acquisitions or share buyback activity.

The outlook change recognizes additional flexibility and improvement in Barnes & Noble's financial profile after the Game Stop IPO. The stable outlook anticipates stable performance for the remaining businesses and the potential for small to mid-size acquisitions in the future. Significant de-leveraging actions or substantial operating improvements could have a positive affect on ratings. Alternatively, ratings could be negatively affected by significant leveraged acquisitions, or a decline in Barnes & Noble's competitive market position.

S&P ups CommScope convertible to BB+

Standard & Poor's raised its corporate credit and convertible subordinated note ratings to BB+ from BB for CommScope Inc., reflecting solid credit measures for the rating and well-established customer relationships. However, S&P said, these factors are more than offset by reliance on capital spending by major domestic cable television system operators, uncertainty associated with developing its fiber optic cable capabilities and challenges associated with establishing other lines of business.

Flat sales to cable operators and weak telecom end markets are likely to pressure profitability in the near term. Operating margins are likely to be toward the low end of CommScope's historic 17 to 20% range, despite management's rationalization efforts. However, EBITDA coverage of interest is likely to remain strong for the rating at more than 11 times. Slowing demand and improved working capital management helped generate nearly $160 million of operating cash flow in 2001. S&P expects cash flow generation to remain solid in 2002. Some financial flexibility is provided by a $62 million cash balance.

Concerns associated with financial policy and management's strategic actions to enhance CommScope's fiber optic capability limit ratings over the intermediate term.

Moody's cuts Foster Wheeler convertible to Caa2

Moody's Investors Service downgraded the long-term ratings of Foster Wheeler Ltd. to B3 from B1 and cut the 6.5% convertible subordinated bonds due 2007 to Caa2 from B3, and the ratings remain under review for possible further downgrade. The action reflects Moody's heightened concern that the company is heavily reliant on the willingness of its bank groups to extend near-term debt maturities, and that negotiations with bank groups may be protracted.

It also reflects the rating agency's ongoing concerns about Foster Wheeler 's operating outlook, financial health and liquidity position in light of the downturn in its end markets that has resulted in lower revenues, earnings and cash flow generation over the past several quarters, and which Moody's expects will continue throughout 2002.

Moody's said that its review will also focus on Foster Wheeler 's competitive environment, which is still characterized by low levels of new project opportunities globally, especially in its Engineering and Construction business segment, severe price competition, smaller advanced payments, and greater working capital requirements. Since a recovery in Foster Wheeler 's end markets is not expected until at least late-2002, the company's ability to generate earnings and cash flow from operations in the near-to-intermediate term, and the ability to win new contact awards and increase order backlog going forward, will be challenging.

S&P rates Commerce convertibles BB+

Standard & Poor's assigned a BB+ rating to Commerce Bancorp's $175 million convertible trust preferred securities issued through Commerce Capital Trust II.

© 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.