S&P cuts WCI Steel

Standard & Poor's downgraded WCI Steel Inc. and maintained a negative outlook on the company. Ratings lowered include WCI Steel's $300 million 10% senior secured notes due 2004, cut to CCC+ from B-.

S&P said the downgrade is in response to WCI's deteriorating liquidity despite improved steel industry conditions, a result of WCI's ongoing losses and cash outlays required for its pension plan and working capital.

WCI's operating leverage is high and the markets served by the company are mature and highly cyclical, S&P said. Relative to many other integrated steel producers, the company derives a higher proportion of its sales from custom products that are typically less price-sensitive than commodity products. In addition, about 40% of WCI's business is conducted under fixed-price contracts that typically range from six months to one year. These contracts temper the often volatile pricing swings experienced in the spot market.

Despite a dramatic improvement in U.S. steel market conditions due to lower imports resulting from the Section 201 tariffs and idled capacity, WCI's financial performance remained weak for the quarter ending July 31, 2002, S&P said. This was primarily due to limits in price increases under its contractual obligations and a shift in product mix to lower value-added products.

WCI's net sales per ton increased to $397 for the quarter ended July 31, 2002, from its low of $352 reached in March 2002 but barely broke even on an operating basis for the July quarter. Although WCI should realize higher selling prices and earnings for its fourth quarter ending October 2002, the company will need to further utilize borrowings to meet its growing working capital needs and cash requirements for its pension plan, S&P said. The company will also likely need to borrow some additional funds to help pay its $15 million interest payment on Dec. 1, 2002.

Moody's confirms J. Crew, keeps negative outlook

Moody's Investors Service confirmed J. Crew Group and its subsidiaries and maintained a negative outlook. Ratings affected include J. Crew Group's $142 million 13.125% senior discount notes due 2008 at Caa3 and J. Crew Operating Corp.'s $150 million 10.375% senior subordinated notes due 2007 at Caa1 and secured revolving credit facilities due 2003 at B1.

Moody's said the confirmation follows recent news of disappointing sales.

J. Crew has taken actions which could improve its market position in the near to medium term, but the company remains severely constrained financially. Moody's said. As a result, it may lack resources to survive unusual levels of volatility or spend heavily on attracting new customers.

Moody's said it is also concerned that J. Crew's franchise may have been eroded as a result of merchandising decisions which may have alienated core customers without attracting new ones.

A new CEO, previously associated with Gap International, has recently been brought in to provide merchandising expertise and revive the brand, Moody's noted.

Ratings could react negatively if sales or margins levels decline precipitously in the very important fourth quarter, or if promotional activity rises in early 2003, Moody's added. Ratings could also be negatively affected by an inability to refinance the bank facilities in a timely manner. Ratings could stabilize or improve if J. Crew is able to generate positive sales momentum and reduce leverage.

Fitch raises AmeriSource-Bergen outlook

Fitch Ratings raised its outlook on AmeriSource-Bergen Corp. to positive from stable. Ratings affected include AmeriSource-Bergen's $300 million senior secured term loan A and $1.0 billion senior secured revolving credit facility at BBB-, $500 million senior unsecured notes due 2008, $150 million senior unsecured notes due 2003 and $100 million senior unsecured notes due 2005, all at BB+, $300 million unsecured convertible subordinated notes due 2007 and $8.4 million unsecured exchangeable subordinated debentures due 2011 at BB and $300 million Trust Originated Preferred Securities (TOPrS) at BB-.

Fitch said the outlook change reflects AmeriSource-Bergen's stronger than anticipated financial performance due to strong pharmaceutical distribution revenue growth and savings from merger synergies along with legitimate prospects for continued improvement in the company's credit profile.

Additionally, the company is positioned to capitalize on a robust generics market, Fitch said.

Fitch anticipates that at the close of fiscal year 2002 coverage (EBITDA/interest) will be approximately 5.6x versus earlier expectations of 4.0x. Fitch further anticipates fiscal 2002 leverage (total debt/EBITDA) will be approximately 2.3x versus an anticipated 2.7x.

Moody's cuts Hynix

Moody's Investors Service downgraded Hynix Semiconductor Manufacturing America, Inc.'s $400 million senior secured notes to Ca from Caa1. The outlook is stable.

Moody's said the action reflects the credit strength of the company's majority owner, Hynix Semiconductor Inc.

Hynix Semiconductor's profitability has been depressed by the fall in DRAM prices since 2001 and although it recorded an operating profit in the first quarter of fiscal 2002 thanks to an early-year price recovery it fell into deficit in the second quarter as the DRAM market slipped back, Moody's said.

The rating agency added that it does not expect Hynix's profitability to rebound significantly in the near future, as the world PC market is unlikely to grow as rapidly as it did before.

Furthermore, the financial difficulties facing Hynix will also severely hinder its future competitiveness and viability as the availability of funds for capital expenditure becomes constrained, Moody's said.

Moody's cuts Tranz Rail

Moody's Investors Service downgraded Tranz Rail Ltd. including cutting Tranz Rail Finance Ltd.'s Pass Through Certificates Series 1996 to B1 from Ba2. The rating remains on review for further possible downgrade.

Moody's said the action reflects its concern about the liquidity position of Tranz Rail, including the need under the terms of the Aratere Lease to provide a letter of credit to support its obligations.

In addition, the company has yet to renegotiate its bank facility which is due in November, Moody's said.

Fitch cuts Green Property

Fitch Ratings downgraded Green Property plc including cutting its £150 million senior unsecured eurobond due 2016 to BB+ from BBB. The ratings remain on Rating Watch Negative.

Fitch initially put Green on watch in July 2002 when a bid for the company, now complete, was made by Rodinheights plc, a special purpose entity led by Stephen Vernon, managing director of Green.

Fitch said it believes that there is now sufficient certainty of bondholders who chose not to exercise the put being subordinated by acquisition funding to warrant a worse case assessment of this credit and change the rating accordingly.

The BB+ credit rating reflects the fact that funding facilities are currently in place for the bonds' repayment at par whilst acknowledging the potential subordination that could take place even during the existing change of control put event period, Fitch said.

The rating agency added that bondholders have now entered an uncertain period of brinkmanship and have to make a judgment call as to whether Rodinheights will legally subordinate bondholders.

Moody's raises Tanger outlook

Moody's Investors Service raised its outlook on Tanger Properties LP to positive from stable and confirmed its ratings, affecting $180 million of securities. Covered by the action are Tanger

Properties' senior unsecured debt at Ba2 and Tanger Factory Outlet Centers, Inc.'s preferred stock at Ba3.

Moody's said the outlook change reflects the success of the REIT's strategy to improve the quality of its outlet center portfolio and of its tenant mix, and its ability to access diverse sources of capital including common equity and unsecured debt to fund acquisitions and development activities.

In addition, the positive outlook reflects Moody's expectation that the REIT's coverages will be consistently improving, and that secured debt will fall over time.

Tanger has been successful in upgrading the quality of its tenant mix by, for example, including a greater share of upscale and fashion-oriented brand name manufacturers and retailers, Moody's said. This stronger tenant mix helps to boost traffic and sales at its centers by improving the shopping experience. The REIT also has pruned some of its underperforming properties.

Fixed charge coverage statistics have benefited and began to improve in 2002, reversing a multi-year downward trend, Moody's said. The rating agency expects Tanger's coverages to experience consistent, measurable improvement.

Moody's cuts Air2US series A, B

Moody's Investors Service downgraded Air2US' $637.6 million series A enhanced equipment notes due Oct. 1, 2020 to Baa2 from A1 and $226.4 million series B enhanced equipment notes due Oct. 1, 2020 to B1 from Ba1.

Moody's said the downgrade reflects an increased likelihood of default by American Airlines and United Air Lines, the two lessees in the transaction; a difficult market environment for lease rates, should one of the lessees default on its obligations; the limited number of operators of A300-600s (which account for about half of the pool) in the current environment; and the potential for a lengthy remarketing period in the event of defaults by major US airlines that would negatively impact the revenues for the issuer.

S&P cuts Mississippi Chemical

Standard & Poor's downgraded Mississippi Chemical Corp. and put the ratings on CreditWatch with negative implications. Ratings lowered include Mississippi Chemical's $200 million 7.25% senior notes due 2017, cut to CCC from B, and $200 million unsecured revolving credit facility due 2002, cut to CCC+ from B.

S&P said the action reflects heightened concerns about the refinancing of the company's bank credit facility, which matures in November 2002, and, consequently, satisfaction of the upcoming bond coupon payment.

Deterioration in the company's credit profile, due to a sizable debt burden, disappointing operating results, and the continuation of challenging industry conditions, and restrictive capital markets have made the task of refinancing the credit line more difficult, S&P said.

The CreditWatch placement highlights the importance of obtaining a line of credit and the risk of a default if the company is unable or unwilling to make its November 2002 bond interest payment, S&P added. In addition, the company could have difficulty complying with financial covenants under its revolving credit facility due to poor earnings.

S&P puts Nuevo on watch

Standard & Poor's put Nuevo Energy Co. on CreditWatch with negative implications. Ratings affected include Nuevo's $257.31 million 9.5% senior subordinated notes due 2008 and $150 million 9.375% senior subordinated notes due 2010 at B+ and its $115 million 5.75% term convertible securities at B.

S&P said the watch placement follows Nuevo's announced acquisition of Athanor Resources Inc. for $102 million, funded with $62 million in cash, $20 million in new equity and the assumption of $20 million in debt.

S&P said the CreditWatch listing reflects its prolonged concerns about Nuevo's high debt leverage and the ability of Nuevo to strengthen its weak credit measures for the current ratings.

While the acquisition of Athanor strengthens Nuevo's reserve base and provides decent growth opportunities, the significant reliance on debt to fund this transaction exacerbates concerns over Nuevo's ultimate ability to delever, S&P said.

S&P withdraws ClimaChem ratings

Standard & Poor's withdrew its rating on ClimaChem Inc. including the company's $105 million 10.75% senior notes due 2007, previously rated C.

S&P said the action was taken at the company's request.

Moody's confirms some Foster Wheeler debt, cuts others

Moody's Investors Service downgraded some ratings of Foster Wheeler LLC and confirmed others. The outlook is negative. Ratings confirmed are Foster Wheeler's long-term debt at B3. Lowered are its industrial revenue bond, cut to Caa1 from B3, the convertible subordinated notes of its parent, Foster Wheeler Ltd., to Caa3 from Caa2, and the trust preferred securities of FW Preferred Capital Trust I to Caa3 from Caa2.

Moody's said the actions reflect the company's improved near-term liquidity position as a result of refinancing its bank obligations into a $290 million senior, secured bank revolver and term loan maturing in 2005, as well as entering into a new $40 million asset securitization financing and refinancing a leased facility.

The rating actions also recognize the benefit to senior noteholders of sharing certain collateral and subsidiaries' guarantees with bank creditors, as required by the indenture, Moody's said.

Moody's added that the debt downgraded suffers from an absence of collateral and operating subsidiary guarantees.

The rating actions also reflect the company's elevated debt level and modest cash flow generation; as well as a challenging business outlook reflected in lower levels of new contract awards, and a declining backlog, Moody's said.

The negative outlook reflects Moody's ongoing concerns about Foster Wheeler's operating outlook and financial strength, in light of weakness in its end markets, particularly in the energy segment, that could result in continued moderation of revenues, earnings, and cash flow generation well into 2003.

S&P withdraws ISG ratings

Standard & Poor's withdrew its ratings on ISG Resources Inc. including its $100 million 10% senior subordinated notes due 2008 previously at CCC and its $50 million senior secured revolving bank loan due 2003 and $15 million tranche B revolving credit facility due 2003 previously at B.

S&P said the action follows the announcement by Headwaters Inc. that it closed the acquisition of Industrial Services Group Inc. and its wholly owned subsidiary, ISG Resources Inc.

As part of the acquisition, ISG Resources announced the completion of its tender offer and consent solicitation relating to rated $100 million 10% senior subordinated notes due 2008.

Fitch cuts Edelnor

Fitch Ratings downgraded Edelnor (Empresa Electrica del Norte Grande SA), cutting its local and foreign currency ratings to D from C and affecting $340 million of debt.

Fitch said the action follows Edelnor's filing of a prepackaged plan of reorganization under chapter 11 of the U.S. Bankruptcy Code.

Under the proposed reorganization, debt holders elected to receive new 15 year senior secured participation certificates in principal amount equal to 92.14% of the principal amount of their participation certificates, a discounted cash payment equal to 38% of the principal amount of their participation certificates, or a combination of the two, Fitch said. Both options are slightly more favorable than terms originally offered to bondholders last year when both Tractebel and AES Gener had made competing offers to purchase the bonds.

Moody's confirms Lamar

Moody's Investors Service confirmed Lamar Advertising Co. including its $1.0 billion in senior secured credit facilities at Ba2, Lamar Media's $455 million senior subordinated notes at Ba3, Outdoor Communications' $105 million senior subordinated notes at Ba3 and Lamar Advertising's $287 million senior convertible notes due 2007 at B2. The outlook is stable.

Moody's said Lamar's ratings reflect the size and market position of its geographically diverse outdoor portfolio, its consistently strong margin performance, and the high underlying asset value of the company's outdoor portfolio.

Lamar is the third largest owner and operator of outdoor advertising structures in the U.S. with assets focused on mid-sized markets in 44 states. In addition, Lamar garners 85% to 95% of outdoor advertising revenue in the markets that is serves outside of the top 50. As a result of this middle market focus, the company derives approximately 85% of its revenue from local sources, Moody's noted. As the soft advertising environment has had a less severe impact on local advertising revenue than on national advertising revenue, Lamar's operating margins, while down from historical levels, have held relatively well and remain at or above levels consistent with its comparative industry peer group.

However Lamar does face risks posed by its high financial leverage, including capitalized leases, and modest cash flow coverage of interest and rent; the acquisitive nature of the company and the financing, and integration risks posed by the same; competition with larger better capitalized companies in markets representing 10% of revenue; the degree to which competition for incremental growth via acquisition may ultimately drive-up acquisition multiples as the industry consolidates; and structural issues related to the company's corporate organization and capitalization.

Moody's said it gives Lamar a stable outlook as it expects a modest recovery in the advertising environment and that Lamar will continue to use a prudent mix of debt and equity to finance its acquisition strategy.

Moody's confirms PDVSA, off review

Moody's Investors Service confirmed Petroleos de Venezuela's (PDVSA) Baa1 local currency issuer rating and the Ba1 foreign currency debt rating on its euro MTN program, removing them from review but retaining a negative outlook. Moody's also confirmed the Baa2 long-term debt rating of PDVSA Finance Ltd.

PDVSA's Baa1 local currency issuer rating reflects the company's monopoly status, its massive reserve base and current production in the area of 2.4 million barrels per day, Moody's said. The ratings were under review for downgrade in response to the turmoil over PDVSA's senior management and board of director appointments and over President Chavez's brief departure from office. Confirmation with a negative outlook of the company's Ba1 cross-border rating reflects Moody's assessment that, although the probability of default on the government's foreign currency debt obligations has increased, the risk of PDVSA becoming subject to a general debt moratorium has not changed sufficiently to warrant a downgrade.

Moody's said it believes the current ratings encompass the risk of government interference, the risk of disruptions to product and crude oil flows, and the negative impact that cash transfers to the government are having on PDVSA's ability to make long-term investments to maintain productive capacity.

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