S&P puts CommScope on negative watch

Standard & Poor's placed the ratings of CommScope Corp., on negative watch, including the 4% convertible notes due 2006 at BB-, due to weakened operating performance over multiple quarters.

S&P is concerned that weak demand for broadband cable products will persist, resulting in profitability and debt protection metrics that are substandard for the rating level.

CommScope's revenues have declined steadily over multiple quarters, falling to $135 million in

With profitability declining, S&P said debt protection metrics have suffered, with total debt-to-EBITDA increasing to 2.7x at Dec. 31 from 1.6x a year earlier.

Moody's ups Washington Mutual outlook

Moody's Investors Service changed to positive from stable the outlook for Washington Mutual Inc. (senior debt at A2), reflecting improving deposit mix and stronger interest rate risk management, as well as its solid core profitability and substantial core earnings.

Going forward, Moody's said that higher ratings for Washington Mutual will depend on its ability to maintain lower interest rate sensitivity, retain and further improve its deposit and funding mix and sustain risk-adjusted returns and risk-adjusted capital ratios.

Fitch cuts Broadwing

Fitch Ratings lowered Broadwing Inc.'s 6.75% convertible subordinated notes due 2009 to B from B+ and the 6.75% convertible preferreds to B- from B, along with others, and put all ratings on negative watch pending the outcome of the company's efforts to amend its existing bank facility.

The downgrade reflects high leverage and an expectation that EBITDA and free cash flow levels will continue to be pressured by moderate access line erosion and competition.

Fitch expects leverage to range between 5-5.2x by the yearend.

Broadwing's core businesses are mature, so Fitch does not foresee material growth in free cash flow or revenue in the near-term that would accelerate debt reduction.

S&P cuts Omnicom to A-

Standard & Poor's lowered the ratings of Omnicom Group Inc., including the two 0% convertibles to A- from A, reflecting increased concerns about a volatile economic environment, which amplify the risks related to the company's concentration of short-term debt. The outlook is stable.

Although Omnicom was able to avert an $850 million put on its 0% convertible in February with a sweetener, S&P sees ongoing risk related to the $900 million put on the other 0% convertible in July.

Liquidity is derived from a $1.025 billion 364-day bank facility maturing in November with a one-year term out option and $800 million revolver due 2005. At Dec. 31, the company had about $1.8 billion of available under the credit facilities and $696 million in cash and short-term investments.

If Omnicom had to draw on bank lines to refinance the convertibles, S&P said it is highly likely the company would need to additional financing within six months to cover its remaining put exposure.

Fitch rates new Simon notes BBB

Fitch Ratings assigned a BBB rating to the $600 million two-part notes issued by Simon Property Group Inc.'s operating partnership, Simon Property Group L.P., and affirmed the BBB- rating on Simon's $858 million of convertible preferreds.

The outlook is stable, to the extent that Simon is able to maintain its unencumbered EBITDA to unsecured debt ratio.

Nevertheless, Simon is an active consolidator in the mall sector, which poses significant event risk. Debt financed acquisitions or more highly leveraged portfolios, such as the targeted Taubman Centers' portfolio, have the potential to put pressure on Simon's ratings, Fitch said.

S&P rates new International Paper notes BBB

Standard & Poor's assigned a BBB rating to International Paper Co.'s new $1 billion two-part note issue.

Also, S&P confirmed the BBB senior debt ratings and BB+ preferred rating.

Liquidity is satisfactory with $1.1 billion of cash at Dec. 31 and unused bank lines and accounts receivable financing totaling $2.8 billion, S&P said.

Strong market positions, sharp focus on cost improvement and prudent financial policies are important contributors to credit quality.

In addition, the company is expected to use discretionary cash flow, which should strengthen during 2003, primarily for debt reduction.

Meaningful progress is necessary near-term to achieve ratios commensurate with the ratings, including funds from operations to debt of 25% to 30% on average over an industry cycle, S&P added.

S&P cuts Corus, still on watch

Standard & Poor's downgraded Corus Group plc and kept it on CreditWatch with negative implications including cutting its €2.4 billion bank loan and €307 million 3% notes due 2007 to BB- from BB and Corus Finance plc's €400 million 5.375% bonds due 2006 and £200 million 6.75% bonds due 2008 to BB- from BB.

S&P said the downgrade follows Corus' announcement that it will not be allowed to proceed with the sale of its Dutch aluminum division to Pechiney SA of France, as had been previously expected, following internal dissension at Corus.

S&P said it will continue to monitor the situation to determine whether the group is likely to obtain an extension, or renewal, of its key €1.4 billion ($1.5 billion) bank line, which matures in January 2004.

The group's failure to dispose of its aluminum division will undoubtedly be a set back in its negotiations concerning this bank line, S&P said.

Any future rating actions, which could be by one or more notches, will depend on: whether the sale of the aluminum assets to Pechiney will eventually be allowed to go ahead or whether the group will be forced to break up following the internal dissensions that have led to the disposal being blocked; whether Corus will manage to meaningfully extend its short-term bank lines - which currently expire in January 2004 - or replace them with long-term financing and, therefore, ease a liquidity situation that could become constrained; whether Corus can generate enough free operational cash flows in 2003 and beyond to cover its capital expenditures, dividends, interest, and taxes.

Moody's cuts Alaska Air

Moody's Investors Service downgraded Alaska Air Group including cutting its convertible subordinated debentures to Caa1 from B3 and Alaska Airlines, Inc.'s equipment trust certificates series 1992A-D to B1 from Ba1. The senior implied rating is B1 and the outlook is negative. The actions complete a review.

Moody's said it lowered Alaska Air because of the company's negative free cash flow due to continued capital expenditures and the expectation that a recovery in the company's financial profile is unlikely in light of limited prospects for a near-term revenue recovery.

But Moody's acknowledged Alaska's current positive operating cash flow, its balance sheet liquidity, financial flexibility, well controlled operating costs, and its strong network and alliance structure.

The ratings anticipate continued financial losses coupled with increasing lease-adjusted debt to fund capital expenditures, Moody's added. The ratings also reflect concerns that yield improvement and revenue growth will be constrained by a continuation of industry over capacity and a highly competitive pricing environment.

The negative outlook reflects the difficult economic environment and the event risks currently facing the company and the entire airline industry, Moody's added.

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