Moody's downgrades AES

Moody's Investors Service downgraded AES Corp. and kept it on review for possible further downgrade, affecting $20 billion of securities. Ratings lowered include AES' senior debt, cut to Ba3 from Ba1, subordinated debt, cut to B2 and preferred stock, cut to Caa1.

Moody's said its action reflects concern about diminished future dividends from subsidiaries and investment interests, the impact of weaker power prices on the merchant portion of AES' generation business, and deteriorating conditions in several international power markets in which the company has substantial investments.

Moody's said it believes cash flows from the company's Latin American investments will remain volatile and these assets are likely to contribute significantly lower dividends to AES over the medium term.

The combination of these factors results in a prospective increased reliance upon additional asset sales at a time when this market is becoming less favorable, Moody's added.

Moody's said its review will focus on the volume and reliability of cash to be derived from various investments, the timing and likely proceeds derived from asset sales, and company actions to support its liquidity position.

Moody's lowers La Petite Academy's notes, confirms loan

Moody's Investors Service downgraded La Petite Academy Inc.'s $145 million 10% senior notes due 2008 to Ca from Caa3, senior implied to Caa2 from Caa1 and issuer rating to Ca from Caa3. The company's secured credit facility was confirmed at Caa1. The loan consists of a $25 million senior secured revolver due 2005 and a $40 million senior secured term due 2005. The outlook is negative.

The downgrade reflects the company's inability to improve operating performance or financial condition, leaving liquidity restrained, Moody's said. The company is in violation of covenants under its bank loan and is presently operating under waivers that expire in August. Furthermore, the company's revolver is fully drawn.

The outlook is negative due to the expectation that profitability will be challenged in the near term. Enrollment is declining and tuition increases may become more challenging in a period of high unemployment and tight family budgets, Moody's said.

S&P upgrades Railtrack

Standard & Poor's raised Railtrack plc to investment grade and kept it on CreditWatch with positive implications.

Ratings raised include Railtrack's £135 million 9.125% bonds due 2006, £100 million 9.625% bonds due 2016, £300 million 7.375% straight bonds due 2022, £250 million 5.875% bonds due 2028, £400 million 3.5% exchangeable bonds due 2009, £1 billion revolving credit facility and £350 million 5.875% bonds due 2009, all raised to BBB+ from BB+.

Moody's puts Focus Wickes on upgrade review

Moody's Investors Service put Focus Wickes plc and its subsidiaries on review for possible upgrade. Ratings affected include Focus Wickes' £345 million senior secured credit facilities at B1 and £170 million senior notes due 2010 at B3.

Moody's said its action follows Focus Wickes' announcement it has filed a price range prospectus at 230-290p per share relating to the company's planned initial public offering.

Subject to market conditions and to the completion of the planned initial public offering, Moody's review will focus principally on the use of proceeds obtained from the IPO and the resulting capital structure of the company (including the mix of senior secured, senior unsecured, and subordinated indebtedness), as well as changes to the company's cash flow profile as a result of expected debt reductions, Moody's said.

Moody's confirms AES Drax

Moody's Investors Service confirmed AES Drax Energy Ltd.'s £135 million and $200 million notes at B1. The outlook remains negative.

Moody's said the confirmation follows the granting of a waiver request by senior secured bank lenders regarding certain insurance events of default.

Moody's put the notes on review for possible downgrade on March 1, 2002 following withdrawal of a request to senior secured bank lenders to waive events of default relating to breach of certain insurance requirements.

On Feb. 28, 2002 the interest payment on the high yield notes was met by drawing on the dedicated high yield debt service reserve account, which consequently contains insufficient funds to meet in full the next scheduled interest payment.

AES Drax subsequently initiated a new amended bank waiver process. Subject to completion of documentation and satisfaction of any conditions in such documents, the insurance event of default has now been waived through to November 2002 when the insurance program will again be due for renewal, Moody's said.

Moody's added that it expects that following the next senior debt interest payment date of June 30 funds will be distributed to AES Drax Energy. These will allow interest on the high yield notes to be met on the next payment date at the end of August, as well as replenish the high yield debt service reserve account.

S&P says Concentra unchanged

Standard & Poor's said Concentra Operating Corp.'s corporate credit rating remains unchanged at B+ with a stable outlook following its announcement it intends to redeem $47.5 million of its $190 million of outstanding senior subordinated notes.

To fund the redemption, the parent, Concentra Inc., will borrow $55 million in a two-year bridge facility that will be guaranteed by the primary equity sponsor, Welch Carson Anderson & Stowe.

As the bridge loan will be have no cash interest payments until maturity and will accrue interest at a much lower rate than the subordinated debt, there will be a positive impact on Concentra Operating Co.'s cash flow, S&P said.

However, as the corporate credit rating incorporates the parent and the operating corporation as one economic entity, the shift of debt up to the parent and the reduction of subordinated debt at the operating corporation has little impact on the overall credit profile, S&P said.

S&P cuts Matria outlook

Standard & Poor's lowered its outlook on Matria Healthcare Inc. to negative from stable. Ratings affected include Matria's senior secured bank loan at BB- and senior unsecured debt at B+.

S&P said the revision reflects the potential for near-term credit deterioration due to several recently clarified operating problems: delayed implementation of a new information technology system to support a growing pharmacy, laboratory, and supplies shipment business, and to link practice areas; delays in installing a new in-house packaging line for just-in-time diabetes products; added labor costs to manually bridge technology limitations; and a significant price increase for a unique preterm labor control drug used in its already pressured women's health business.

Rapid growth, significant operating bottlenecks and cost pressures have strained Matria's ability to deliver efficiently, impeding sales growth deemed necessary to offset reimbursement and cost pressures, S&P said.

Although the company expects to resolve the majority of its issues in 2002, certain challenges, such as higher drug costs, could prove chronic, S&P added. To date, the company has not lost customers, but quick resolution of the above issues will prove necessary to the economic retention of existing clients and to growth.

Moody's cuts Venture Holdings

Moody's Investors Service downgraded Venture Holdings Co., LLC and kept them on review for possible further downgrade. Ratings affected include Venture's $425 million guaranteed senior secured bank credit facilities cut to B2 from B1, $125 million 11% guaranteed senior notes due 2007 and $205 million 9.5% senior notes due 2005 cut to Caa1 from B2 and $125 million 12% guaranteed senior subordinated notes due 2009, cut to Caa2 from B3.

Moody's said the downgrades reflect its expectation that Venture's near-to-intermediate term prospects have been impaired to some meaningful degree by the fallout from "recent extraordinary events at the company."

Moody's believes that some resulting weakening of Venture's business will be evident for a while, no matter what the ultimate resolution is regarding the petition for investigation of a potential insolvency of Peguform's operations made by four of Venture's German management directors.

The review for possible further downgrade reflects Moody's continued uncertainty regarding the ultimate determinations to be made by the German court administrator regarding the validity of the insolvency claims, whether the existing bank group will permit Venture to resume access to unused availability under its existing credit facilities during the interim waiting period, or whether the company will be permitted by its bank group to pay approximately $14.4 million of defaulted public bond interest prior to the July 3, 2002 expiry date of the 30-day interest grace period, Moody's added.

Venture's ratings stand to be severely downgraded in the event that the German insolvency claims are confirmed to be valid by the temporary court administrator, or that the company's banks, key customers and suppliers, and other interested parties fail to negotiate effectively, Moody's said.

S&P rates Oregon Steel Mills loan BB

Standard & Poor's rated Oregon Steel Mills Inc.'s senior secured credit facility due June 30, 2005 at BB, proposed $300 million first mortgage notes due 2009 at BB- and corporate credit rating at BB-. The outlook is stable.

"The ratings reflect OSM's diversified product mix, improved cost structure from capital expenditure programs, and good market position," S&P said. "The ratings also reflect its aggressive capital structure and volatile operating performance due to exposure to cyclical industries, particularly oil and gas transmission pipeline business."

S&P expects the company to benefit from higher oil and gas exploration activity and associated infrastructure projects, improved pricing for its plate and rod products and increased spending by rail companies..

Moody's rates Sinclair Broadcast's loan Ba2

Moody's Investors Service rated Sinclair Broadcast Group's proposed $600 million senior secured credit facilities at Ba2, consisting of a $225 million revolver and a $375 million term loan B. In addition, Moody's confirmed the company's $1 billion senior subordinated notes at B2, $173 million convertible preferred stock at B3, $200 million of HYTOPS at B2, senior implied at Ba3 and senior unsecured at Ba3. The rating outlook is stable.

Ratings reflect high leverage, modest cash flow coverage of interest and dividends, risks posed by weak market position, the need to renegotiate several affiliate agreements over the near term and risks related to potential acquisitions and their financing, Moody's said.

Ratings are supported by the company's significant number of stations in diversified markets, significant portion of local advertising, the recent sale of its Indiana stations and the consequent reduction of debt, Moody's said.

The stable outlook reflects that while the advertising market hasn't completely recovered, 2002 should be a better year.

At March 31, debt leverage was 6.5 times and interest and dividend coverage by EBIDTA was at 1.3 times.

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