Moody's puts Terex on review

Moody's Investors Service put Terex Corp. on review for possible downgrade, affecting $1.6 billion of debt. Ratings affected include Terex's $300 million senior secured revolving credit facilities due 2007, $375 million senior secured term loan B due 2009 and $210 million senior secured term loan C due 2009 at Ba3 and $300 million 10.375% senior subordinated notes due 2011, $200 million 9.25% senior subordinated notes due 2011, $100 million 8.875% senior subordinated notes due 2008 and $150 million 8.875% senior subordinated notes due 2008 at B2.

Moody's said it began the review because it has concerns about Terex's ability to maintain an adequate operating performance and credit profile appropriate to its rating levels in the face of continuing weak demand for construction and mining equipment in a difficult economic environment.

The challenges were evident in the company's weaker-than-expected third quarter operating results and the uncertain outlook over the intermediate term, Moody's continued.

The review was also prompted by concerns over integration challenges facing Terex, as evidenced by recently-revealed integration difficulties at Atlas, one out of a string of acquisitions made by Terex over the past two years, the rating agency said.

S&P puts Centennial Communications on watch

Standard & Poor's put Centennial Communications Corp. on CreditWatch with negative implications. Ratings affected include Centennial Communications' $370 million 10.75% senior subordinated notes due 2008 at B-, Centennial Cellular Operating Co. LLC's $1.25 billion senior secured credit facility at B+ and Centennial Puerto Rico Operations Corp.'s $250 million senior subordinated notes due 2008 at B-.

S&P said the CreditWatch listing reflects its concerns that Centennial Communications' business risk has weakened during 2002.

In addition, despite a 20% increase in consolidated operating cash flows for the first quarter of fiscal 2003 from the first quarter of fiscal 2002, the company's cash balances and funding sources may not provide sufficient liquidity beyond mid-2003 if these business trends continue, S&P said.

The rating agency added that is concerned about the company's ability to meet financial maintenance covenants under its secured bank loan agreement, especially if operating cash flow from the Caribbean wireless and broadband businesses do not grow materially in fiscal 2003 from fiscal 2002 levels.

As of Aug. 31, 2002, Centennial had nearly $90 million of liquidity from cash balances and availability under its secured bank loans. This represents a fairly limited cushion, especially given ongoing amortization requirements under its bank facility, which totals $72 million for the fiscal year ending May 31, 2003, S&P said.

The company's domestic markets have been subject to heightened competition from the larger, national players, such as AT&T Wireless and Cingular. As a result, the cost per gross customer addition in its U.S. markets has remained fairly high at $366 for the three months ended Aug. 31, 2002, S&P said. The company also lost 6,300 subscribers in its U.S. wireless market over the three month period ended Aug. 31, 2002, against a backdrop of overall growth for the industry.

Moreover, the company relies on roaming revenues from other carriers for about 26% of its current domestic revenue base, S&P said. Declining pricing trends are expected to reduce this revenue source over the next few years, despite anticipated increases in overall roaming minutes of use due largely to a new contract signed with Cingular Wireless with minimum minute requirements. Furthermore, the 6% growth of the company's domestic wireless customer base as of August 2002 versus 2001 is slower than that experienced by the overall industry.

S&P lowers Premium Standard outlook

Standard & Poor's revised its outlook on Premium Standard Farms Inc. to negative from stable and confirmed its ratings including its senior unsecured debt at BB.

S&P said the action reflects the impact of the recent downturn in hog prices, higher grain costs, and its expectation that results will not begin to improve until the second quarter of 2003 (the first quarter of Premium Standard Farms' fiscal 2004 results).

Although hog prices have improved somewhat in the last several weeks, they are still well below 2001 prices, S&P said, adding that it is concerned that the firm's vertically integrated operations have not reduced the degree of volatility in Premium Standard Farms' operations as originally anticipated.

The company's financial profile is aggressive, S&P added. The rating agency expects that fiscal 2003 financial measures will be substantially below those of the prior three fiscal years, with EBITDA (adjusted for capitalized operating leases) to interest coverage in the 1.5 times area and total debt to EBITDA of more than 10x. However, if EBITDA to interest coverage is averaged through the expected cycle (1999 through 2003) then the coverage is about 3.0x, which is appropriate for the rating.

EBITDA margins are expected to decline to the mid-to-high single digit range for 2003, well below the historic 18% to 21% range of the past three years, S&P said. Capital expenditures should decline to about $35 million in 2003, with the completion of the North Carolina expansion and renovation.

Moody's lowers TravelCenters of America outlook

Moody's Investors Service lowered its outlook on TravelCenters of America, Inc. to stable from positive and confirmed its ratings including its $100 million revolving credit facility due 2006 and $328 million term loan B due 2008 at Ba3 and $190 million senior subordinated notes due 2009 at B3.

Moody's said it changed TravelCenters' outlook because its operating performance and financial statistics have not improved to the extent necessary to warrant a ratings upgrade in the near term.

The previous positive outlook, assigned in conjunction with the company's re-capitalization in October 2002, reflected Moody's expectations that EBITDA would improve significantly, capex levels would reduce substantially, and that debt levels would be rapidly brought down.

However, from fiscal 2000 to the 12 months ending June 2002, improvements have only been modest, Moody's said. While EBITDA has increased from $83 million to $111 million (33%), debt reduction has not been commensurate, reducing only 3% from $563 million as of December 2000 to $545 million as of June 2002. Capex in 2001 was $54 million, and $24 million in the six months through June

2002. While this was lower than the $68 million experienced in fiscal 2000, the reduction in capex has not been sufficient to reduce debt levels significantly.

As a result, although debt-to-EBITDA reduced from 6.8x in fiscal 2000 to 4.9x for the 12 months to June 2002, EBITDA interest coverage only improved from 1.8x to 2.1x, Moody's said.

Moreover, Moody's said it does not expect general economic conditions that affect TravelCenter's markets to improve in the near term to such a level that would justify a continued positive ratings outlook.

S&P keeps Tyco on watch

Standard & Poor's said Tyco International Ltd. remains on CreditWatch with negative implications including its senior unsecured debt at BBB-, subordinated debt at BB+ and preferred stock at BB.

S&P's comment follows Tyco's announcement of fiscal fourth quarter earnings.

Earnings, which continue to be depressed by economic weakness, largely reflected in the electronics business, included: impairment and restructuring charges totaling $2.8 billion pretax (most of which had previously been announced and is associated with downsizing the telecommunications business; of the total, $2.2 billion is non-cash); a minor restatement of the previous three quarters' earnings related to the recognition of upfront fees received in the security business; and a $400 million non-cash charge for increased pension liabilities, S&P said.

Management does not anticipate any major additional writedowns in the near term.

The company remains in compliance with bank loan covenants and is in discussions with lenders regarding new financing arrangements, S&P said.

Free cash flow exceeded previous guidance primarily because of aggressive receivables collections and lower inventories. The company repaid $1.9 billion of debt during the quarter and had a cash balance of $6.5 billion as of Sept. 30, 2002.

The company also reported that the investigation into its accounting practices that is being conducted by outside counsel and forensic accountants has not uncovered anything to date that requires additional disclosure or would meaningfully diminish earnings, S&P added. The lead investigator said that based on the extensive work completed so far, the chances of uncovering a large fraud are slim.

S&P said liquidity remains its key concern. In February 2002, Tyco drew down its bank credit facilities in full and has not accessed debt markets since then. The company has public and bank debt maturities during the next 15 months of about $5.6 billion, plus the potential put of two zero-coupon debt issues totaling about $5.9 billion. Of the total, $3.9 billion of bank debt is due and $2.3 billion of puts can be exercised in February (for cash or stock).

Management indicated that it expects to have a financing plan in place before February, S&P said. It intends to satisfy the February put in cash; the second zero-coupon debt issue, putable in November 2003, must be satisfied in cash.

The resolution of the CreditWatch will depend on how management addresses the gap between cash balances (currently $6.5 billion) plus free cash flow (estimated by new management to total between $2.5 billion and $3.0 billion in fiscal 2003 based on current market conditions and an increase in the income tax rate) and obligations coming due in the next 15 months ($11.5 billion), S&P said. A potential additional obligation is amounts outstanding under accounts receivable securitizations (currently about $540 million) that might come due as a result of downgrades during the past several months. The funding gap could be bridged through a combination of successful negotiation of new bank credit facilities, selling additional assets, and accessing the public capital markets.

S&P keeps Carnival on watch, puts P&O Princess on positive watch, takes Royal Caribbean off watch

Standard & Poor's said Carnival Corp. remains on CreditWatch with negative implications including its senior unsecured debt at A, P&O Princess plc is put on CreditWatch with positive implications instead of developing implications, including its senior unsecured debt at BBB, and Royal Caribbean Cruises Ltd. is removed from CreditWatch with negative implications, its ratings confirmed and a negative outlook assigned. Royal Caribbean ratings affected include its senior unsecured debt and convertibles at BB+.

S&P said its announcements follow Carnival's revised offer for P&O Princess, which is subject to certain pre-conditions. The proposed offer envisages creation of a dual-listed single economic enterprise. In contrast to Carnival's earlier offer, there is no cash component. As a result of the announcement, the board of P&O Princess withdrew its recommendation that shareholders accept Royal Caribbean's offer to create a similar dual-listed structure.

Consequently, S&P said it now believes that it is highly probable that Carnival and P&O Princess will ultimately combine and that Royal Caribbean will remain independent.

Royal Caribbean's negative outlook reflects its continued high debt leverage for its rating and concerns that the global political landscape could negatively affect cruise industry performance in the intermediate term.

S&P rates Bell Actimedia notes B, loan BB-

Standard & Poor's assigned a B rating to Bell Actimedia Inc.'s planned C$600 million notes due 2012 and a BB- rating to its planned C$1.14 billion term loan B due 2008, C$100 million bank loan due 2008 and C$400 million term loan A due 2008. The outlook is stable.

The bank loan and subordinated debt issue will be used to partially fund Kohlberg Kravis Roberts & Co.'s and the Ontario Teachers' Pension Plan Board's C$3.0 billion purchase price of Bell ActiMedia from Bell Canada.

S&P said its ratings on Bell ActiMedia reflect the company's leading market position as Canada's largest directory publisher and its strong brand equity and intellectual property ownership.

The ratings also take into consideration Bell ActiMedia's predictable revenue and EBITDA stream, and its commitment to maintaining a prudent capital structure through planned deleveraging in the medium term, S&P said.

Negatives include the company's moderate EBITDA base and limited geographic focus outside of the provinces of Ontario and Quebec, as well as by the low growth industry in which it operates, S&P said.

With an annual circulation of 17 million, Bell ActiMedia produces more than 209 revenue-generating directories, which support a pro forma revenue and EBITDA base of C$612 million and C$342 million, respectively, S&P said.

With total debt to EBITDA at 6.25 times (x), pro forma leverage is high for the current rating, S&P said, but added that it expects internally generated funds will be applied toward lowering total debt to EBITDA to around 5.05x by the end of 2004.

Moody's cuts Milacron

Moody's Investors Service downgraded Milacron Inc. and its subsidiaries. The outlook is stable. Ratings affected include Milacron's $110 million senior secured revolving credit facility due 2004, cut to B1 from Ba3, $115 million 8.375% senior unsecured notes due 2004, cut to B2 from B1, and Milacron Capital Holdings BV's €115 million 7.625% senior unsecured eurobonds due 2005, cut to B2 from B1.

Moody's said it cut Milacron because of the company's high pro forma leverage and modest pro forma interest coverage, which are symptomatic of soft order flow combined with the still highly uncertain industrial outlook.

Milacron's credit protection measures remain weak, despite the substantial third quarter 2002 debt reduction achieved by the company through divestiture of its most significant Metalworking Technologies businesses (Valenite, Widia and Werkö), Moody's said.

Milacron is subject to additional contractual step-downs of its bank revolving credit facility commitment below the current $110 million level, and notably faces first quarter 2003 negotiations to amend existing bank covenants related to later periods, the rating agency added.

Milacron is additionally confronted with a definitive need to access the bank debt and/or capital markets by 2004 in order to address scheduled principal maturities of both the bank revolving credit and the domestic senior unsecured notes issue.

Moody's cuts Conseco

Moody's Investors Service downgraded Conseco Inc. and assigned a developing outlook. Ratings lowered include Conseco's guaranteed senior notes, cut to Ca from Caa2, its old senior notes, cut to Ca from Caa3, and its trust preferreds, cut to C from Ca. Conseco's preferred stock was confirmed at C.

Moody's said the Ca ratings reflects the heightened uncertainty surrounding Conseco's liquidity and financial flexibility, and the residual value of the company, a key determinant of the recovery value for debtholders.

Moody's said its expects Conseco to make a prepackaged bankruptcy filing.

The company is currently in default on its holding company bonds and has received temporary waivers on its bank loans, Moody's noted. The value received by debt holders will depend on the specifics of any capital restructuring plans as well as any events that could impact the overall value of the company.

Notwithstanding the uncertain fate of bondholders, Moody's believes it unlikely that insurance policyholders will lose value on their policies.

Aside from the specifics of a capital restructuring, Moody's believes the value of the company will be most affected by the following events: first, the longer it takes the different parties to implement a viable restructuring plan, the more likely it is that the value of the company will deteriorate; i.e. time is not on the company's side. Furthermore, Moody's said adverse publicity could make it more difficult for the company to maintain stable levels of surrender and lapse activity in the insurance companies, potentially leading regulators to intervene. Second, Moody's noted that the harsh and volatile capital market conditions of late, as well as the weak economy, create additional uncertainty and could further constrain the earnings of Conseco and the financial flexibility of the holding company. Moody's said it believes the difficult market conditions will only complicate Conseco's recently announced plans to find investors for Conseco Finance Corp.

Moody's expects bondholders will emerge from any restructuring with a majority ownership of Conseco.

Moody's confirms Dan River

Moody's Investors Service confirmed Dan River Inc.'s ratings including its $120 million 10.125% senior subordinated notes due 2003 at Caa3 and maintained a negative outlook.

The ratings and the negative outlook reflect the company's near term liquidity risk, specifically the need to refinance all debt in 2003, and significant sales concentration to K-Mart (18% for fiscal 2001), Moody's said.

In addition the company has an insufficient fixed charge coverage ratio (inclusive of operating leases and current maturities of long-term debt).

The ratings also incorporate the recent improvements in Dan River's operations, as evidenced by lower working capital needs, improving product mix, and increased asset utilization resulting from a consolidation of operations, Moody's added. Should the company continue to improve its cash generation and secure refinancing of its debt, the ratings and the outlook would likely improve.

Weak consumer demand contributed to a decline in net sales in the second quarter of 202, Moody's said. In the second quarter, sales declined 4.9%, to $153.9 million as compared with the similar period last year. Home fashion sales, which accounted for approximately 69.6% of total sales in the period, declined 8.4%, to $107.2 million in the second quarter of 2002 compared to the second quarter of 2001.

A lower average cost of borrowing and lower debt balances resulted in improved interest protection measures in the first half of 2002, Moody's said. In the first half of 2002, EBITDA-based interest coverage improved to 2.5 times from 1.1 times for the comparable period a year ago.

Moody's rates Bank Negara notes B3

Moody's Investors Service assigned a B3 rating to Bank Negara Indonesia's proposed US dollar subordinated notes due 2012.

Moody's said the rating reflects its view that the bank's size and importance in the banking system and its close government ties will accord it strong government support for all of its debt obligations.

In addition, the rating also incorporates the bank's own capability to service its debt obligations given adequate liquidity and its weak but stabilizing financial fundamentals, Moody's said.

Although the proposed notes are structurally subordinated to the senior obligations, Moody's said that given the bank's improvement in credit quality, its size, adequate liquidity, strong government support and currently low foreign currency bond ceiling, a notching differential was not deemed warranted.

© 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.