Moody's cuts Solectron

Moody's lowered the ratings of Solectron Corp., including its credit facility to Ba2 from Ba1, its senior notes and 0% convertibles to Ba3 from Ba1 and its convertible ACES to B2 from Ba2. The outlook is stable.

The downgrade, Moody's said, is based on the continued erosion in operating performance, high debt to cash flow ratio and continued uncertainty over the strength and trajectory of a recovery in its customers' end markets.

Risks are heightened by Solectron's customer base, which is heavily skewed to computing, data networking and telecommunications, which could impede the company's return to profitability if manufacturing volumes from existing and new product platforms do not pick up.

These risks are mitigated, however, by Solectron's March 1 cash position of $3.25 billion, $2.6 billion of which was unrestricted. Also helping are a significant number of awards from new and existing OEM customers that are set to ramp-up as early as fiscal third quarter and the company's ongoing restructuring activities, Moody's said.

The stable outlook takes into account Solectron's sizable scale of business, cost savings from restructuring activities, and its advanced technological capabilities.

Fitch confirms Allied Waste

Fitch Ratings confirmed Allied Waste Industries, Inc. including Allied Waste North America's $1.3 billion senior secured credit facility and $3.1 billion tranche A, B and C loans at BB, $3.1 billion senior secured notes at BB- and $2.0 billion senior subordinated notes at B as well as Browning-Ferris Industries' $741 million of senior secured notes, debentures and MTNs at BB-. The outlook is stable.

Fitch said the ratings reflect Allied Waste's geographically diverse asset base, market density, solid EBITDA margins and cash flow generating ability.

The ratings also incorporate the relatively low risk profile of the waste industry.

Negatives include Allied Waste's "very high leverage position, which leaves AW with reduced flexibility during times of economic weakness," Fitch said.

During the first quarter of 2002, typically the weakest quarter, Allied Waste continued to feel the effects of softer economic conditions, Fitch said.

EBITDA declined 14% to $404 million and EBITDA margins declined 410 basis points to 30.7% during the first quarter 2002 compared to last year's first quarter, the rating agency noted.

However, Allied Waste still expects to generate in the range of $250-$300 million in free cash flow after $550 million in capital spending that will be directed towards debt reduction. It expects full-year EBITDA to approximate $1.85 billion and debt at December 31, 2002 to be below $9.0 billion, resulting in leverage of 4.8 times, Fitch added.

Moody's rates Roundy's loan Ba3, notes B2

Moody's Investors Service assigned ratings to Roundy's Inc. of Ba3 for its $340 million secured bank facility and B2 for its $200 million 10-year senior subordinated notes. Proceeds from the debt will be used to finance the leveraged buyout of the company. The company's senior implied rating is Ba3 and issuer rating is B1. The outlook is stable.

The bank loan consists of a $90 million revolver and a $250 million term B. It is secured by all tangible and intangible assets of the company and its subsidiaries. About $3 million of the revolver is expected to be drawn at closing.

Negative influences on the ratings include Roundy's leverage, narrow geographic region, sector competition and the possibility of further store acquisitions, Moody's said.

Positive influences include the company's leading position in Wisconsin, relatively modern condition of its store base and expectation that internally generated cash flow will largely finance construction and acquisitions, Moody's said.

The stable outlook anticipates the improvement of Roundy's financial profile as revenue grows both organically and from acquisitions.

Moody's puts Intertek on upgrade review

Moody's Investors Service put Intertek Testing Services Ltd. on review for possible upgrade including its senior secured credit facilities at Ba3 and its $203 million 10.25% senior subordinated notes due 2006 at B2.

Moody's said the review follows Intertek's announced it has filed a preliminary offering circular for a planned initial public offering.

Moody's said its review will focus principally on the use of the IPO proceeds and the resulting capital structure of the company as well as changes to the company's cash flow profile as a result of expected debt reductions, including the redemption of at least a portion of the senior subordinated notes and the expected re-financing of the existing senior secured credit facilities.

Fitch cuts Tesoro's outlook

Fitch Ratings lowered its outlook on Tesoro Petroleum Corp. to negative from stable due to unexpected changes in the terms of the Golden Eagle acquisition and weaker forecasts. The company's senior secured credit facility is rated BB and subordinated debt is rated B+.

New terms for the Golden Eagle acquisition should improve Tesoro's liquidity by reducing the total price by $50 million and through the issuance of deeply subordinated seller's notes for another $150 million, reducing cash requirements at closing by $200 million, Fitch said. The seller's notes have zero coupons for a significant period and are non-callable. At closing, total debt for Tesoro will be over $2 billion, adjusted debt-to-capitalization should be 70% and debt to EBIDTA is expected to be 3.0 to 4.0 times.

Management is working on amending the credit facility as a result of substantial first quarter loss. Limits are placed on capital spending and required de-levering from non-operating sources in the amended agreement. In addition, Tesoro is required to raise $125 million from a combination of mandatory divestment of assets or issuance of equity to be used for the repayment of debt, Fitch said. Cap-ex for the current year is limited to $275 million and $302.5 million in 2003.

On April 2, Tesoro's debt ratings were downgraded due to the significant debt required for the acquisition and expectations on performance of the oil industry.

Moody's rates PacifiCare notes B3, raises outlook

Moody's Investors Service assigned a B3 rating to PacifiCare Health Systems, Inc.'s proposed $200 million senior unsecured notes, confirmed the existing ratings including the FHP International senior notes at B2 and raised the outlook to stable from negative.

Moody's said it revised PacifiCare's outlook because a successful note offering will better enable the company to meet the terms of a newly negotiated two-year bank facility extension.

The notes are notched below the company's FHP senior debt because both FHP noteholders and bank lenders benefit from security in assets of the non-regulated entities at PacifiCare, whereas the senior unsecured noteholders will not, Moody's said.

The ratings reflect relatively weak, though improved liquidity and regulated capital cushions, a short track record of operating improvements and potential dividend increases at the regulated subsidiaries, and pending litigation with the Texas Department of Insurance, Moody's said.

During 2001, PacifiCare increased its capital surplus at regulated entities by approximately $50 million, bringing excess reserves up to approximately $276 million, based on current minimum state requirements. However, capital cushions, based on the higher of risk-based capital calculations or state requirements are still low relative to industry peers, Moody's added.

S&P rates Sybron notes B, loan BB-

Standard & Poor's assigned a B rating to Sybron Dental Specialties Inc.'s proposed $150 million 10-year senior subordinated notes and a BB- rating to its $350 million senior secured credit facility.

S&P said its assessment of Sybron reflects the company's position as a leading manufacturer of professional dental products, offset by the challenges of effectively operating its expanding business while shouldering debt associated with its late-2000 spin-off.

Dentists' repeat use of Sybron's products provides a measure of predictability for the business, S&P said. Moreover, moderate pricing flexibility and Sybron's manufacturing expertise have enabled the company to consistently maintain lease-adjusted operating margins of about 30%.

Sybron's R&D effort and niche-filling acquisitions should support the company's growth, S&P added. In addition, increased dental spending by developing countries presents opportunity in the long term.

The company is vulnerable to competition from a much larger industry player and many smaller niche firms, S&P added. Because about 40% of Sybron's revenues are international, its profitability is tied to foreign currency swings.

S&P keeps Advanced Glassfiber on watch

Standard & Poor's said Advanced Glassfiber Yarns LLC's ratings remain on CreditWatch with negative implications, where they were placed on Nov. 16, 2001. The corporate credit rating remains CCC.

Sales and earnings for the quarter ended March 2002 have risen somewhat from the very low levels of December 2001 quarter and the company is reducing inventory and capital expenditures, S&P said.

Nevertheless credit measures remain very weak, S&P added, and management does not expect to be in compliance with financial covenants under its bank credit facility as of June 30, 2002.

S&P believes there is a high likelihood of default.

S&P rates PacifiCare notes B+

Standard & Poor's assigned a B+ rating to PacifiCare Health Systems Inc.'s $200 million of senior unsecured notes due 2009. The outlook is negative.

With the proposed new debt issue, S&P said it expects PacifiCare's debt-to-capital ratio will remain close to the current level of about 40%.

If PacifiCare is unable to refinance or extend the maturity of the existing term loan in 2002, or if the company's 2002 earnings performance does not meet S&P's expectation, the ratings will likely be lowered.

PacifiCare currently has a good business position as a regional managed care organization. Offsetting this strength is the company's below-average operating performance, marginal capitalization, and high percentage of goodwill in its capital, S&P added.

PacifiCare is expected to complete its debt restructuring before year-end 2002 and to further improve its earnings performance with pretax operating income of about $260 million in 2002, S&P said.

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