S&P puts KPNQwest on negative watch

Standard & Poor's put KPNQwest NV's BB corporate credit and senior unsecured debt ratings on CreditWatch negative.

Ratings affected include the company's $450 million 8 1/8% notes due 2009, its €340 million 7 1/8% notes due 2009 and its €500 mil 8 7/8% notes due 2008, all rated BB.

S&P said its action follows KPNQwest's announcement that it plans to acquire the Ebone and Central European businesses of U.S.-based Global Telesystems Inc. (GTS) for €645 million (net of cash; $580.5 million), and the concurrent announcement that Netherlands-based Koninklijke KPN NV will sell part of its interest in KPNQwest to U.S.-based co-owner Qwest Communications International Inc.

The rating agency said the placement on CreditWatch reflects the all debt-financed structure of the transaction. S&P will also reevaluate the implied ownership support from KPN and Qwest, which provides "a substantial underpinning" of KPNQwest's ratings.

S&P said: "KPN is no longer considered to be a long-term investor in KPNQwest and, as a consequence, Qwest's commitment to KPNQwest has assumed greater importance."

Fitch downgrades Shopko, keeps negative outlook

Fitch downgraded Shopko Stores, Inc., cutting its bank credit facility to BB- from BB and its senior notes to B from BB-. The outlook remains negative. Approximately $803 million of debt is affected.

Fitch said the action reflects "a highly competitive retail environment, which has negatively impacted the company's operating results, difficulty in achieving the benefits from its Pamida acquisition and refinancing risks associated with several debt maturities over the next three years."

The rating agency cautioned that a poor retail environment in the upcoming holiday season could further pressure Shopko's results.

Fitch added that while Shopko has competed against the top three specialty discounters - Wal-Mart, Target, and Kmart - for some time, their penetration in its key markets continues to increase. "Moreover, weak same-store sales and a more cautious consumer have hurt results as shoppers are more selective with regard to purchases."

Moody's rates Dimon upcoming notes Ba3, ups outlook to positive

Moody's Investors Service rated Dimon Inc.'s upcoming $175 million 10-year senior note offering at Ba3 and also gave a Ba3 rating to its planned $175 million senior unsecured credit facility due 2004. The rating agency changed its outlook on the company to positive, saying that continuing improvement in debt protection measures and operating performance could lead to an upgrade.

The rating agency commented: "Over the last year, Dimon has continued to strengthen its operating performance and financial profile. The company benefits from its efforts in generating efficiencies in its supply chain and procurement, and from the industry-wide reduction in tobacco leaf processing capacity. Dimon has also significantly reduced its level of inventory backed by client orders, or 'uncommitted inventory.' This effort enhances Dimon's cash flow predictability."

Moody's noted debt has fallen from $678 million at the end of fiscal 2000 on June 30, 2000 to $530 million a year later.

Because U.S. cigarette manufacturers are quickly moving towards buying tobacco direct from U.S. growers, Dimon will not have to finance inventory for those purchases, helping debt reduction, Moody's said. This part of the chain added minimal value, unlike overseas where Dimon's relationships with farmers and local governments is "significant," Moody's added.

Fitch rates Pennzoil-Quaker State planned $250 mln senior notes BB-

Fitch rated Pennzoil-Quaker State Company's expected $250 million senior unsecured notes due 2008 at BB-. Pennzoil's existing senior notes, which will become secured, maintain BB+ ratings, Fitch said, adding that the company's new $350 million secured revolver will rank pari passu with the existing seniors and also be rated BB+. The rating outlook is changed to negative from stable.

Fitch said it "anticipates that Pennzoil's credit profile will remain weak given higher operating costs for Pennzoil, lower volumes in the lubricants and consumer products segment, and increased debt levels. Despite the weaker credit profile, the additional security given to the existing senior noteholders and new bank lenders is a significant benefit and is reflected in the above secured ratings. The level of subordinated debt included in the capital structure also enhances the secured note holders' positions."

The company's total debt will be higher than previously expected given lower motor oil volumes and reduced proceeds from asset sales during fiscal 2001, Fitch stated, adding that on June 30, 2001 total debt was $1.2 billion including $236 million in bank debt.

Moody's downgrades BGF sr sub notes to B3 from B2

Moody's Investors Service downgraded BGF Industries, Inc.'s $150 million of 10¼% senior subordinated notes due 2009 to B3 from B2 and its $50 million guaranteed senior secured revolving credit facility due 2003 to B1 from Ba3. The outlook was revised to negative.

Moody's said it took the action in response to BGF's 29% decline in revenues for the second quarter ended June 30, 2001, attributable largely to a sizable decrease in sales of electronic fabrics.

It commented: "The year-long contraction in information technology and telecommunications capital spending has led fabricators of printed circuit boards (PCBs) to draw down existing inventories, directly affecting shipments by BGF's customers engaged in the manufacture of laminates that are used in PCBs. The company's second largest end market, composite high performance fabrics for the aerospace and commercial aircraft industries, which had held up well prior to Sept. 11, is now likely to confront a decline in shipments. The cancellation of orders from United States domestic carriers and continuing uncertainty over traffic recovery is unlikely to be fully offset by the market for refurbishing of existing aircraft or increased purchases by the military."

S&P affirms AIMCO at BB+

Standard & Poor's affirmed its BB+ corporate credit rating and B+ preferred stock ratings on Apartment Investment and Management Co. (AIMCO). The outlook is stable.

S&P said the rating "acknowledges AIMCO's seasoned and deep management team and the solid geographic diversification of its portfolio. These strengths are tempered by the inherent risks associated with the company's transaction-oriented growth strategy and an aggressive financial profile."

AIMCO's apartments are well diversified by type and geography, S&P said. However it noted: "recent macroeconomic events, including increasing corporate layoffs and declining household formations, are expected to hamper rental rates and occupancy gains industrywide for the near term."

The rating agency said AIMCO's acquisitions are initially financed "more aggressively" than the company itself and are more complex than typical acquisitions. Short-term financing exposes AIMCO to capital market fluctuations although to date AIMCO has not experienced "any major missteps," S&P said.

S&P withdraws Nakornthai Strip Mill's D rating

Standard & Poor's withdrew its long-term corporate credit rating on Nakornthai Strip Mill Public Co. Ltd. It also withdrew ratings on the senior mortgage notes and senior subordinated mortgage notes issued by NSM Steel (Delaware) Inc.

S&P said the withdrawal is the result of "the prolonged debt restructurings at the company."

All ratings have been D (default) since 1999.

S&P cuts Texon notes to CCC- from B-

Standard & Poor's downgraded Texon International PLC's DM245 million of 10% notes due 2008 to CCC- from B- and its corporate credit rating to CCC+ from B. It also put the ratings on CreditWatch with negative implications.

S&P said it took the action because of concerns over the company's short-term liquidity position. The rating agency commented that "as market conditions in North America and Asia deteriorate, Texon's weak liquidity position is likely to come under increasing pressure over the next few months, bringing into doubt the ability of the company to make the coupon payment due Feb. 1, 2002, on its 10% bonds.

Although a global leader in its niche shoe component markets, S&P said Texon's financila profile is weak, with EBITDA (earnings before interest, taxation, depreciation and amortization) cash interest coverage of 1.7 times and total debt to EBITDA of 5.7 times for the 12 months ended June 30, 2001.

S&P raises America West 1996-1 passthroughs class E

Standard & Poor's raised America West Airlines Inc.;s $14.5 million of passthrough certificates series 1996-1 class E due January 2004 to CCC+ from CCC-.

S&P puts Avecia on negative watch

Standard & Poor's put Avecia Group plc on CreditWatch with negative implications. Included are Avecia's B senior unsecured debt rating and B- preference stock rating.

The rating agency said it is concerned the U.K.-based specialty-chemicals producer will be "unlikely, in the short to medium term, improve its financial profile to levels compatible with the current ratings."

Coverage ratios are "very stretched" for Avecia's rating category, S&P said, noting that EBITDA (earnings before interest, taxation, depreciation and amortization) to cash net interest was about 1.8 times in the first half of 2001.

Avecia's 2001 performance has been adversely affected by the economic slowdown throughout the year, S&P said. It added: "Moreover, owing to challenging general economic conditions, key end markets for Avecia, including electronics, are not expected to recover in the near term."

S&P noted that it considers the potential sale of Avecia's Stahl business as neutral from a credit standpoint.

S&P removes Iasis from watch

Standard & Poor's affirmed its ratings on IASIS Healthcare Corp. and removed them from CreditWatch. However the outlook is negative. Affected ratings include the B+ senior secured bank loan rating and B- subordinated debt rating.

S&P put the ratings on CreditWatch on Sept. 29, 2000 because of concerns about IASIS's "growing financial constraints."

S&P commented: "The company's recent actions addressing key problem areas are expected to limit further downside pressure on operating performance. The struggling Rocky Mountain Medical Center has been closed. Senior management in IASIS's Arizona market has been replaced, and that market now appears stabilized. The company's corporate infrastructure is more complete and is expected to be more effective. Key functions such as accounts receivable management are improving, influenced by recently completed conversions and replacements of information systems. The purchase of the existing lease at St. Luke's Medical Center, and Tempe St. Luke's Hospital in Arizona, should improve cash flow and provide more operating flexibility."

But the rating agency added that management will be challenged to sustain these expected improvements.

S&P upgrades Alaris

Standard & Poor's upgraded Alaris Medical Inc. and its operating company Alaris Medical Systems Inc., and removed them from CreditWatch with positive implications where they were placed Sept. 10 following the company's announcement of its planned refinancing of its operating company's existing bank facility.

Among the rating affected are Alaris Medical Systems' subordinated debt, raised to B- from CCC+ and Alaris Medical Inc.'s senior unsecured and subordinated debt, raised to B- from CCC+. Alaris Medical Systems' senior secured notes are affirmed at B+.

S&P said the action follows completion of Alaris' bank loan refinancing which has increased its financial flexibility.

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