Moody's downgrades Mirant to junk

Moody's Investors Service downgraded Mirant Corp., Mirant Americas Energy Marketing, LP and Mirant Americas Generation, Inc. to Ba1 and Mirant Trust I to Ba2. The ratings remain under review for further downgrade. Moody's also put its Baa3 rating on Mirant Mid-Atlantic, LLC under review for possible downgrade. A total of $4.9 billion of debt is affected including Mirant Corp.'s senior unsecured debt, cut to Ba1 from Baa2, Mirant Trust I trust preferreds to Ba2 from Baa3 and the commercial paper of Mirant and Mirant Americas Energy Marketing to Not Prime from Prime 2,

Moody's said the ratings remain on review for downgrade pending action from Mirant to improve its capitalization and arrangements to obtain financing, with the exception of Mirant Mid-Atlantic, which is on review for downgrade to reflect the risk that Mirant can draw on Mirant Mid-Atlantic's liquidity sources for its own needs.

Moody's said the downgrade was based on expectations for "moderating cash flows in light of the heavy debt burden."

Moody's said it believes Mirant's cash flow will be restricted over the coming months.

Moody's downgrades American Airlines

Moody's Investors Service downgraded American Airlines, Inc., affecting $13.6 billion of debt. Ratings affected include the American and parent AMR Corp.'s senior unsecured ratings, lowered to B1 from Ba2. The outlook is negative.

Moody's said the downgrade completes the review begun after the Sept. 11 terrorist attacks.

Moody's said its ratings reflect "the more difficult business environment facing American due to the weak economy and the specific effects on the airline industry of the September 11 terrorist attacks. The intermediate term outlook for American's cash flow has deteriorated, and large cash losses from operations experienced over the last several months have eroded American's financial profile."

Recovery of adequate levels of cash flow will be limited by higher costs and the continued work to merge TWA into American, Moody's said.

But the rating agency also noted American has a strong business franchise and "the potential benefits of restructuring and cash conservation initiatives that should assist the company in adapting to the new business environment."

Although there is increased potential for airline insolvencies, Moody's believes American's current liquidity, its sizable unencumbered asset base and probable continued access to the capital markets should provide it with financial flexibility to weather the current difficult conditions.

Moody's downgrades Delta Air Lines

Moody's Investors Service downgraded Delta Air Lines, Inc., affecting $12.9 billion of debt securities. Among the ratings lowered is the company's senior unsecured debt and revolving credit facility, cut to Ba3 from Ba2. The outlook is negative.

Moody's said the downgrade completes the review begun after the Sept. 11 terrorist attacks.

Moody's said the ratings reflect "the more difficult business environment facing Delta due to the weak economy and the specific affects on the airline industry of the September 11 terrorist attacks. The intermediate term outlook for Delta's cash flow and debt protection measurements is for continued weakness, and the cash losses from operations experienced over the last several months have eroded Delta's financial profile."

But Moody's said Delta also has a well-established business franchise and "the potential benefits of restructuring and cash conservation initiatives that should assist the company in adapting to the new business environment."

Although there is increased potential for airline insolvencies, Moody's believes Delta's current liquidity, its sizable unencumbered asset base and probable continued access to the capital markets should provide it with financial flexibility to weather the current difficult conditions.

Moody's downgrades Quality Distribution

Moody's Investors Service downgraded Quality Distribution Inc. including lowering its $347 million senior secured bank facilities to B3 from B1, its $100 million 10% senior subordinated notes due 2006 to Ca from Caa1 and its $40 million floating-rate subordinated term notes due 2006 to Ca from Caa1. The outlook remains negative.

Moody's said it downgraded the company because of "continuing operating weakness with revenue declines over like year 2000 levels and net losses for the last four consecutive quarters as the weak economic environment has decreased demand for bulk liquid chemicals, and thus demand for chemical tanker transportation."

Debt coverage is poor and unlikely to recover in the near term, Moody's commented. The poor operating results also raise questions about the carrying value of the $150 million of goodwill on the balance sheet as of Sept. 30, 2001.

EBIT interest coverage has been less than 1 times and bank agreement covenant levels have had to be waived and modified, Moody's noted.

S&P cites liquidity concerns in Touch America downgrade

Standard & Poor's cited "heightened concerns" about Touch America Inc.'s liquidity in its downgrade of the company, reported by Prospect News Tuesday. Included in the debt lowered was the company's bank loan, cut to CCC+ from B- and kept on CreditWatch with negative implications.

Although Touch America received waivers on Dec. 14 for financial covenants in its senior secured bank credit facility through Feb. 15, 2002, additional borrowings can only be made with the consent of the lenders, S&P noted. In addition, the bank facility was reduced to $278 million from $308 million and only $24 million is available. Borrowings under this facility of about $15 million and repayment of an intercompany loan of $25 million from Montana Power were to be used to fund Touch America's operating needs through Jan. 31, 2002, until the utility business sale was completed, S&P added.

S&P also warned the proceeds from the sale of the utility business may be lower than anticipated because of the possibility that Montana Power may be required to share some of the profit with ratepayers.

S&P raises outlook on Per-Se Technologies to positive

Standard & Poor's raised its outlook on Per-Se Technologies Inc. to positive from stable and affirmed the company's B corporate credit, senior unsecured and senior secured bank loan ratings.

S&P said the outlook revision reflects its expectation that Per-Se will return to profitability and improve cash flow protection measures over the next year, following several years of restructuring.

It added: "The ratings reflect the company's developing market position and material execution risks in an evolving and fragmented marketplace.

"Although the company has substantial recurring revenues and a good niche position in a competitive and evolving market, it experienced sizable operating losses over the past few years because of issues surrounding the integration of acquisitions, large asset write-downs, shareholder and government lawsuits, and product flaws," S&P continued.

However it is now emerging from a broad restructuring and has begun to achieve moderate cost reductions and productivity improvements, leading to improved operating profitability and cash flow, despite flat overall revenues in the past year, S&P said.

S&P cites Vivendi infusion in EchoStar positive watch

Standard & Poor's cited the announced $1.5 billion equity investment by Vivendi Universal in its decision to put EchoStar Communications Corp.'s rating on CreditWatch with positive implications, up from developing implications. The change was reported by Prospect News Tuesday. S&P assigned a B+ rating to Echostar DBS Corp.'s planned $700 million senior unsecured notes due 2009.

S&P said the Vivendi infusion reduces the amount of debt needed to finance the acquisition of either Hughes Electronics Corp. or PanAmSat, "effectively eliminating a downside rating risk."

"The upside potential for the ratings reflects the significant cost and revenues synergies that could be achieved if DirecTV operations are combined with those of EchoStar, as well as the overall improved competitive position of the combined company," S&P commented.

Cost benefits include lower programming, general, and administrative expenses, and lower subscriber acquisition costs, S&P said. Revenue opportunities would come from the significant addition of markets with access to local programming, and from advertising revenues, a result of a larger subscriber base and broader reach.

If the merger with Hughes does not go through, any ratings upgrade would depend on the final capital structure of the EchoStar and PanAmSat combination, "which would be enhanced by Vivendi's investment."

However, "integration challenges and high leverage" would likely limit the rating to B+ in either scenario, S&P said.

S&P downgrades Hylsa

Standard & Poor's downgraded Hylsa SA de CV's corporate credit rating to SD (selective default) from CCC+ and its $300 million senior unsecured bonds due 2007 to CC from CCC+.

S&P said the action follows the Mexican steelmaker's non-payment of scheduled interest and principal payments, announced as part of the proposal for the restructuring of its total outstanding bank debt.

Payments will resume when the refinancing is closed, which is expected by the end of February 2002.

S&P revises Stoneridge outlook to negative

Standard & Poor's revised its outlook on Stoneridge Inc. to negative from stable and affirmed the company's ratings including its senior secured debt at BB-.

S&P said the outlook revision reflects "lower-than-expected cash flow generation, which has further weakened credit protection measures and may result in potential bank covenant violations in the near term."

S&P said Stoneridge has an aggressive financial profile buy solid niche positions as a leading producer of highly engineered electrical and electronic components; modules; and systems to the automotive, medium- and heavy-duty truck, agricultural, and off-highway vehicle markets.

"Due to industry pressures and weak end markets, the company reported a moderate decline in sales and a sharp decline in operating income for the nine months ended Sept. 30, 2001," S&P noted. Sales declined about 15% to $444 million, compared with $520 million in 2000. Operating income for the first nine months of 2001 declined 44% to about $48 million, compared with about $88 million in the same period for 2000, S&P said.

S&P cuts ACT Manufacturing to CC

Standard & Poor's downgraded ACT Manufacturing Inc.'s corporate credit and senior secured bank loan ratings to CC from B- and its subordinated notes to C from CCC+. The ratings remain on CreditWatch with negative implications.

S&P said its action follows the lack of any additional or extended waivers on ACT's credit facility from its domestic bank syndicate.

The rating agency said the company has "severe liquidity concerns."

S&P downgrades Louisiana-Pacific

Standard & Poor's downgraded Louisiana-Pacific Corp.'s ratings and removed them from CreditWatch. The outlook is negative. Ratings affected include Louisiana-Pacific's senior secured bank loan, cut to BB+ from BBB-, its senior unsecured debt, cut to BB- from BB, and its subordinated debt, cut to B+ from BB-.

S&P said the downgrade reflects expectations that oversupply and seasonal softness in Louisiana-Pacific's primary markets are likely to keep cash flow protection measures "very weak for the next year or so."

The rating agency anticipates debt could rise in the next several months to fund seasonal operating needs.

But S&P also noted Louisiana-Pacific has begun "considerable operating cost reductions, lowered capital expenditures substantially, and eliminated all dividend payments." It and other companies have also taken significant production downtime to manage inventories.

In addition, S&P said: "The company has also completed a debt refinancing that should provide the necessary flexibility during this cyclical trough and pushed all major debt maturities beyond 2003."

S&P puts Albecca on positive watch

Standard & Poor's put Albecca Inc. on CreditWatch with positive implications. The action affects $151.2 million of debt, including its B- subordinated debt.

The action follows Albecca's announcement that it will be acquired by Berkshire Hathaway Inc.

S&P cuts Acindar

Standard & Poor's downgraded Acindar Industria Argentina de Aceros SA's corporate credit rating to D from CCC and its $100 million senior unsecured notes due 2004 to CC from CCC.

S&P said the downgrade reflects Acindar's "decision to stop fulfilling its financial obligations as a means of preserving liquidity to continue operating. The company has already missed payments on local bank debt and some of its obligations with the IFC. In addition, Acindar has announced its intention to enter into negotiations with financial creditors to restructure the terms of existing indebtedness to make it more adequate to its current cash generation ability."

S&P believes it "very unlikely" Acindar will make the next coupon payment on the $100 million notes, at which point they will be downgraded.

S&P downgrades Advanced Lighting

Standard & Poor's downgraded Advanced Lighting Technologies Inc. and put the ratings on CreditWatch with negative implications. Affected ratings include the senior secured debt, cut to B+ from BB- and its $100 million 8% senior notes due 2008, cut to B- from B.

S&P said its actions reflect Advanced Lighting's "more modest size and reduced business diversity following the sale of its fixture lighting subsidiaries, and the company's weaker-than-expected operating performance, heavy debt burden and limited financial flexibility. These combined elements have increased financial risk."

Advanced Lighting completed the sale of its fixture lighting business on Dec. 13, allowing the company to reduce its debt by about $38 million by calendar year-end, S&P said. Revenues related to the assets sold were about $82 million in fiscal 2001, 37% of total sales.

"Although Advanced Lighting's operating efficiencies and profitability should gradually improve following the divestiture of its weaker operating fixture businesses, the company's revenue base and business diversity are materially reduced," S&P commented. "Despite the asset sale, Advanced Lighting will continue to have a heavy debt burden, weak credit protection measures, and limited financial flexibility."

S&P affirms some Comstock ratings, lowers others

Standard & Poor's affirmed its B+ corporate credit and BB senior secured ratings on Comstock Resources Inc. and removed them from CreditWatch where there were placed with negative implications on Oct. 23, 2001. It also downgraded Comstock's senior unsecured rating to B- from B and removed it from CreditWatch with positive implications. Ratings on DevX Energy Inc. were withdrawn and removed from CreditWatch with positive implications where there were placed on Oct. 23, 2001. The outlook is negative.

The actions follow closing of Comstock's $143 million debt-financed acquisition of DevX Energy

S&P said its affirmation of Comstock's corporate credit rating and the outlook revision reflect the company's "reduced liquidity and increased fixed charge burden resulting from the acquisition of DevX. If natural gas prices substantially fall from current levels on a sustained basis, Comstock's ability to fund capital programs from internal free cash flow would likely diminish given its paucity of commodity price hedges."

If the company's reliance on its secured bank credit facility for funding reserve replacement and production growth rises, debt leverage may also rise, impinging on the company's financial flexibility and potentially resulting in a downgrade.

S&P said it lowered Comstock's senior unsecured debt because of the increased presence of senior secured bank debt in the capital structure. "If Comstock materially reduces reliance on secured debt on a sustained basis, Comstock's senior unsecured rating could be raised," S&P said.

S&P cuts Impsat notes to D

Standard & Poor's downgraded Impsat Fiber Networks Inc.'s $225 million senior unsecured notes due 2008 to D from C. The CC rating on Impsat's $125 million senior unsecured guaranteed notes due 2003 and the C rating on its $300 million senior unsecured notes due 2005 remain on CreditWatch with negative implications. These ratings will be lowered when an effective default occurs.

The downgrade of the $225 million senior unsecured notes follows the company's decision to not make the interest payment due on Dec. 17 to preserve cash as part of a financial restructuring process that will reduce its high debt burden.

S&P puts Magnum Hunter on positive watch

Standard & Poor's put ratings of Magnum Hunter Resources Inc. on CreditWatch with positive implications. Affected ratings include Magnum Hunter's senior unsecured debt at B.

The action follows the announcement that Magnum Hunter and Prize Energy Corp. will merge.

S&P said the merger "significantly increases Magnum Hunter's scale in its core onshore properties." The combined company will have a total proved developed reserve base of about 970 billion cubic feet equivalent (bcfe; 55% natural gas) using Dec. 31, 2000 reserve figures, S&P said.

S&P also expects leverage of the combined company to decrease from Magnum Hunter's current level.

S&P puts Standard Motor Products on negative watch

Standard & Poor's put Standard Motor Products Inc. on CreditWatch with negative implications. Ratings affected include its senior unsecured debt at BB and its $90 million 6.75% convertible subordinated notes due 2009 at B+.

S&P said its action reflects Standard Motor's "weaker-than-expected operating results and higher-than-expected debt use in the past few quarters, leading to subpar credit protection measures, and Standard & Poor's increasing concern that the company will not be able to achieve the improvement in financial measures factored into the ratings."

S&P said Standard Motor's operating results have come under pressure during the past two years due to higher-than-expected product returns in its temperature control segment; inventory reduction efforts by the company and several major retail customers; and weather-related drops in demand.

As a result, credit protection measures have remained below expected levels. An improvement in to EBITDA to 4 times level in the near term, settling at 3.0-3.5 times over the longer term has not occurred, with debt to EBITDA at 4.5 last year and likely to be worse this year, S&P said.

S&P puts Venture Holdings on negative watch

Standard & Poor's put Venture Holdings. Co. LLC on CreditWatch with negative implications. Affected ratings includes its senior secured bank loan at B+, its $205 million 9.5% senior notes due 2005and its $125 million 11% senior notes due 2007 at B and its $125 million 12% senior subordinated notes due 2009 at B-.

S&P said the action reflects its "increasing concerns over the company's liquidity and upcoming refinancing requirement."

Venture is highly leveraged, S&P said, estimating the current level of debt to EBITDA (adjusted for operating leases and accounts receivable sales) at 4.4 times.

S&P said the company has tight covenants, limited borrowing availability and must refinance a $125 million bank loan by March 31, 2002.

"Although Venture was in compliance with bank covenants at the end of the third quarter, the company has little room under the covenants for deterioration in financial performance," S&P said.

Moody's cuts Providian senior debt to B2 from Ba3, ratings remain on review for downgrade

Moody's Investors Service downgraded the long-term ratings of credit card issuer Providian Financial Corp. (Senior to B2 from Ba3) and its subsidiary Providian National Bank (Deposits to Ba2 from Ba1). The ratings remain on review for possible downgrade, Moody's added.

Moody's said the downgrade and continued ratings review reflect uncertainty regarding the timing of any restructuring initiatives and the implications on regulatory capital, as well as Providian's weaker earnings profile and funding challenges. The two-notch downgrade of the parent holding company's debt reflects the rating agency's expectation that parent company double leverage will increase and holding company cash flows will be reduced as a result of the company's written agreements with its bank regulators entered into on Nov. 21. The rating agency also noted that the bank continues to have access to the brokered deposit market, and has been able to successfully issue short-term private securitizations to replace some of its maturing issues.

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