Moody's puts Pennzoil-Quaker State on upgrade review

Moody's Investors Service put Pennzoil-Quaker State Co. on review for possible upgrade following the announcement it will be acquired by Shell Oil Co. (rated Aa1). A total of $1.1 billion of debt is affected including Pennzoil's 9.40% notes due 2002, 6.625% notes due 2005, 6.75% notes due 2009 and 7.375% notes due 2029, all rated Ba2, and its $250 million unsecured notes due 2008 rated Ba3.

Moody's noted Shell Oil has announced its intention to assume Pennzoil-Quaker State's outstanding debt and added that its review will focus on the specific terms of the assumption of debt.

S&P puts Pennzoil-Quaker State on positive watch

Standard & Poor's put Pennzoil-Quaker State Co.'s BB+ senior secured and senior unsecured ratings on CreditWatch with positive implications following the announcement Shell Oil Co. will acquire Pennzoil. S&P also confirmed Shell Oil and the Royal Dutch/Shell Group of Cos. at AAA.

S&P said it will examine Pennzoil's inclusion in Shell to determine whether its existing debt will be structurally subordinated.

Ratings affected include Pennzoil's $100 million 6.625% notes due 2005, $200 million 6.75% senior notes due 2009, $400 million 7.375% senior debentures due 2029, $150 million 8.65% notes due 2002 and $350 million revolving credit facility due 2004, all rated BB+, and its $250 million 10% senior notes due 2008 rated BB-.

Fitch puts Pennzoil on positive watch

Fitch Ratings put Pennzoil-Quaker State Co.'s rated senior secured notes and secured bank revolver rated BB+ and its senior unsecured notes rated BB- on Rating Watch Positive following the announcement that Shell Oil Co., a wholly-owned member of the Royal Dutch/Shell Group, will acquire Pennzoil. Fitch rates Royal Dutch/Shell Group's long-term debt AAA and its commercial paper F1+ with a stable outlook.

Moody's downgrades Marconi

Moody's Investors Service downgraded Marconi plc affecting $3.1 billion of debt. Ratings affected include Marconi's €1 billion 6.375% guaranteed eurobonds due 2010, €500 million 5.625% guaranteed eurobonds due 2010, $900 million 7.75% guaranteed bonds due 2010 and $900 million 8.375% guaranteed bonds due 2030, all cut to Ca from B2.

Moody's said the negative outlook reflects uncertainty over the timing of a possible restructuring of Marconi's obligations.

Moody's said it lowered Marconi because of the company's extremely weak liquidity profile, uncertainty regarding its funding horizon from existing cash balances and expectations that trading difficulties will continue to hamper its ability to strengthen operational cash flow.

Moody's said it has heightened concern because of Marconi's announcement of prolonged market weakness in its core business and that it had agreed to cancel the undrawn commitments under its two syndicated loan facilities and to place the £2.2 billion drawn portion on demand.

Moody's said it "increasingly believes" Marconi will likely need to restructure its debt obligations in order to maintain the viability of the business.

Should a restructuring occur, there may not be enough tangible assets for bondholders to receive meaningful recovery, Moody's added. Marconi currently has over £1 billion of cash.

Fitch rates new Boyd notes B

Fitch Ratings assigned a B rating to Boyd Gaming's planned offering of $200 million senior subordinated notes due 2012 and confirmed the company's existing ratings including its $612 million senior secured bank credit facility due 2003 at BB and $200 million 9.25% senior unsecured notes due 2003 and $200 million 9.25% senior unsecured notes due 2009 at BB-. The outlook is negative.

Fitch said Boyd has substantial debt maturing in 2003 and the new notes addresses in part these pending maturities.

Fitch said its ratings are based on Boyd's diversified property portfolio, strong customer focus, favorable earnings mix and growing cash flow visibility.

Approximately 60% of Boyd's revenues are generated from slot play, which is generally a more consistent source of earnings, the rating agency said.

Due to the events of Sept. 11 and the slowing economy, drive-to properties have had a relatively strong performance compared to the Las Vegas Strip, Fitch continued. More than 60% of property EBITDA during 2001 was generated by the Blue Chip, Par-A-Dice and Treasure Chest casinos, which are all drive-to properties, while less than 10% of EBITDA was generated from Boyd's Las Vegas Strip property.

However Fitch said it has concerns about Boyd's relatively high debt levels in relation to cash flows. Total debt of $1.146 billion was 5.1 times total company EBITDA at Dec. 31, 2001.

However, following the $37 million equity contribution to The Borgata project, which was funded during the first quarter 2002, Fitch said it expects debt reduction to be a priority for the remainder of the year.

Moody's rates American Seafood's loan Ba3; notes B3

Moody's Investors Service assigned a Ba3 rating with a stable outlook to American Seafoods Group's $75 million senior secured revolver, due in 2007, $90 million senior secured term A, due in 2007 and $225 million senior secured term B, due in 2009. A rating of B3 was assigned to the company's $175 million senior subordinated notes due 2010. The company was also assigned a B1 senior implied rating and a B2 unsecured issuer rating.

Proceeds from the proposed credit facility and notes will be used to fund an equity distribution and to refinance all outstanding debt, including approximately $200 million of borrowings under the current secured facility and $95 million of 10% subordinated seller notes, Moody's said.

"The ratings are limited by high leverage and a weak balance sheet, resulting from the substantial cash distribution to equity holders from the proceeds of the recapitalization," Moody's explained. "The ratings also take into account reliance on market values for ASG's fishing rights, quota share allocations and licenses to support debt."

S&P puts Northern Offshore on negative watch

Standard & Poor's put Northern Offshore Ltd. on CreditWatch with negative implications. Ratings affected include its $340 million 10% notes due 2005 rated B-.

Fitch downgrades Metrogas

Fitch Ratings said it lowered MetroGas SA, cutting its foreign currency debt rating to C from CC and its local currency debt rating to C from CCC+. The Rating Watch remains Negative. Fitch noted that a C rating indicates imminent default.

Fitch said it took the action after MetroGas said on March 25 it is suspending principal and interest payments on all its debt. MetroGas's decision in turn follows the alteration of its concession agreement by the Argentine Public Emergency Law #25.561, which includes the suspension of tariff adjustments and the tariff's pesofication.

"These changes combined with the devaluation impact, have materially affected the financial condition of MetroGas, given the mismatch between its income in pesos and its debt in hard currency, at an exchange rate of around Arg$4:US$1," Fitch commented.

Fitch said MetroGas' scheduled payments in 2002 are $5 million of interest on April 1, $1.6 million of interest on May 7 and $94.4 million of principal in September.

Moody's rates new Biovail notes B2

Moody's Investors Service assigned a B2 rating to Biovail Corp.'s new $400 million senior subordinated notes due 2010 and confirmed the company's existing ratings. The outlook is positive.

Moody's said its ratings reflect rapid changes at fast growing Biovail, expectations of more significant acquisitions, concerns about Biovail's ability to sustain the continued sales, margins and cash flows of its branded and generic products that face on-going competition (although its current margins are good), substantial intangibles expected to exceed its book equity due to the write-off upon purchase of the value of unapproved technology and products, negative retained earnings, periodic stock buybacks, and a pending investigation by the FTC related to Biovail's agreement with Elan Corp. plc regarding transactions related to Adalat CC.

The ratings also continue to reflect product concentration in Cardizem and Tiazac cardiovascular drug products, Biovail's reliance on the development and acquisition of new products for continued growth and the limited proprietary protection of its branded and generic drugs relative to patented products.

However Biovail also benefits from the overall technological barrier of controlled release products that helps limit competition, the company's sizable cash flow from existing products, good current margins, its product pipeline, manufacturing and distribution capabilities and its low tax rate, Moody's added.

Moody's rates Banco Itau eurobond Ba2

Moody's Investors Service assigned a Ba2 rating to Banco Itaú SA (Cayman Islands)'s $100 million eurobond maturing April 2005. The outlook is positive.

Moody's said the Ba2 rating incorporates the change in Moody's long-standing approach to rating the foreign currency bonds of debt issuers, which now permits the securities of certain qualified issuers to pierce their respective country ceilings.

S&P upgrades Express Scripts to investment grade

Standard & Poor's raised Express Scripts Inc. to investment grade. Ratings covered by the action include Express Scripts' $250 million 9.625% notes due 2009, $300 million revolver due 2005, $285 million term loan A due 2005 and $350 million term loan B due 2007, all raised to BBB- from BB+. The outlook is stable.

S&P said the investment-grade ratings reflect Express Scripts' strong position in the expanding pharmaceutical benefit management (PBM) industry, continued solid operating performance and growing cash flows, offset by the intense competition in the industry.

"The increasing focus in the U.S. on controlling drug costs has increased the importance of the PBM industry, as it already processes over half of the drug spend in the U.S.," S&P commented.

These companies should also benefit from the growing utilization of drugs, particularly higher margin generic versions, and the increased sell-through of value added, higher-margin services such as pharmaceutical mail order processing and specialty pharmaceutical operations, S&P said.

However, the industry remains highly competitive and while client turnover remains low there is an increased level of price competition on renewed service contracts, S&P continued.

S&P rates L-3 shelf

Standard & Poor's assigned preliminary ratings to L-3 Communications Corp.'s $1 billion shelf registration of BB for the senior debt and B+ for the subordinated debt and confirmed L-3's other ratings. The outlook is stable.

S&P said L-3 has a slightly below-average business risk profile and somewhat elevated debt levels.

However it also benefits from an increasingly diverse program base and efficient operations, S&P added.

"Acquisitions are very important for revenue growth, and the balance sheet has become leveraged because of debt-financed transactions. However, management has a good record of restoring financial flexibility by issuing equity," the rating agency continued.

L-3's exposure to a challenging competitive environment is mitigated by some well-supported programs with a high percentage of sole-source contracts, S&P said.

S&P cuts Tricom outlook

Standard & Poor's lowered its outlook on Tricom SA to stable. The company's corporate credit rating is B+.

S&P aid the action reflects Tricom's tighter credit protection measures resulting from its high debt and weaker operating ratios.

In addition, 40% of the company's $498 million in debt is payable in the short term, which poses refinancing risk in existing market conditions, S&P said.

S&P said it expects the improvement in Tricom's credit profile over the next few years will be much slower than previously expected, even considering the scale-down of Tricom's planned iDEN technology-based expansion strategy into Central America.

Moody's rates new Boyd notes B1

Moody's Investors Service assigned a B1 rating to Boyd Gaming Corp.'s new $200 million of senior subordinated notes due 2012. The outlook remains negative.

Moody's said the ratings reflect Boyd's high financial leverage, responsibility related to the successful completion and introduction of the Borgata, and significant near-term scheduled debt maturities.

Although proceeds from the new note offering will be used to reduce term and revolver debt, a significant amount of debt scheduled to mature in 2003 will still be outstanding, the rating agency said.

While Boyd does not expect that further refinancing of its debt or the completion of the Borgata will be a problem, the financial pressure caused by less than favorable refinancing terms and/or delays or cost overruns related to the Borgata could be severe, Moody's cautioned.

However Moody's noted that management has stated its intention to reduce leverage and the company benefits from strong operating performance, the successful opening of Delta Downs and geographic diversity and regional riverboat focus.

The completion of capital investment programs in several markets should limit the amount of development related capital expenditures required during fiscal year 2002, Moody's added.

S&P rates International Wire revolver BB-

Standard & Poor's assigned a BB- rating to International Wire Group, Inc.'s $70 million senior secured bank revolving credit facility due 2005.

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