Moody's cuts CMS outlook

Moody's Investors Service lowered its outlook on CMS Energy Corp. to stable from positive, affecting $15 billion of debt. The company's senior unsecured rating is Ba3.

Moody's said the action follows CMS' announcement that its energy marketing unit, CMS-Marketing, Services and Trading had engaged in "round trip" electricity trades with both Reliant Energy

Services, Inc. and Dynegy Power Marketing, Inc. involving the simultaneous purchases and sales at the same price in order to boost overall trading volumes.

As these trades had no margin associated with them, the trades did not impact on the company's earnings, cash flow, or financial condition.

While the contribution from CMS-MST to CMS Energy's operating net income is expected to be less than 15% in 2002, event risks associated with an ongoing Securities and Exchange Commission investigation and the increased risk associated with potential litigation make it highly improbable that an upgrade in the company's rating will occur in light of these current circumstances, Moody's said.

The rating agency said it intends to reevaluate the company's outlook when the current situation clarifies itself.

Moody's lowers Tesoro

Moody's Investors Service downgraded Tesoro Petroleum Corp. The outlook is stable. Ratings affected include Tesoro's $225 million secured bank revolver due December 2006, $250 million secured term loan A due December 2006 and $750 million secured term loan B due December 2007 to Ba3 from

Ba2 and its $450 million of senior subordinated notes, due 2012, $300 million 9% senior subordinated notes due 2008 and $215 million 9.625% senior subordinated notes due 2008 to B2 from B1.

Moody's said Tesoro has faced extremely difficult first quarter refining market conditions that have persisted into May due to high product imports and high inventories.

"The confluence of these weak market conditions with Tesoro's steep leverage upon closing the Golden Eagle acquisition could make targeted debt reduction challenging to achieve," Moody's said.

The stable outlook takes into account the cyclical nature of the refining business and currently weak market conditions, along with Tesoro's actions to adjust the terms of the Golden Eagle transaction, reduce capital spending and increase and accelerate targeted asset sales, the rating agency added.

Moody's said Tesoro has very high debt for its ratings and suffers from the historically high prices paid for acquisitions, resulting high leverage and capital requirements; sector margin cyclicality and seasonality; regional margin risk; and risk associated with Golden Eagle's operating forecast.

The company benefits from the favorable qualities, diversification and scale of its pro-forma business base with Golden Eagle and its potential for deleveraging over time.

S&P puts Young on watch

Standard & Poor's put Young Broadcasting Inc. on CreditWatch with negative implications.

Ratings affected include Young's $125 million 9% senior subordinated notes due 2006, $200 million 8.75% senior subordinated notes due 2007 and $500 million 10% senior subordinated notes due 2011, all at B-, its $250 million 8.5% senior notes due 2008 at B, and its $150 million senior secured revolving credit facility due 2005, $300 million senior secured term loan A due 2005 and $350 million senior secured term loan B due 2006, all at BB-.

Moody's rates Advantica notes Caa1, lowers others ratings

Moody's Investors Service assigned a Caa1 rating to Advantica Restaurant Group, Inc.s new $70.4 million 12.75% senior notes due 2007 offered in an exchange and downgraded the company's existing ratings including lowering its $441.5 million 11.25% senior notes due 2008 to Caa2 from B3 and its $200 million secured revolving credit facility to B2 from B1. The outlook is negative.

The action concludes a review for downgrade begun on Jan. 8, 2002 after Advantica announced the exchange offer.

The Caa1 rating on the new 2007 senior unsecured notes reflects their effective subordination to the bank facility, $39 million of capital leases and $6 million of other secured debt and structurally subordinated to $36 million of trade accounts payable at the operating level, Moody's said. But it added that in a default scenario the note indenture requires the trustee to completely repay the 2007 noteholders before any excess cash is distributed for benefit of the 2008 notes.

The Caa2 rating on the 2008 senior unsecured notes reflects their effective subordinated to significant amounts of senior debt, Moody's said. In a default, Moody's said it expects this class of debt would suffer a material loss.

Moody's said it has a negative outlook on Advantica because its ratings could be lowered again due to uncertainties in making a substantial recovery on the loan to FRD Acquisition Co., currently in bankruptcy, or resolving the pressing liquidity concerns.

A substantial loss on the $49 million loan to FRD or a reversal in the trends of modestly improving operating performance at Denny's would place downward pressure on the rating, the rating agency said. However, ratings could be upgraded once the FRD situation is resolved - particularly if the current plan to settle the FRD loan comes to pass - the bank loan is refinanced and Denny's performance leads to improved debt protection measures.

Moody's lowers Premier International outlook

Moody's Investors Service lowered its outlook on Premier International Foods plc to negative from stable. The £500 million of debt affected includes Premier's B3 senior unsecured rating and Premier Financing Ltd.'s B1 senior secured bank credit facility.

Moody's said the negative outlook reflects the risks associated with the announced debt-financed acquisition of some UK grocery businesses from Nestle for a total consideration of £135 million, according to market estimates.

Premier's credit measures will be temporarily somewhat strained by the increased bank debt although the acquired businesses are expected to generate significant cash-flows and also synergies amounting to at least £5 million a year, Moody's said.

The EBITDA margin of the acquired businesses is high at close to 20% but it could be challenging for Premier to improve further the operating performance of these mature businesses and to a certain extent fully achieve the expected synergies, the rating agency commented.

The negative outlook also reflects that the exposure of Premier to the very competitive private label market will remain significant despite this acquisition, Moody's added.

S&P cuts Northern Offshore

Standard & Poor's lowered Northern Offshore Ltd. including cutting its $340 million 10% notes due 2005 to D from CC.

Moody's lowers Song Networks

Moody's Investors Service downgraded Song Networks Holding AB. The outlook is negative. Ratings affected include Song's $150 million 13% senior notes due 2009 €100 million 13% senior notes due 2009, €150 million 11.875% senior notes due 2009 and €175 million 12.375% senior notes due 2008, all cut to Ca from Caa3

Moody's said the downgrade follows Song's announcement it is seeking to restructure its debt.

Moody's has also increased its expected loss severity to par bondholders given Song's considerable funding requirements and uncertain asset values.

Moody's recognises that Song has limited time to achieve a consensual agreement with bondholders before it exhausts limited cash resources which Moody's estimates are sufficient to fund the business until the end of 2002 or early 2003.

Moody's cuts Cellco on upgrade review

Moody's Investors Service put Cellco Finance NV, the financing vehicle of Turkcell Iletisim Hizmetleri AS, on review for possible upgrade. Ratings affected include Cellco's $400 million 12.75% senior notes due 2005 at Caa1 and $300 million 15.0% senior subordinated notes due 2005 at Caa2.

Moody's said the review is in response to Turkcell's improving liquidity position since ratings were lowered in July 2001, and its ongoing operating and financial progress, despite a weak economic climate and a challenging business environment.

Turkcell remains market leader in the Turkish mobile market and has demonstrated an ability to maintain operational flexibility in extremely difficult commercial circumstances, Moody's said.

At the end of the first quarter, Turkcell increased its subscriber base to 12.7 million from 12.2 million at the end of 2001 and has been able to demonstrate improved revenue and EBITDA generation to support ongoing debt interest and principal repayments, whilst adapting capital expenditures to meet operational requirements, Moody's said.

The company also continues to evidence improving liquidity, which included $290 million of cash at the end of March 2002, Moody's added.

S&P cuts Roma Restaurant

Standard & Poor's downgraded Roma Restaurant Holdings Inc. and Romacorp Inc. and put them on CreditWatch with negative implications. Ratings affected include Romacorp's $75 million 12% senior unsecured notes due 2006, cut to CC from B, and $25 million senior secured revolving credit facility bank loan due 2003, cut to CCC+ from B+.

S&P said its action follows Romacorp's announcement it will exchange $57 million of existing 12% senior unsecured notes due July 1, 2006 for up to $45 million of 12% senior secured notes due April 1, 2006; each $1,000 in principal will be exchanged for $790 in principal.

On completion of the transaction, S&P said it expects to lower the rating on the notes to D.

Under S&P criteria, a default includes an exchange offer in which the total value of securities and cash offered is materially less than the originally contracted amount. In addition, this offer is deemed coercive because the unexchanged old notes will be structurally subordinated to the new notes.

Fitch cuts BCE Teleglobe to D

Fitch Ratings downgraded BCE Teleglobe's senior unsecured notes to D from CCC-, affecting $1.3 billion of debt.

Fitch said its action follows Teleglobe's announcement it has applied to the Ontario Superior Court of Justice for protection from creditors.

S&P rates Parker Drilling notes B+

Standard & Poor's assigned a B+ rating to Parker Drilling Co.'s $235.6 million senior unsecured notes due 2009.

S&P cuts Mrs. Fields Cookies

Standard & Poor's downgraded Mrs. Fields Original Cookies Inc. and kept it on negative outlook. Ratings lowered include Mrs. Fields' $140 million 10.125% senior unsecured notes due 2004, cut to CCC+ from B.

S&P said its action is in response to Mrs. Fields' very limited liquidity position caused by declining operating performance.

The company has a $7 million interest payment due on June 1 and only $1.2 million in cash and $0.7 million available on a $9.9 million revolving credit facility as of March 30, 2002, S&P said.

Operating performance has been negatively affected by the general economic downturn, which was exacerbated by the events of Sept. 11, 2001, which led to a decrease in mall traffic, S&P noted. Most of Mrs. Fields' stores are located in shopping malls.

EBITDA fell 21.3% to $6.6 million in the first quarter of 2002 following a 19.6% decline to $23.6 million in all of 2001, S&P added. Comparable-store sales decreased 1.8% in the first quarter of 2002, following 3.6% decline in all of 2001. Moreover, performance at Wal-Mart locations has been well below expectations.

This resulted in weakened credit measures and increased leverage, with EBITDA coverage of interest at only 1.3 times and total debt to EBITDA at 7.0x for the 12 months ended March 30, 2001, S&P said.

S&P raises Port Arthur Finance outlook

Standard & Poor's raised its outlook on Port Arthur Finance Corp.'s $255 million 12.5% senior secured notes due 2009 to positive from stable. The notes are rated BB.

S&P said its action is in response to Port Arthur Finance's proposed restructuring of Port Arthur Coker Co. that will eliminate most of the transaction's project finance structure.

This will result in Port Arthur Coker becoming wholly owned direct or indirect subsidiaries of The Premcor Refining Group (BB-/positive) and will provide lenders with a senior unsecured guarantee by PRG of payment of the Port Arthur Coker notes.

Fitch rates PacifiCare notes B+

Fitch Ratings assigned a B+ to PacifiCare's proposed $200 million senior unsecured notes due 2009. The outlook is evolving.

PacifiCare is expected to use the full proceeds of the note issuance to pay down a portion of its bank term loan, which will be used to satisfy the conditional requirement in its agreement to extend the maturity of its existing facility by two years to January 3, 2005, Fitch said.

PacifiCare's current debt structure is viewed as unfavorable, Fitch said, since the company is potentially within 12 months of a major maturity.

Fitch added that it views the conditional extension as positive, believing it will provide the company time to explore a more permanent and favorable capital structure.

PacifiCare's ratings continue to reflect the large exposure to the troubled Medicare+Choice market and operational challenges associated with the company's movement away from capitated contracting and the shift towards shared-risk reimbursement arrangements, Fitch said. The ratings also consider the company's well-established competitive position in several major markets and positive steps taken over the past one to two years to strengthen the management team.

The evolving outlook reflects the uncertainty in meeting the conditions under the agreement, and the resulting risk that the company would be unable to refinance its indebtedness by the Jan. 2, 2003 maturity date, Fitch added.

If the company is successful in extending the maturity of its senior credit facility, Fitch expects PacifiCare's existing senior debt ratings will likely be upgraded one notch to BB and the senior unsecured rating upgraded one notch to BB-.

S&P downgrades Aurora Foods

Standard & Poor's downgraded Aurora Foods Inc. and put the company on CreditWatch with negative implications. It had previously had a positive outlook. Ratings affected include Aurora's $100 million 9.875% senior subordinated notes due 2007 and $200 million 8.75% senior subordinated notes due 2008, both lowered to CCC from CCC+, and its $225 million term loan due 2005 and $175 million revolving credit facility due 2005, both lowered to B- from B.

S&P said the action is in response to Aurora's weak near-term liquidity. The company is seeking alternative funding sources, including a possible equity infusion and the sale of certain assets.

The company has a total of $9.3 million of cash and availability under its revolving credit facility to meet debt service obligations for the remainder of the year, S&P noted

The company has been undergoing a major restructuring program and other cost cutting actions during the past fiscal year in an effort to strengthen its operating performance. Although implementation of these programs has been on schedule, in March of 2002 Aurora was required to amend its senior secured debt agreement to deal with expected financial covenant violations, S&P said. These arose from weaker then planned operating results as a result of increased expenses in the first quarter of 2002 and accounting adjustments.

S&P raises outlook on O'Sullivan Industries

Standard & Poor's raised its outlook on O'Sullivan Industries Holdings Inc. and its subsidiaries to stable from negative. In addition, the company's corporate credit and bank loan ratings of B+ and subordinated debt rating of B- were affirmed.

"Standard & Poor's expects that recent cost reductions that have yielded improved profitability will be sustainable, and will allow O'Sullivan Industries to maintain credit ratios appropriate for the ratings," S&P said.

Negative influences on the ratings include high leverage, the volatile nature of the industry and customer concentration. However, the company's solid market position supports the assigned ratings.

For the third quarter ending March 31, 2002, EBIDTA rose to $19.4 million, a 32% increase from the same period of the previous year. For the 12 months ended March 31, EBIDTA coverage was 2.2 times compared to 1.7 times for the same period in 2001. Total debt to EBIDTA was 4.2 times down from 5.0 times during the prior year.

S&P rates new Crescent preferreds B

Standard & Poor's assigned a B rating to Crescent Real Estate Equities Co.'s $75 million 9.5% series B cumulative redeemable preferred stock.

S&P puts Pegasus on watch

Standard & Poor's put Pegasus Media & Communications Inc. on CreditWatch with negative implications. Ratings affected include Pegasus Media's $83.2 million 12.5% notes due 2005 at CCC+, its $275 million senior secured bank loan due 2004 and $225 million senior secured term loan B due 2005, both at B+, Pegasus Communications Corp.'s $300 million 6.5% convertible preferred stock at CCC, and Pegasus Satellite Communications Inc.'s $115 million senior notes due 2005, $100 million 9.75% senior notes due 2006, $155 million 12.5% notes due 2007, $195 million 12.375% senior unsecured notes due 2006, $192.835 million 13.5% senior subordinated notes due 2007 and $175 million notes due 2010, all rated CCC+.

The action is based on the company's rising financial risk and operating challenges, S&P said. "The company continues to operate with heavy subscriber acquisition costs and high leverage, and recorded a net reduction in subscribers in the first quarter of 2002," S&P said. In addition, negative factors influencing the ratings include the high competitiveness in the pay TV market, the pressure on liquidity due to the scheduled payments of cash dividends on 12¾% debt-like preferred stock and the affect the potential merger of EchoStar and DirecTV may have on the company's future competitive position.

At March 31, Pegasus had about $40 million in cash and about $131 million in available borrowings under its revolver.

S&P upgrades Benton Oil

Standard & Poor's upgraded Benton Oil & Gas Co. including raising its corporate credit rating and $115 million 9.375% senior notes due 2007 to B from B-. The outlook is stable.

S&P said the action follows Benton's announced sale of its Artic Gas Co. subsidiary and the redemption of $108 million of unsecured notes.

The ratings revision reflects Benton's greatly improved financial profile following the Artic Gas sale and redemption of the 2003 notes, S&P said.

Until the completion of the $220 million sale of its Artic Gas subsidiary and redemption of the outstanding $108 million 11 5/8% senior unsecured notes due 2003, Benton had been struggling with imminent debt maturities and scant cash for reinvestment after accounting for its considerable financing expenses, S&P explained. After the repurchase of $20 million of its 9 3/8% senior unsecured notes due 2007, the company has approximately $90 million of debt outstanding and benefits from a $13 million reduction in the company's annual interest burden.

Benton's $50 million cash position following the transaction greatly enhances liquidity, although the company is not expected to maintain such relatively high balances. Benton is likely to redeploy its cash surplus in international growth initiatives, S&P said.

Moody's rates new LDM Technologies notes Caa2

Moody's Investors Service assigned a Caa2 rating to the proposed new senior notes to be issued in an exchange by LDM Technologies, Inc. and confirmed all existing ratings of the company. The outlook remains negative. Ratings confirmed include LDM's $110 million of 10.75% guaranteed senior subordinated notes due 2007 at Caa3.

The new notes will be senior to the old ones.

Moody's said its ratings reflect its ongoing concerns about LDM's weak credit protection measures and minimal effective liquidity after taking into account all existing covenant and borrowing base restrictions.

The company has itself reported that its operating strategy during the past year has been to survive, the rating agency noted.

The proposed exchange offer is driven by management's desire to counteract LDM's presently limited financial flexibility and take initial steps to improve the company's balance sheet; reduce leverage; and decrease ongoing cash interest requirements, Moody's said.

While LDM is not currently in violation of any bank financial covenants, the company has limited effective availability and runs the risk of having to restructure its balance sheet should automotive market conditions fail to meaningfully improve or additional program launch delays or other unexpected negative events occur, Moody's said.

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