Moody's cuts Tyco to junk

Moody's Investors Service downgraded Tyco International Group SA to junk, cutting its long-term ratings to Ba2 from Baa3 and its short-term ratings to Not-Prime from Prime-3. A total of $25.5 billion of debt was affected. CIT Group's ratings were affirmed but the outlook was lowered to negative.

Tyco's ratings remain on review for possible further downgrade.

Moody's said it lowered Tyco because of heightened concern about the potential implications for Tyco from widening investigations, both internally and externally, including the recent firing of Tyco's chief counsel.

Possible further management changes, emerging from adverse developments of corporate governance issues, could divert management focus from the core business and hinder the company's ability to restore confidence of its customers, suppliers and investors, Moody's added.

Moody's noted that Tyco is expected to proceed with the planned IPO of its CIT subsidiary, which should bring needed cash to begin debt reduction.

"However, even with the anticipated debt reduction from the CIT transaction, the potential risks attendant to the widening array of management and corporate governance issues at Tyco render the company's credit profile inconsistent with an investment grade rating," Moody's said.

Moody's noted its rating actions trip triggers that could require Tyco International to repurchase its ¥30 billion ($223 million) 3.5% notes due 2030 and to settle an interest rate hedge that would result in Tyco receiving approximately $160 million.

S&P puts JL French on positive watch

Standard & Poor's put J.L. French Automotive Castings on CreditWatch with positive implications. Ratings affected include J.L. French's $175 million 11.5% senior subordinated notes due 2009 at CCC+ and its $75 million revolving credit facility bank loan due 2005, $105 million term A loan due 2005 and $190 million term B loan due 2006, all rated B.

S&P said the action follows J.L. French's filing of an S-1 registration with the SEC to issue

$115 million of class A common stock. Proceeds will be used to repay senior bank debt.

Should the equity offering meaningfully improve the company's financial profile, credit protection measures, and liquidity, modest upside ratings potential exists, S&P said.

Moody's rates Metaldyne's notes B3, loan B1

Moody's Investors Service rated Metaldyne Corp.'s $300 million proposed new guaranteed senior subordinated notes due June 2012 at B3 and the new $350 million guaranteed senior secured term loan D due December 2009 of subsidiary Metaldyne LLC at B1. All other company ratings remain unchanged and the outlook remains positive.

The B1 rating on the guaranteed senior secured bank credit facilities continues to reflect the benefits and limitations of the collateral and guarantee packages, Moody's said. Security for the loan is a first priority pledge of substantially all assets of Metaldyne LLC and each of its domestic subsidiaries other than the receivables subsidiary.

The B3 rating on the notes reflects their contractual subordination to all of Metaldyne's and its guarantors' existing and future senior debt and effective subordination to all their secured debt, including any borrowings under credit facility, Moody's said.

Proceeds will be used to refinance existing debt, enhancing the company's capital structure by extending maturities and lowering pricing, Moody's said. Currently, the company has $235 million outstanding under its term A, $250 million outstanding under its term B and $97 million outstanding under its term C. All three of these will be prepaid in full with proceeds from the notes and the loan. In addition, the company has a $250 million revolving line of credit.

S&P withdraws Anchor Glass ratings

Standard & Poor's said it withdrew its CC senior secured debt rating on Anchor Glass Container Corp. and the D corporate credit and senior unsecured debt ratings.

S&P said Anchor Glass had not provided adequate information to maintain ongoing surveillance.

S&P rates Burns Philp notes B

Standard & Poor's assigned a B rating to Burns Philp Capital Pty Ltd.'s new $450 million senior subordinated notes due 2012. The outlook is negative.

Moody's rates Encore notes B2

Moody's Investors Service assigned a B2 rating to Encore Acquisition Co.'s proposed $150 million of 10-year senior subordinated notes.

Proceeds will be used to repay bank debt and pro-forma at the closing Encore will have roughly $200 million of undrawn bank borrowing capacity, Moody's said.

The ratings are supported by Encore's execution of measured operating, funding, and acquisition/exploitation strategies over the cycle, building a concentrated, low leverage, long-lived, competitive total cost, exploration and production firm of modest scale, Moody's said.

It has so far been able to buy mature properties at competitive costs relative to their return and production potential, the rating agency noted.

Debt support is currently strong, with conservative debt on proven developed reserves, a long reserve life on PD reserves, and solid unit cash flow cover of unit reserve replacement costs and of growth capital spending, Moody's said.

Negatives are Encore's modest scale, potential acquisition risk and relatively low level of basin diversification, Moody's added. Roughly 79% of its proven reserve volumes and a high percentage of its prospect inventory are situated along the large 120-mile long Cedar Creek Anticline structure in the Williston Basin of Montana. Roughly 41% of reserves are in the Pennel/Coral Creek unit of the Anticline.

Moody's rates Mariner B3

Moody's Investors Service assigned a B3 rating to Mariner Health Care, Inc.'s planned $150 million senior subordinated notes due 2010 and confirmed its $85 million senior secured revolving bank credit facility due 2007 and $212 million senior secured term loan B due 2008 at Ba3. The outlook remains stable.

The ratings broadly reflect Mariner's high leverage and modest interest coverage, the significant increase in costs for professional and general liability insurance, which is mostly attributable to the company's operations in Texas and Florida, a difficult labor environment and the challenges of operating in a highly competitive and regulated industry, Moody's said.

The ratings also consider the potential September 30, 2002 sunset of certain Medicare add-on payments and the resultant impact this could have on the company's performance.

Positive factors supporting the ratings include the company's stabilizing operating trends, favorable demographic trends and an anticipated improvement in the company's credit profile post bankruptcy, the rating agency added.

The stable outlook anticipates that Mariner's continued focus on improving operations will lead to stable operating trends, with modest revenue and EBITDA growth supported by small increases in payor rates (Medicare, Medicaid and private) which will be somewhat offset by increasing labor costs, Moody's said.

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