Fitch cuts WestPoint Stevens

Fitch Ratings downgraded WestPoint Stevens' $1 billion of senior notes to D from CC.

Fitch said the action follows the company's announcement that it has filed under Chapter 11 of the U.S. Bankruptcy Code.

The rating reflects the expectation that noteholders will have a limited recovery, given that they are subordinated to a $667 million secured bank facility, a $165 million second lien facility, and a $160 million receivables securitization facility, Fitch said.

S&P rates Ubiquitel notes CC, upgrades loan

Standard & Poor's assigned a CC rating to UbiquiTel Operating Co.'s $48.2 million 14% senior discount notes due May 15, 2010 and its existing subordinated discount debt. The outlook is developing.

The senior discount notes are rated two notches lower than the corporate credit rating because the amount of total priority obligations to total assets exceeds 30%, S&P said.

S&P also upgraded UbiquiTel Operating's $280 million senior secured credit facility to CCC from CC following completion of the note exchange. The bank loan is rated the same as the corporate credit rating, because the company does not own its spectrum licenses, and under a stressed scenario simulated by S&P the likelihood of full recovery of principal is 50% or less.

The rating on UbiquiTel reflects its limited liquidity position, high debt leverage, and increased competitive pressures of the wireless industry, S&P said.

Although the exchange offer results in $147 million in net debt reduction, debt to EBITDA is not expected to decline to the 6x area until at least 2005, S&P said.

EBITDA turned minimally positive in the first quarter of 2003. EBITDA margin is impacted by the management fee paid to Sprint PCS, which is equal to 8% of service revenues. Revenue growth has been adversely affected by the slowdown in subscriber growth, high churn related to subordinated prime customers, and lower roaming yield under the Sprint PCS management agreement. In the first quarter of 2003, subscriber growth was about 3% compared to 12.9% in the first quarter of 2002 reflecting the reduction in sub-prime subscribers without deposit and the improvement in the quality of the subscriber base, together with, increased competition. Revenues declined about 3% compared to the fourth quarter of 2002, primarily due to the 42% drop in roaming rates with Sprint PCS from 10 cents to 5.8 cents per minute. Average revenue per user declined $3 to $54 due to seasonality and decline in overage charges attributable to large anytime minute rate plans. ARPU is anticipated to increase by $1 to $2 due to the higher take-up rates for the Sprint Vision third generation data services. About 13% of the company's subscriber base takes Sprint Vision.

The company has limited liquidity given its minimal EBITDA and the potential for violating the minimum revenue covenant in the fourth quarter of 2003 and additional covenants in 2004, S&P said.

S&P confirms Cone Mills, off watch

Standard & Poor's confirmed Cone Mills Corp. including its $100 million 8.125% debentures due 2005 at CCC+ and removed it from CreditWatch negative. The outlook is negative.

S&P said the confirmation reflects Cone Mills' announcement that it has amended agreements with its lenders to extend its existing credit facility and senior note obligations through March 15, 2004, and that it has indefinitely postponed its previously announced exchange offer for its existing $100 million notes due March 15, 2005.

As part of the amendment, Cone settled the Equity Appreciation Rights, which were contingent rights previously granted to the lenders, for $4.1 million.

Cone Mills' operating performance and credit measures in recent years have been hurt by the troublesome operating environment for U.S.-based textile companies and a difficult retail market for its customers, primarily apparel manufacturers and particularly Levi Strauss & Co. and VF Corp., S&P said. As a result, the company's volumes and operating margins declined across all operating segments.

The credit ratios are currently above average for the rating category, (the trailing 12 months EBITDA to interest as of March 30, 2003 was 3.1x; EBITDA to total debt was about 7x for the same period), S&P noted. However, the company faces significant refinancing risk as the credit facility and senior note obligations come due in March 2004. Furthermore, S&P said it expects the operating environment to remain difficult, in light of the weak economy and consumer confidence. The sluggish retail environment is expected to continue for the remainder of 2003, and this may have a dampening effect on Cone Mills' operating results for the fiscal year.

S&P cuts WestPoint Stevens

Standard & Poor's downgraded WestPoint Stevens Inc. including cutting its corporate credit to D from CCC and $475 million 7.875% senior notes due 2008 and $525 million 7.875% senior notes due 2005 to D from CC.

S&P said the actions are a result of the company's announcement that it and certain of its U.S. affiliates and subsidiaries, including WestPoint Stevens Inc. I, WestPoint Stevens Stores, Inc., J.P. Stevens & Co., and J.P. Stevens Enterprises, filed voluntary petitions under Chapter 11 of the U.S. bankruptcy code on June 2.

S&P cuts Penn Traffic

Standard & Poor's downgraded Penn Traffic Co. including cuttings its $100 million 11% senior unsecured notes due 2009 to D from C and $205 million revolving credit facility due 2005, $40 million term loan A due 2005 and $75 million term loan B due 2006 to D from CCC-.

S&P said the downgrade is based on the company's announcement that it filed voluntary petitions for reorganization under chapter 11 of the U.S. Bankruptcy Code.

S&P cuts National Equipment

Standard & Poor's downgraded National Equipment Services Inc. including cutting its $275 million 10% senior subordinated notes due 2004 to D from CC and $480 million revolving credit facility due 2003 and $70 million term A loan due 2003 to C from CCC.

S&P said the downgrade follows the company's failure to make $13.8 million in interest payments that were due on its subordinated notes on May 30.

Moody's rates Mission Resources loan B3

Moody's Investors Service assigned a B3 rating to Mission Resources' senior secured term loan and downgraded Mission's existing ratings including cutting its $127.4 million senior subordinated notes to Ca from Caa3. The outlook remains negative.

The B3 rating for the term loan reflects lenders' rights to effect control and liquidate the collateral (if necessary) under the current covenanted facility agreement, Moody's said. The downgrade reflects the implicit substantial asset coverage shortfall on total debt, weak production trends, and the weaker position of the bonds in the recapitalization of Mission.

The new term loan facility funded the repurchase of $97.6 million in principal amount of the senior subordinated notes. Mission paid $71.7 million, a 27% discount, reflecting the decline in asset value relative to debt.

Moody's noted that given Mission's current situation inherited from prior management, current management appears to be pursuing practices and policies in line with the company's remaining production base and financial challenges. Management's success will depend on commodity prices remaining high enough to provide sufficient internal cash flow for debt service and for reinvestment in its drilling program, which if productive, will increase the probability of building momentum for management's efforts to raise new equity.

Mission's liquidity position is currently weak, however, it should improve with strong commodity prices and the closing of the new working capital facility, Moody's said. The company has about $15 million of cash on hand and no alternative sources of liquidity at the moment, Mission will need its projected EBITDA of $30-$40 million for the remainder of the year to cover $18 million of interest expense and its remaining $26 million capital budget. Based on current commodity prices and significant hedges in place for 2003 production, this projected EBITDA is within reason.

S&P rates Qwest loan B-

Standard & Poor's assigned a B- rating to Qwest Corp.'s $1 billion senior unsecured term loan facility due 2007 and confirmed the other ratings of Qwest Corp., its parent, Qwest Communications International Inc. and related companies. The outlook is developing.

The ratings reflects the high degree of risk that continues to surround Qwest due to the ongoing U.S. Department of Justice criminal and SEC investigations, as well as the existence of various shareholder lawsuits, S&P said.

Near-term liquidity still remains a source of concern to, particularly if completion of the $4.3 billion second phase of Qwest's directories sale is delayed beyond 2003, S&P added.

Despite these risks, S&P said it recognizes that Qwest continues to hold a leading position in its local exchange markets in a 14 state region in the western U.S. with 17 million access lines.

While the refinancing of maturing Qwest Corp. debt with proceeds from the bank facility provides some improvement to Qwest's overall liquidity, substantial risks continue to face Qwest in the near term, S&P said. These include Qwest's delay in filing audited financial statements, which could be problematic to its ability to meet 2002 financial statement filing requirements under Qwest Services Corp.'s $2 billion bank loan. Failure to provide audited 2002 statements by July 15 would result in a technical default under the credit facility. The company's original deadline for filing these statements was May 15, but was extended by the bank group. It seems likely that the banks would extend another waiver, assuming the company continues to operate its local telephone business at current levels. Yet, this does represent another overhang issue.

Further, Qwest has yet to close on the sale of the second half of the directories sale. Until that transaction is completed, the company continues to face a potential liquidity constraint beyond 2003, even with the added liquidity from the Qwest Corp. refinancing - consolidated maturities through 2005 total about $5.5 billion after refinancing, versus a cash balance at March 31, 2003, of $2.4 billion and anticipated breakeven level of free cash flow after capital expenditures, S&P said.

The company may also face some potentially significant shortfalls in funding of its pensions and other post retirement benefits, S&P added. For the last reported period, 2001, the company had a gross pension and OPEB liability of about $14 billion, versus total pension and OPEB-related assets of $13 billion. However, given weakness in the stock market in the past 12 months - 18 months, the value of these assets has likely been adversely affected.

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