Moody's downgrades Calpine

Moody's Investors Service downgraded Calpine Corp., ending a review begun on Dec. 14, 2001. The outlook is negative. The action affects $12.4 billion of debt including Calpine's senior unsecured notes and senior unsecured convertibles notes, cut to B1 from Ba1, Calpine Canada Energy Finance ULC's senior unsecured notes, cut to B1 from Ba1, Calpine Canada Energy Finance II ULC's senior unsecured notes, cut to B1 from Ba1, passthrough certificates of Tiverton Power Associates LP and Rumford Power Associates LP and South Point Energy Center, LLC, Broad River Energy LLC and RockGen Energy LLC, cut to B1 from Ba1, Calpine's trust preferred securities, cut to B2 from Ba2. Moody's rated Calpine's new $2 billion senior secured bank facilities at Ba3.

Moody's said the downgrade reflects Calpine's high leverage, limited financial flexibility, substantial ongoing capital expenditure requirements to complete its reduced build out program and concerns about the company's liquidity profile.

The rating agency said it notched the senior unsecured notes senior implied rating of Ba3 to reflect the increasing proportion of secured debt as well as the substantial structural subordination to liabilities at subsidiaries. The $8 billion of senior unsecured notes are structurally subordinated to project financings and leases that total about $6 billion, and are effectively subordinated to usage under the $2 billion senior secured facilities.

Moody's said that Calpine's 10-K filed on March 29 shows net cash provided by operations (after working capital changes) totaled $557 million or about 3.5% of debt, including off-balance sheet financings and convertible preferred stock.

Calpine's debt is expected to grow over the course of the coming year in connection with the continued development of committed projects, the rating agency added. Although Calpine's total megawatt sales will increase this year as the company completes additional plants, net cash provided by operating activities is expected to remain very low.

Moody's said it assigned a negative outlook to indicate that ratings could be further downgraded should Calpine's liquidity position further deteriorate or its cash flow fall below expectations.

"Calpine's near-term liquidity continues to be tight even with $2 billion of senior secured facilities," Moody's said.

Moody's puts Quest and Unilab on review for upgrade

Moody's Investors Service put Quest Diagnostics Inc. and Unilab Corp. on review for possible upgrade in response to Tuesday's announcement that Quest will acquire Unilab.

Quest ratings on review for upgrade include: $325 million revolver due 2006 rated Ba1, $275 million 6.75% senior notes due 2006 rated Ba1, $275 million 7.5% senior notes due 2011 rated Ba1, $225 million contingent convertible debentures due 2021 rated Ba1, the senior unsecured shelf rating of Ba1, the subordinate shelf rating of Ba2, the preferred shelf rating of Ba3, the senior implied rating of Ba1 and the senior unsecured issuer rating of Ba1.

Unilab ratings on review for upgrade include: $185 million bank credit facilities due 2006 rated B1, $155 million 12.75% senior subordinated notes due 2009 rated B3, the senior implied rating of B1 and the senior unsecured issuer rating of B2.

"The review for possible upgrade reflects Quest's increasing scale, positive operating trends and consistently adequate cash flow, and follows the announcement earlier today that Quest has signed a definitive agreement to acquire Unilab Corporation," Moody's said. "Specifically, the Unilab acquisition will strengthen Quest's leading position on the west coast and will further enhance its geographic coverage and service offerings."

Moody's is planning to assess the acquisition benefits, the company's forward strategy, the increase in leverage and the integration plans in order to complete its review for possible upgrade. Also being looked at are the company's capital structure and on-going reliance on short-term debt (a $550 million bridge loan) for the acquisition and Quest's present revolver and financing vehicles, Moody's concluded.

Moody's downgrades General Chemical Industrial Products

Moody's Investors Service downgraded General Chemical Industrial Products Inc.'s and removed the ratings from review for possible downgrade. The company's $70 million senior secured revolver due 2004 was lowered to B3 from B1 and $100 million senior subordinated notes due 2009 were lowered to Caa2 from B3. Other downgrades include the senior implied rating to B3 from B1 and the issuer rating to Caa1 from B2. The outlook remains negative.

Moody's explained that the rating downgrades and negative outlook are a result of the company's high leverage and weak earnings and cash flow outlook. Other factors that affected the ratings include, reduced demand for soda ash, global overcapacity of the product, the uncertain timing of a recovery of soda ash prices and demand, the adverse impact of a mild winter upon the demand for its calcium chloride products that are used for road maintenance and ice removal, the volatility of natural gas costs and negative book equity, Moody's said. There is also hesitancy by lenders to support the company, according to Moody's, due to potential violations of financial covenants in regard to the revolving credit facility.

On the plus side, the company does currently have adequate liquidity, is one of the top five soda ash producers globally, has a leading market position in calcium chloride in North America, has high quality natural soda ash and low cost, has been taking cost saving measures and participates in the ANSAC export cooperative of U.S. producers, according to the release.

Fitch Tenneco's debt ratings; negative outlook

Fitch Ratings affirmed Tenneco Automotive Inc.'s B+ senior secured debt rating and B- subordinated debt rating on Tuesday. The outlook remains negative.

"While some nascent signs of a rebound in the general North American economy are evident with attendant implications for vehicle build rates, Tenneco remains exposed to continuing pricing pressures from its OE customers and ongoing softness in after market demand," Fitch explained. "Fitch expects that 2002 will be another challenging year with top line and margin pressures limiting much net free cash flow for any meaningful debt reduction."

As of Dec. 31, 2001, the company had a balance sheet debt totaling $1.515 billion, which is $12 million less than total debt from the previous year. Tenneco recently reached agreements with its lenders on relaxed financial covenants through 2004 on its $899 million term loan and $500 million revolver, the Fitch release said. As part if the credit facility amendment, the revolver portion of the loan was reduced to $450 million. There is approximately $68 million drawn under the revolver and $61 million in letters of credit outstanding. A $500 million senior subordinated debt due in 2009 combined with the credit facility constitutes the majority of the company's debt, the release added.

S&P rates Russell's loan BB+; notes BB

Standard and Poor's assigned ratings of BB+ to Russell Corp.'s proposed $375 million senior secured bank loan and BB to the company's proposed $200 million senior unsecured notes. Russell also received a corporate credit rating of BB+.

The proposed bank loan consists of a five-year $325 million revolver and a five-year $50 million term. "The facility is secured by substantially all of the company's domestic assets, which provides a strong measure of protection to lenders," the release said.

The senior unsecured notes, however, received a slightly lower rating than the corporate credit rating "due to the material amount of secured debt in the capital structure, which ranks senior to the notes," the release explained.

According to the S&P release, the ratings reflect the competitiveness and volatility in the apparel industry, which is subject to changing consumer preferences and a consolidating retailer base.

However Russell benefits from a well-known brand name, a strong market position and a moderate financial profile.

S&P estimated total debt to EBITDA and EBITDA coverage of interest expense at about 2.6 times and 4.2 times respectively for 2001.

Moody's rates new Pliant notes Caa1, raises outlook

Moody's Investors Service assigned a Caa1 rating to Pliant Corp.'s planned offering of $100 million senior subordinated notes, confirmed its existing ratings including its $220 million 13% senior subordinated notes due 2010 at Caa1 and its $529 million pro-forma secured facility at B2, and raised the outlook to stable from negative.

Moody's said it raised Pliant's outlook because of "some improvement" in the company's financial condition since Moody's last ratings action in January 2001. The rating agency said the outlook also incorporates its expectation that Pliant will make modestly sized acquisitions throughout the intermediate term.

Stabilization of the ratings would be jeopardized by tightening of credit statistics (notably EBITA coverage of interest expense and material leverage creep) and/or any significant use of cash in excess of Moody's expectations revised for the Decora Industries, Inc. acquisition, the rating agency said.

Moody's added that Pliant's ratings reflect its weak financial condition resulting from significant financial leverage and moderate profitability.

Credit statistics remain weak, albeit improving, as evident in modest coverage of interest expense, deficit free cash flow and deficit equity, Moody's added.

S&P downgrades Syratech, on watch

Standard & Poor's downgraded Syratech Corp. and put the company on CreditWatch with negative implications. Ratings affected include Syratech's $130 million senior unsecured revolving credit facility bank due 2002, lowered to B- from B, and its $165 million 11% senior unsecured notes due 2007, lowered to CCC from CCC+.

S&P said the action reflects its heightened concern about Syratech's weaker-than-expected operating performance.

Syratech reported financial performance and cash flows for the year ended Dec. 31, 2001 significantly below S&P's expectations, the rating agency said.

In addition, although Syratech recently extended its bank revolving credit facility by one year, S&P said it is concerned whether Syratech will have adequate financial flexibility, given the uncertainty and timing of operating performance improvements.

S&P rates Kinetek bank facility BB-, downgrades notes

Standard & Poor's assigned a BB- rating to Kinetek Industries Inc.'s new $50 million secured revolving bank credit facility due 2005 and downgraded Kinetek Inc.'s $270 million senior unsecured notes due 2006. The long-term corporate credit rating was affirmed.

S&P said it downgraded Kinetek's senior unsecured notes because of increased structural subordination following completion of the credit facility.

Kinetek's corporate credit rating reflects its solid positions in small niche markets and its very aggressive financial profile, S&P added.

Although the specialty electric motor manufacturer's end markets are cyclical, sufficient product line and customer diversity, along with a competitive cost structure and modest capital intensity, enable the firm to enjoy consistently good operating margins, S&P said.

However many key end markets, including the subfractional refrigeration and appliance motor market, and the bottle and vending can motor market, have declined significantly during the past few quarters, S&P continued. As a result, sales declined more than 9% in 2001. Industry fundamentals are not expected to improve in the next couple of quarters.

S&P confirms Continental, off watch

Standard & Poor's confirmed Continental Airlines Inc.'s ratings and removed them from CreditWatch with negative implications. The outlook is negative. Ratings affected include Continental's corporate credit rating at BB-, its senior notes at B, its convertible preferred TIDES at B-, its convertible notes at B and various passthroughs.

S&P said Continental's earnings and cash flow are expected to recover steadily through 2002 but it warned that a renewal of terrorist attacks or recession would pose a serious setback for U.S. airlines and would likely prompt a downgrade of Continental.

The rating agency added that its assessment of Continental reflects continued risks from the adverse airline industry environment, a heavy burden of debt and leases and still limited financial flexibility. These negatives outweigh the company's better-than-average operating performance and the advantage of its modern fleet of aircraft.

S&P noted Continental's 2001 net loss of $266 million before special items was smaller than those of other major airlines except Southwest Airlines Co. and that it ended the year with $1.1 billion of cash.

Management is targeting year-end cash of about $1.5 billion as a result of forecast positive operating cash flow starting in the second quarter of 2002 and the fact that remaining 2002 aircraft deliveries have financing arranged, S&P added.

As a result, S&P said Continental's financial flexibility, while still constrained, has improved materially since mid-September 2001.

S&P cuts Flag to D

Standard & Poor's downgraded FLAG Telecom Holdings Ltd. Ratings affected include its €300 million 11.625% notes due 2010 and $300 million 11.625% senior notes due 2010, both cut to D from CCC-, and FLAG Ltd.'s $430 million 8.25% notes due 2010, cut to C from CCC+.

S&P said its action follows FLAG Telecom's failure to make the March 30 interest payments on its senior unsecured notes.

S&P said Flag Ltd. remains on CreditWatch with negative implications and its ratings will be cut to D when it misses the coupon payment on its notes or if a restructuring or bankruptcy filing occurs.

S&P confirms Quest, puts Unilab on positive watch

Standard & Poor's confirmed Quest Diagnostics Inc.'s corporate credit and senior unsecured debt ratings and put Unilab Corp. on CreditWatch with positive implications. Ratings affected include Quest's corporate credit rating at BBB- with a positive outlook and Unilab's corporate credit at BB-.

S&P said its action follows the announcement that Quest will acquire Unilab for $1.1 billion, the majority of which will be paid with equity.

S&P said its ratings continue to reflect Quest's leading position in the U.S. market for diagnostic testing services and its moderate debt burden, somewhat offset by its aggressive growth strategy.

Because Quest bought American Medical Laboratories Inc. in February for about $500 million, S&P said it has concerns about integration because of the timescale, even though both transactions greatly expand Quest's operations with minimal overlap of facilities and contracts.

S&P cuts Williams to D

Standard & Poor's downgraded Williams Communications Group Inc. to D including cutting its $1.5 billion 10.875% senior notes due 2009 and its $250 million redeemable cumulative convertible preferred stock to D from C.

S&P said its action follows Williams Communications' decision to defer payment of $91 million in interest due on April 1 on $1.7 billion of debt and suspend quarterly dividend payment on its preferred stock.

S&P rates new Pliant notes B-

Standard & Poor's assigned a B- rating to Pliant Corp.'s new offering of $100 million 13% senior subordinated notes due 2010 and confirmed the company's existing ratings. The outlook is stable.

S&P said the ratings reflect Pliant's average business position, offset by very aggressive debt leverage and limited financial flexibility.

Pliant benefits from a diverse product mix, leading niche market shares, well established customer relationships and a solid technology base, S&P said.

Although Pliant has not generated free cash flows in the past two years, improved working capital management and lower capital spending levels should aid modest free cash flow generation in the future, S&P said.

In the intermediate term, funds from operations to total debt (adjusted for capitalized operating leases) is expected to improve to the 10%-15% range, from the high-single digit area, the rating agency added.

Fitch rates new Fleming notes B+

Fitch Ratings assigned a B+ rating to Fleming Co.'s pending offering of $260 million senior subordinated notes due 2012 and confirmed and removed from Rating Watch Negative the company's existing ratings including its BB+ rated secured bank credit facilities, BB rated senior unsecured notes and B+ rated senior subordinated notes. The outlook is negative.

Fitch said the negative outlook reflects uncertainty as to Kmart's sales levels and the ultimate nature of Fleming's agreement with Kmart, as Fleming's contract with Kmart has not yet been confirmed in the bankruptcy process. Also of concern is the possibility for additional Kmart store closures, beyond those already announced.

While the bankruptcy filing of Kmart, which represented nearly 20% of 2001 revenues, has negatively impacted Fleming's anticipated revenue growth, its revenues from Kmart are expected to increase in 2002 to about $3.6 billion from $3.1 billion in 2001, Fitch said.

This revenue growth is expected as 2002 will be the first full year working with Kmart, but also factors in lost sales from the 284 Kmart stores to be closed as well as more conservatively plans sales to the remaining Kmart stores, the rating agency added.

The company's wholesale distribution business continues to serves nearly 12,000 supermarkets, supercenters, discount and convenience stores throughout all 50 states from its network of 35 distribution centers, Fitch noted, adding that due to the low-margin nature of the Kmart relationship, the impact on Fleming's profitability from the Kmart bankruptcy is modest.

Moody's cuts KPNQwest

Moody's Investors Service downgraded KPNQwest NV and assigned a B3 rating to its €525 million senior secured credit facility maturing 2006 and a Caa3 rating to its €210 million senior unsecured 10% convertible notes due 2012. The outlook is negative. Ratings lowered include KPNQwest's €340 million 7.125% eurobonds due 2009, €500 million 8.875% eurobonds due 2008 and $450 million 8.125% global bonds due 2009, all cut to Caa3 from B3.

Moody's said it cut KPNQwest's ratings because of the company's recent downward revision of its financial guidance. Moody's said it has heightened concerns about the difficult operating environment which currently characterizes the retail and wholesale telecom markets and said they may adversely impact KPNQwest's ability to grow operating cash flows in line with Moody's previous expectations and to a level that provides adequate bank facility covenant headroom.

KPNQwest's core retail and whole telecom markets have continued to show weakness in the early part of 2002 and to a level that Moody's believes places extreme pressure on management to achieve operating cash flow targets to support its sizable debt service requirements, the rating agency said.

Moody's rates new Dura notes B1

Moody's Investors Service assigned a B1 rating to Dura Operating Corp.'s planned $250 million senior notes and confirmed the company's existing ratings. The outlook is stable. Ratings confirmed include Dura's $300 million 9% guaranteed senior subordinated notes due May 2009, €100 million 9% guaranteed senior subordinated notes due May 2009 and $158.5 million 9% guaranteed senior subordinated notes due May 2009, all rated B2, Dura's $950 million guaranteed senior secured bank facilities due 2005 and 2006 rated Ba3, and Dura Automotive Systems Capital Trust's $55.25 million of 7.5% convertible trust preferred securities due 2028 rated B3.

Moody's said it action reflects Dura Automotive's substantial leverage and modest interest coverage, which have been at similarly weak levels since 1998 when the company began a program of aggressive growth.

The approximate tripling of Dura Automotive's revenue base since that time was achieved primarily through a series of debt-financed acquisitions that continued until the end of fiscal 2000, Moody's noted.

The company's 2001 credit protection measures failed to demonstrate anticipated improvement due to a series of factors, some of which were outside of management's direct control. Dura Automotive's revenues were negatively impacted by the depressed general economic environment during 2001, and more specifically by the decreased volumes in the North American automotive and recreational vehicle markets. The impact on Dura Automotive's margins was exacerbated by the company's high operating leverage, Moody's commented.

S&P rates new Synagro notes B, bank debt BB-

Standard & Poor's assigned a B rating to Synagro Technologies Inc.'s $150 million senior subordinated notes due 2009 and a BB- rating to its $80 million revolving credit facility due 2007 and $70 million term B loan due 2008.

S&P rates new Dura notes B+, upgrades bank debt

Standard & Poor's assigned a B+ rating to Dura Operating Corp.'s upcoming offering of $250 million senior notes due 2012 and upgraded Dura's $400 million revolving credit facility due 2005, $275 million term A loan due 2005 and $275 million term B loan due 2006 to BB from BB-.

Fitch downgrades Williams

Fitch Ratings downgraded Williams Communication Group, Inc.'s senior unsecured rating to D from CC, its convertible preferred stock to D from C and its senior secured credit facility to C from CCC-. The credit facility remains on Rating Watch Negative.

Fitch said its action follows Williams Communications' announcement it will take advantage of a 30-day grace period on the interest payment due April 1 for its senior redeemable notes and to suspend the quarterly dividend payment on its preferred stock, which in Fitch's view puts the notes in technical default.

The downgrade of Williams Communications's senior secured credit facility reflects Fitch's concern that the facility will be in default, absent a waiver of cross default provisions contained in the terms of the credit facility within the next 30 days.

S&P downgrades Viasystems

Standard & Poor's downgraded Viasystems Group Inc. and kept the outlook at negative.

Ratings affected include Viasystems' $500 million 9.75% senior subordinated notes due 2007, cut to C from CC and its $628.1 million senior secured credit facility, cut to CC from CCC.

S&P said its action reflects Viasystems' severe liquidity constraints because of its breach of covenants in its senior secured credit facility.

Although an amendment to the credit agreement means the lenders will not exercising any rights or remedies before May 29, 2002, up to $1 billion of debt could become due and payable if the company is unable to extend the forbearance, S&P said.

S&P downgrades WKI

Standard & Poor's downgraded WKI Holding Company Inc. and kept the outlook at negative.

Ratings lowered include WKI's $200 million 9.625% senior subordinated notes due 2008, cut to C from CC, and its $592 million credit facility, cut to CC from CCC.

S&P said it cut WKI's ratings after the company said it is working with financial advisors to explore strategic alternatives, including the possible need for a Chapter 11 filing to facilitate a financial restructuring.

S&P added that WKI is not expected to make the next interest payment on its subordinated notes due May 1.

S&P upgrades Caremark Rx

Standard & Poor's upgraded Caremark Rx Inc. and maintained the outlook at positive.

Ratings affected include Caremark's $450 million 7.375% senior notes due 2006, raised to BB from BB-, its $300 million revolving credit facility due 2005 and $250 million senior secured term loan B due 2005, both raised to BB+ from BB, and Caremark Rx Capital Trust I's $200 million shared preference redeemable securities due 2029, raised to B+ from B.

S&P said the "near-investment grade" ratings reflect Caremark's solid financial performance, improving financial flexibility and strong position in the growing PBM sector, partially offset by the continued fierce competition in the industry.

Its large size enables Caremark to negotiate favorable drug discounts with pharmaceutical companies and offer those savings to its clients, S&P noted.

In addition and more importantly, Caremark has one of the largest and most efficient mail-order pharmacy services in the industry, S&P said. Its mail-order prescription penetration rate at 22% is much higher than that of its rivals, Express Scripts at 8% and AdvancePCS at 2%.

"Mail-order prescriptions yield a higher margin than retail-network prescriptions and enable Caremark to have more influence on the market share of drugs, which, in turn, increases Caremark's leverage in negotiating rebates with pharmaceutical manufacturers, the rating agency said.

The company's margins also benefit from its CTS unit, one of the largest specialty pharmaceutical handling businesses in the U.S. Caremark's net margin percentage is more than twice as much as that of other major PBMs, S&P said.

S&P cuts High Voltage

Standard & Poor's downgraded High Voltage Engineering Corp. and kept the company on negative outlook. Ratings lowered include High Voltage's $155 million 10.5% senior notes due 2004, cut to CCC from B.

S&P said its action reflects High Voltage's limited near-term financial flexibility, including high refinancing risk, and the significant erosion in its financial profile.

The ratings reflect the potential for senior credit agreement covenant violations and the company's niche business positions in weak industrial markets including semiconductors and off-highway vehicles, which have more than offset improvements in energy and utility markets, which utilize the company's medium voltage variable frequency drives, S&P said.

High Voltage only has $3.5 million available on its $25 million credit facility and cash of $15.2 million as of Jan. 26, S&P said.

Liquidity will remain constrained due to the company's semi-annual $8.3 million interest payment on its 10.5% senior unsecured notes, annual debt maturities of about $2.0 million, and restrictive financial covenants, the rating agency added.

Fitch downgrades Tesoro

Fitch Ratings downgraded Tesoro Petroleum Corp. in expectation of its acquisition of Valero's 168,000-bpd Golden Eagle refinery and 70 associated marketing sites. Fitch cut Tesoro's senior secured credit facility to BB from BB+ and its subordinated debt to B+ from BB-. The outlook is stable.

Fitch said it views the Golden Eagle acquisition as a significant positive from an operational and geographical diversification standpoint it added that the acquisition requires the addition of a significant amount of debt.

The Golden Eagle acquisition follows closely behind Tesoro's debt-financed acquisition of two refineries and associated retail assets from British Petroleum in September 2001 for $670 million, Fitch noted.

At closing, adjusted debt-to-capitalization (including 8.0 times gross rental expense) should be 70%. Going forward, Fitch said it expects credit protection, as measured by EBITDA to interest to be above 3.0 times with debt-to-EBITDA of 3.0 times to 4.0 times.

Moody's rates new Panavision notes Caa2, cuts existing ratings

Moody's Investors Service assigned a B3 rating to Panavision Inc.'s $30 million senior secured revolving credit facility and $150 million senior secured term loan B and a Caa2 rating to its $250 million senior secured notes due 2009. Moody's also downgraded its existing debt, including cutting its $195 million 9 5/8% senior subordinated discount notes due 2006 to Ca from Caa1 and its $340 million of secured bank credit facilities to B3 from B2. The outlook is negative.

Moody's said it cut Panavision's ratings because it considers the company's capital structure to be still over-leveraged given the company's modest growth potential.

After the transaction, Panavision will have sizable funding requirements for debt service, capital expenditures for the manufacture and maintenance of its film equipment and operating leases, Moody's noted.

Panavision is subject to revenue volatility driven by the lack of predictability and decline in film starts as well as the impact of periodic threatened or real strike activity. Further, Panavision's global operations leave the company vulnerable to foreign exchange risk. Finally, Moody's said Panavision's revenue and cash flow performance has fallen short of expectations.

If the proposed transaction is successful, current note holders are expected to receive substantially less than par - 65% - for their existing bonds, Moody's added.

However Panavision benefits from a dominant position in the North American feature film, television and commercial markets, Moody's said, and its strong relationships within the film industry, proprietary equipment and limited competition should help preserve market share.

Moody's confirms American Greetings, negative outlook

Moody's Investors Service confirmed American Greetings and assigned a negative outlook, concluding the review for possible downgrade begun on Jan. 22. Ratings affected include American Greetings' $150 million revolving credit facility due 2002, $200 million revolving credit facility due 2006 and $300 million senior notes due 2028 at Ba1 and its $260 million senior subordinated notes due 2008 at Ba3. Moody's assigned a Ba3 rating to the company's $175 million junior convertible debentures due 2006.

Moody's said its action reflects the absence of significant client contract renegotiation expected in the coming two years, anticipated benefits from the restructuring completed in fiscal year 2002 and American Greetings' currently satisfactory liquidity position.

However the rating agency cautioned that stagnation in the volume of greeting cards sold as well as the strong bargaining power of large retailers contribute to uncertainty in future performance.

Deterioration in operating performance due to possible widespread future Kmart store closings or other causes could place pressure on the ratings, Moody's said.

The announced closing of 284 Kmart stores is not expected to result in a significant decline in cash flow from operations and debt protection measures, Moody's noted. However, likely store closings stemming from the implementation of Kmart's restructuring plan could lead to significant revenue losses from this key account in the coming years.

The rating agency noted American Greetings now sells to 100% of Kmart stores and achieves the same percentage with another large mass retailer, Target, but only sells to 40% of Wal-Mart stores.

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