S&P upgrades Ameristar

Standard & Poor's upgraded Ameristar Casinos Inc. including raising its $75 million revolving credit facility due 2005, $100 million term loan A due 2005, $150 million term loan B due 2006 and $150 million term loan C due 2007 to BB- from B+ and its $380 million 10.75% notes due 2009 to B from B-. The outlook is stable.

S&P said the upgrade is in response to Ameristar's continued steady operating results for the six months ended June 30, 2002 and reflects the expectation that this trend will continue in the near term.

In addition, the higher ratings reflect the successful completion and opening of the St. Charles, Mo., expansion, S&P said.

While total debt has increased in 2002 from 2001 to fund the St. Charles expansion, credit measures have remained solid due to the steady operating results and the completion of a late 2001 equity offering, the rating agency added.

EBITDA, from ongoing operations, for the six months ended June 30, 2002, rose to $90.5 million from $74.5 million in the year-earlier period due to solid performance at the Missouri properties and improved performance at the company's other assets, S&P noted. Based on current operating trends, EBITDA coverage of interest is expected to exceed 2.5 times and total debt to EBITDA to be less than 4.5x for 2002.

S&P cuts Leap Wireless

Standard & Poor's downgraded Leap Wireless International Inc.'s corporate credit rating to CC from CCC- and maintained it on CreditWatch with negative implications. The senior unsecured debt continues at C and also remains on CreditWatch.

S&P said the action follows Leap's Sept. 6 8-K filing in which it said its Cricket Communications Inc. operating subsidiary had defaulted on interest payments on its vendor facilities.

The default by the subsidiary increases the likelihood that Leap will either restructure its debt through a distressed exchange, default on its debt, or be subject to a potential bankruptcy filing if the subsidiary files for Chapter 11 protection, S&P said.

S&P cuts Columbus McKinnon

Standard & Poor's downgraded Columbus McKinnon Corp. and removed it from CreditWatch with negative implications. Ratings lowered include Columbus McKinnon's $300 million revolving credit facility due 2003, cut to B from B+, and its $200 million 8.5% senior subordinated notes due 2008, cut to CCC+ from B-. The outlook is stable.

S&P said the action follows Columbus McKinnon's announcement that it has withdrawn its registration statement for a follow-on public equity offering. Proceeds from the offering were expected to be used to reduce debt, which would have modestly improved the company's aggressive financial profile.

Columbus McKinnon continues to be negatively affected by soft end markets, causing weak financial results and deteriorating credit protection measures, S&P said. Columbus McKinnon's operating income has declined by almost 40% to about $62 million for the fiscal year ended March 31, 2002, compared with about $98 million for the same period in 1999. Management continues to focus on improving profitability by rationalizing facilities, reducing overhead, and by selling non-core assets.

However, financial results remain weak and credit protection measures are subpar with total debt to EBITDA of about 5.8 times and EBITDA to interest coverage of about 1.7x as of June 30, 2002, S&P said.

Market conditions are expected to remain challenging over the near term, and as a result, operating performance will only gradually improve, S&P added. In the future, total debt to EBITDA is expected to average 4x to 5x, and EBITDA to interest coverage is expected in the 2x-3x range.

Moody's cuts some American Airlines ratings

Moody's Investors Service downgraded American Airlines, Inc.'s senior unsecured rating to B2 from B1 and confirmed its senior implied rating at B1, affecting $12.6 billion of debt. The outlook remains negative. Ratings affected include AMR Corp.'s senior unsecured debt, cut to B2 from B1 and American Airlines' senior unsecured debt and industrial revenue bonds, cut to B2 from B1. Some equipment trust certificates and enhanced equipment trust certificates were also downgraded.

Moody's said it lowered American's senior unsecured rating to reflect a weakening position in liquidation priority as the company continues to use unencumbered assets as collateral to secure its debt obligations. The downgrades of ratings of transactions secured by aircraft reflect Moody's assessment of the decline in value of certain aircraft and the anticipation that these values may not recover substantially from current depressed levels.

The B1 senior implied rating continues to reflect the earnings and cash flow deterioration seen at American as a result of the current difficult business environment, the expectation that the company will experience negative cash flow for the intermediate term and the expectation that additional debt financing will be required to cover anticipated cash shortfalls, Moody's said.

Acknowledged in the rating are the actions the company is taking to reduce its costs and adjust its operations to weakened demand levels, financial flexibility afforded by significant balance sheet liquidity and availability of unencumbered assets, and continued access to the capital markets, particularly on a secured basis.

Moody's raises Hilton outlook

Moody's Investors Service raised its outlook on Hilton Hotels Corp. to stable from negative and confirmed its ratings including senior unsecured notes and medium-term note program at Ba1 and its convertible subordinated debentures at Ba2.

Moody's said it raised Hilton's outlook because it believes the company's existing rating includes enough cushion for soft performance despite continued weak industry conditions, given the company's progress in reducing debt through the first half of 2002. Moody's expects Hilton will continue to delever through modest reductions in debt levels.

Moody's added that it expects industry conditions to remain challenging into 2003, given continued weak demand from the business traveler and the slow economy.

During this period of industry weakness, Hilton has continued to cut costs to stem margin erosion caused by negative operating leverage inherent with its owned hotel portfolio that comprises about 65% of EBITDA, the rating agency said. Since the third quarter of 2001, Hilton reduced absolute debt levels by about $273 million to $4.5 billion (excluding debt assumed by Park Place Entertainment) that has helped to offset year-over-year declines in EBITDA. As of June 30, debt to trailing twelve-month EBITDA was 4.70x, up slightly from 4.43x at year-end.

S&P rates Jefferson Smurfit (U.S.) notes B

Standard & Poor's assigned a B rating to Jefferson Smurfit Corp. (U.S.)'s planned $700 million senior notes due 2012. Jefferson Smurfit Corp. is a wholly owned subsidiary of Smurfit-Stone Container Corp. S&P also confirmed its existing ratings on the company including Smurfit-Stone Container Corp.'s preferred stock at CCC+, Jefferson Smurfit Corp. (U.S.)'s secured debt at B, Stone Container Corp.'s senior unsecured debt at B, Stone Container Finance Co. of Canada's senior unsecured debt at B and Smurfit Newsprint Corp.'s senior unsecured debt at B. The outlook is stable.

S&P said the ratings reflect market leadership and an improving cost position, offset by industry cyclicality, a narrow product focus compared with many other large forest products companies and high debt levels.

During the past three years, Smurfit-Stone and others have closed or "mothballed" a considerable amount of high-cost capacity, helping to improve the U.S. supply and demand balance and improve their cost positions, S&P noted. Although containerboard prices have risen slightly from trough levels and demand shows signs of modest strengthening, markets remain fairly weak due to the still sluggish U.S. economy and reduced export sales. However, continued widespread production discipline among containerboard producers should cushion against downside risk, and once demand and pricing pick up, performance could improve meaningfully due to the company's high degree of operating leverage.

Smurfit-Stone is acquiring MeadWestvaco's Stevenson, Ala. mill and associated operations for $350 million in cash plus an additional $25 million within the next 12 months related to financing arrangements. This mill is a large (830,000 tons of annual capacity), low-cost producer of corrugated medium, S&P said. This acquisition should enable Smurfit-Stone to continue to optimize its manufacturing base and lower operating costs. Management expects at least $40 million in synergies from the transaction. In addition to the mill, the acquisition includes seven corrugated container plants (consuming about 24% of the mill's output), about 82,000 acres of timberland, a hardwood sawmill, and related working capital assets.

Pro forma for the acquisition, an asset sale to Caraustar and the refinancing, Smurfit-Stone's credit measures will weaken slightly from current levels, with consolidated debt (including capitalized operating leases and other off-balance sheet financing) to EBITDA rising to the low 5 times area from about 5x currently, and EBITDA interest coverage declining, but remaining in the mid-2x area, S&P said. However, mix improvement, the addition of the low-cost Stevenson mill, and other operating cost reductions should enable operating margins to continue strengthening, averaging in the low to mid-teens percentage area over the industry cycle.

Moody's rates Intrawest notes B1, raises outlook

Moody's Investors Service assigned a B1 rating to Intrawest Corp.'s planned $125 million 10.5% senior notes due 2010, confirmed its existing ratings and raised the outlook stable from negative. Ratings confirmed include Intrawest's $135 million 10.5% senior notes due 2010, $125 million 10.5% senior notes due 2010 and $200 million 9.75% senior notes due 2010, all at B1.

Moody's said it revised Intrawest's outlook in response to the company's current and expected deleveraging efforts as well as the stability of its ski resort operations.

In June 2002, Intrawest raised $55 million through an equity offering and used the proceeds to reduce debt. More recently, the company applied approximately $30 million of proceeds raised from recent asset sales to further reduce debt, Moody's noted.

Debt/EBITDA is currently running at 4.9x and Moody's said it expects this will be reduced over the next two years to below 4.0x, a level considered more appropriate for the company's current rating.

In addition to the equity offering and asset sales, the combination of reduced resort and real estate capital expenditures going forward will improve the company's free cash flow generating ability. Moody's expects that a portion of this free cash flow improvement, as well as the proceeds from any additional asset sales, will be applied towards further debt reduction.

S&P rates Intrawest notes B+, removes from watch

Standard & Poor's assigned a B+ rating to Intrawest Corp.'s planned $125 million 10.5% notes due 2010, removed the company from CreditWatch with negative implications and confirmed its existing ratings. The outlook is stable.

Ratings confirmed include Intrawest's $125 million 9.75% notes due 2008, $75 million 9.75% senior notes due 2008, $135 million 10.5% notes due 2010 and $125 million 10.5% notes due 2010, all at B+.

S&P says United Surgical unchanged

Standard & Poor's announced that United Surgical Partners International Inc.'s $115 million common stock offering will not result in an immediate change to the company's ratings or outlook.

Proceeds from the sale will be used to repay approximately $16 million in outstanding debt under the company's bank facility and to fund additional interests in two surgical facilities.

United Surgical has strengthened its credit measures in recent years and the equity offering both deleverages the balance sheet and creates the financial capacity to conservatively fund additional investments in surgical facilities, S&P noted.

"However, depending on the pace of growth, cash flow protection measures can be suppressed as the number of sites increases," S&P said.

S&P cuts Continental 1997-2, 1998-2

Standard & Poor's downgraded Continental Airlines Inc. enhanced equipment trusts series 1997-2 and 1998-2 including cutting 1997-2 class A to BBB- from A+, class B to BB- from BBB+, class C to B+ from BB and 1998-2 class A to BBB A-, class B to BB from BB+ and class C to BB- from BB.

Both transactions financed a mixture of B737-300 and MD82 aircraft delivered originally in the late 1980s, S&P noted. Continental has grounded most of its MD82 fleet and has announced that it will be gradually retiring all of those planes from its fleet. The airline continues to fly most, but not all, of its B737-300 planes, but these are gradually being replaced by a newer generation of B737 aircraft.

Continental would probably turn back to creditors the MD82s financed in the 1997-2 and 1998-2 enhanced equipment trust certificates, and would either seek to renegotiate financing terms or turn back the B737-300s, S&P said.

S&P said its ratings on aircraft-backed financings incorporate some credit for the possibility that an airline will choose to keep paying on such financings during a Chapter 11 bankruptcy reorganization in order to maintain control of the planes, but such credit is no longer warranted in this case.

Fitch cuts Conseco to D

Fitch Ratings downgraded Conseco Inc. to D including its senior debt, preferred stock and trust preferreds, all previously at C. Conseco Finance Corp. remains on Rating Watch Negative including its senior debt at CC.

Fitch said the action follows the expiration of the 30-day grace period on unpaid bond interest payments.

On August 9 Conseco missed interest payments on several of its public securities and exercised the 30-day grace period allowed by the bond indentures, Fitch said. Conseco has failed to cure the delayed interest payments within the grace period. Given the cross-default provisions within the company's securities agreements, all Conseco public debt and preferred stock is now in default.

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