S&P cuts UPC Polska

Standard & Poor's downgraded UPC Polska Inc. including cutting its $100 million 14.5% senior discount notes due 2009 and $125 million 14.5% discount notes due 2008 to C from CC. The ratings were removed from CreditWatch negative. The outlook is negative.

S&P said the downgrades reflect the expectation that the public debt at UPC Polska will be restructured under distressed terms. The company indicated that it is in discussions to restructure its debt.

In its first quarter 10Q for the three months ended March 31, 2003, UPC Polska stated that it has relied on parent United Pan European Communications NV to meet its prior payment obligations, S&P noted. However, because UPC is currently operating under bankruptcy protection, the ability of UPC Polska to obtain further financing from the parent is highly uncertain.

Fitch cuts Avon Energy Partners

Fitch Ratings downgraded Avon Energy Partners Holdings to CC from BB- and maintained a negative outlook. It confirmed Midlands Electricity plc and Aquila Power Network at BBB- and BBB+ respectively.

Fitch said the action follows the announcement by Scottish & Southern Energy plc that it will buy Aquila Sterling Ltd., the U.K. ultimate holding company of Aquila Power Networks, the distribution company, and various ancillary subsidiaries.

The offer is conditional upon the acceptance by Avon Energy Holding Partners' bondholders, who have been offered 86% of their nominal value plus accrued interest.

The downgrade is based on the shortfall in the value of the debt, Fitch said. Refusal by bondholders to accept the current and possibly final offer would increase the uncertainty relating to any sale and the likelihood that they may become owners of the business.

S&P cuts Tranz Rail

Standard & Poor's downgraded Tranz Rail Holdings Ltd. including cutting Tranz Rail Finance Ltd.'s $74.48 million 7.278% passthroughs due 2008 to CC from CCC. The outlook is negative.

S&P said the action follows the withdrawal of RailAmerica Inc.'s proposed offer for the equity securities of the New Zealand-based rail-freight operator.

Following RailAmerica's due diligence investigation on Tranz Rail, RailAmerica's management has determined that, under current circumstances, the proposed acquisition does not represent the opportunity for enhanced shareholder value that had been originally contemplated, S&P noted. RailAmerica had intended to offer NZ$0.75 cash for each ordinary share of Tranz Rail, for a total consideration of about $90 million. In addition, it would have assumed about $135 million of existing indebtedness.

In the meantime, Toll Holdings Ltd. (not rated) announced on May 19 that it has purchased 6.1% of TranzRail's equity and that it would consider purchasing more equity if the share price remained reasonable.

The negative outlook reflects Tranz Rail's liquidity constraints and uncertainty regarding the extent of support from its bankers, S&P said. The company has a very tight liquidity position that is compounded by the requirement to meet some critical external obligations before the end of June 2003.

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