S&P keeps Cluett American on watch

Standard & Poor's said Cluett American Corp. remains on CreditWatch with negative implications including its senior secured debt at CCC+ and subordinated debt at CCC-.

S&P said the continuing watch reflects its concern with with Cluett's liquidity, as well as Cluett's ability to make a required payment of about $45 million on its secured bank facility by March 31.

Although the deadline was extended until May 7, the company is still challenged to make the payment because of its continued inability to generate free cash flow, S&P said.

S&P upgrades Trump AC

Standard & Poor's upgraded Trump Atlantic City Associates and removed it from CreditWatch with positive implications. The outlook is stable. Ratings raised include Trump Atlantic City's first mortgage bonds, raised to CCC+ from CCC.

S&P said Trump Atlantic City's ratings are linked to its affiliate, Trump Casino Holdings LLC, given their common parent company, Trump Hotels & Casino Resorts Holdings LP. Despite covenants under each individual entity's bond indentures that limit transactions with affiliates, S&P said its consolidated approach to the Trump companies reflects the common ownership and that management decisions in the interest of the parent company and shareholders may not always be fully aligned with the interests of each individual entity.

As a result, Trump Atlantic City's ratings have been restrained by the refinancing risk that existed at its affiliates, most recently Trump Castle.

The upgrade to Trump Atlantic City reflects the improved financial flexibility for the consolidated group of Trump companies with the recent refinancing of near-term debt maturities at Trump Castle, the good performance at Taj Mahal and Plaza that has created EBITDA cushion against any initial impact from the opening of Borgata in mid-2003, and S&P's assessment that Trump Atlantic City will likely be able to meet debt service requirements in the near term.

Operating performance during 2002 at Trump Atlantic City was good with EBITDA increasing 16% to $221.9 million due to higher slot volumes and steady market growth, S&P said. Still, credit measures are weak with EBITDA interest coverage less than 1.5x and total debt to EBITDA around 6x.

S&P said it expects that both Trump Taj Mahal and Trump Plaza will be negatively affected by the summer 2003 opening of Borgata, a 2,000-room property being built in the Marina District by joint venture partners MGM Mirage and Boyd Gaming Corp.

S&P cuts Anthony Crane

Standard & Poor's downgraded Anthony Crane Rental LP including cutting its $155 million 10.375% senior notes due 2008 to D from C.

S&P said the action is because Anthony Crane did not make the cash interest payments due on these notes in February 2003.

Parent Anthony Crane Rental Holdings LP's $48 million 13.375% senior discount debentures are currently rated C and remain on Credit Watch with negative implications where they were originally placed on Dec. 14, 2001, due to financial weakness.

On March 14, S&P lowered its corporate credit and senior unsecured bank loan ratings on the company following the filing of an exchange offer that S&P viewed as coercive.

Fitch cuts Atlas Air

Fitch Ratings downgraded Atlas Air, Inc. including cutting its senior unsecured debt to D from CCC and secured bank debt to D from CCC+.

Fitch said the action follows Atlas' announcement that it is suspending payments on all unsecured notes, bank debt and aircraft leases.

The default on Atlas' debt obligations comes after the company's February announcement that it was withholding lease payments related to six Boeing 747 freighter aircraft and the replacement of its senior management team in early March.

Since October 2002, Atlas has been the subject of an investigation by the SEC in connection with accounting misstatements dating back to 2000. A re-audit of the company's financial statements is in progress. Due to the SEC investigation and the re-audit, audited financial statements have not been released since the end of the second quarter of 2002.

Atlas' announcement follows an extended period of weakness in global air cargo demand that first appeared in 2001, Fitch noted. Despite the fact that Atlas has seen military charter revenues rise sharply in recent months, the company's core ACMI (aircraft, crew, maintenance and insurance) cargo business remains very weak. While recent financial statements are unavailable as a result of the SEC investigation, operational statistics such as revenue per block hour indicate that ACMI pricing has deteriorated, worsening Atlas' current liquidity crisis, Fitch said.

S&P lowers Interep outlook

Standard & Poor's lowered its outlook on Interep National Radio Sales Inc. to negative from positive and confirmed its ratings including its subordinated debt at CCC-.

S&P said the change is based on renewed liquidity and earnings concerns.

S&P said it had previously expected that positive revenue and earnings trends related to growing national radio advertising demand would enable Interep to steadily improve its cash flow and liquidity in 2003.

However, national radio advertising may suffer due to advertiser concerns about the war in Iraq, geopolitical tensions, and ongoing economic weakness and uncertainty, S&P said. This may prevent Interep from reaching at least breakeven discretionary cash flow as previously expected. In addition, the company announced that its Employee Stock Option Plan will begin purchasing Interep shares on the open market, rather than buying new shares from the company, if the stock price remains below $3. This could reduce Interep's cash flow by up to $500,000 per quarter and reduce its already limited liquidity.

Operating EBITDA, which excludes contract termination revenue, restructuring expenses, option repricing costs, and certain legal costs, increased to $16.0 million in 2002 from $8.8 million in 2001. This improvement was due to an 8% increase in commission revenue and cost-reduction measures. Nonetheless, operating EBITDA remains well below the $23.4 million achieved in 2000, S&P said. Interep's ability to meet its 2003 guidance of operating EBITDA of $17 million - $20 million and free cash flow of nearly breakeven is uncertain given its assumption of a relatively short war and a quick rebound in national radio advertising demand. As of Dec. 31, 2002, EBITDA coverage of interest is thin at 1.5x and EBITDA plus rent to interest plus rent is about 1.3x. Debt to EBITDA is high at 6.8x and debt plus PIK preferred stock to EBITDA is 7.6x.

S&P confirms Elgin National, lowers notes

Standard & Poor's confirmed Elgin National Industries Inc.'s corporate credit rating at CCC+ but downgraded its $85 million 11% senior notes due 2007 to CCC- from CCC. The ratings were removed from CreditWatch with negative implications. The outlook is negative.

S&P said the downgrade reflects the increased structural subordination of the notes due to a reduction in tangible assets over the past year, which would likely weaken asset protection in a default scenario.

The ratings on Elgin National reflect the company's limited liquidity, very aggressive financial profile, and niche positions in cyclical end-markets, S&P said.

As a result of declining industrial markets and soft coal power plant construction in the U.S., Elgin's cash generation was subpar during 2002, S&P continued. For the full year 2002, EBITDA fell to about $10.5 million, from about $22 million for 2001. Credit protection measures are very weak, with total debt to EBITDA around 10x at yearend 2002, compared to 4.5x one year earlier.

The negative outlook is because failure to improve cash flow generation will result in increasing financial stress and liquidity pressures, potentially leading to a default in the near term, S&P said.

S&P raises US Airways watch

Standard & Poor's revised its CreditWatch on US Airways Group Inc. and subsidiary US Airways Inc. to positive from negative or developing following the companies' emergence from Chapter 11 bankruptcy reorganization.

S&P said it will assign a new rating shortly.

US Airways' successful bankruptcy reorganization, despite very difficult airline industry conditions, is an impressive achievement and bolsters the company's liquidity, S&P sai.

The airline emerges with an improved operating cost structure and reduced debt burden, but still faces challenges from the weak revenue outlook and rising low-cost competition, S&P noted. US Airways will have cash and available bank lines of about $1.3 billion, following repayment of its debtor-in-possession bankruptcy financings using a $240 million equity investment, a 90% federally guaranteed $1 billion credit line, and a $360 million facility provided by General Electric Capital Corp. (GECC).

US Airways reduced its capacity by about 13% in bankruptcy, and shifted passengers to smaller regional jets, which are well suited to the airline's markets and will be used more extensively in the future, S&P said. Cost reductions are forecast to average $1.9 billion annually over the next six years (about $1.5 billion lower in 2003), relative to what they would otherwise have been. The largest portion consists of a $1.0 billion (about 30%) decline in labor expenses, achieved through pay cuts, reduced benefits, and productivity from work rule changes. This will leave US Airways with operating costs that are at the bottom of the range among large U.S. hub-and-spoke airlines, though still materially above costs of low-cost carriers like Southwest Airlines Co.

The bankruptcy reorganization reduces total debt and leases by about one third, and termination of the pilots' pension plan and its replacement with a less costly version reduces pension-funding requirements by about one quarter.

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