S&P rates Lyondell notes BB

Standard & Poor's assigned a BB rating to Lyondell Chemical Worldwide, Inc.'s planned offering of $275 million senior secured notes due 2012 and confirmed Lyondell Chemical Co.'s other ratings including its senior secured debt at BB and subordinated debt at B+. The outlook is stable.

Proceeds of the new notes will be used to prepay $200 million of an existing term loan. The balance of the net proceeds (approximately $50 million), together with approximately $100 million from a new equity issue, will be retained on the balance sheet.

A new $350 million committed revolving credit facility, together with Lyondell Chemical's plans to retain additional cash on its balance sheet, will provide ample liquidity through the bottom of the current trough in the petrochemical cycle, S&P said.

In addition, following the proposed transactions, Lyondell will have substantially relieved concerns related to restrictive financial covenants and will benefit from the extension of the debt maturity profile, the rating agency added.

The ratings for Lyondell Chemical reflect its high debt levels from the 1998 acquisition of ARCO Chemical Co., which continue to overshadow the firm's average business profile as a leading North American petrochemical producer, S&P said.

S&P said its ratings on Lyondell incorporate expectations that a gradual recovery in business conditions and moderate capital spending will lead to strengthened credit protection measures. EBITDA interest coverage and debt to EBITDA should improve from currently weak levels to about 2.5 times and 3.0x, respectively, within several years.

S&P keeps CMS on watch

Standard & Poor's said CMS Energy Corp. and its subsidiaries Consumers Energy Co. and CMS Panhandle Pipeline Cos. remain on CreditWatch with negative implications. Ratings affected include CMS' senior unsecured debt at BB, Consumers Energy's senior secured debt at BBB+ and senior unsecured debt at BB+, and CMS Panhandle's senior unsecured debt at BBB-.

S&P said there is no immediate impact on CMS Energy's credit quality from the extension of its $450 million revolving credit facility to July 12, 2002 from June 15, 2002.

At issue will be what type of longer-term financing CMS Energy puts in place to repay about $300 million of the borrowings under the facility, S&P said.

CMS credit quality has become increasingly uncertain since the discovery of "round-trip" electricity trades conducted by its subsidiary, CMS Marketing Services & Trading Co., S&P added.

The round-trip trades resulted in the resignation of Bill McCormick, long-time chairman and CEO of CMS Energy, and have further eroded the firm's standing in the capital markets, S&P said.

There is also uncertainty because of an SEC inquiry into the round-trip trades, plans to restate 2000 and 2001 financial statements, Arthur Andersen LLP's announcement that it will not comment on the company's restated financial statements, the establishment of a committee by CMS' board of directors to investigate matters surrounding the trades, and shareholder class-action lawsuits.

S&P cuts Philipp Brothers

Standard & Poor's downgraded Philipp Brothers Chemicals, Inc. including cutting its $100 million 9.875% senior subordinated notes due 2008 to CCC- from CCC+. The outlook is negative.

S&P said it cut Philipp Brothers because of significant deterioration in the company's liquidity.

S&P added that the downgrade reflects substantially heightened concerns regarding the ability of the company to meet near-term financial commitments. The rating actions also reflected the continued weakness in the company's end markets, which is likely to forestall any meaningful recovery in operating performance.

Without significant improvement in the company's operational performance and cash flow generation, the company may not be able to service interest and current principal due in fiscal 2003, S&P said. The company has indicated that it is considering asset divestitures and cost reduction programs to provide funds.

S&P puts Jazztel on watch

Standard & Poor's put Jazztel plc on CreditWatch with negative implications.

Ratings affected include Jazztel's €342.4 million 13.25% notes due 2009, €103.5 million 14% with warrants notes due 2009, $86.5 million 14% with warrants notes due 2009 and €189.7 million 14% notes due 2010, all rated C.

Moody's withdraws Wyndham's ratings

Moody's Investors Service withdrew the ratings on Wyndham International Inc. due to the company's announcement that it would not proceed with the proposed refinancing. Furthermore, the stable outlook was withdrawn as well.

Ratings withdrawn include, $750 million senior secured notes due 2008 at Caa1, $278 million senior secured revolver due 2006 at Caa1, $1.084 billion senior secured term loan B due 2006 at Caa1, $181 million senior secured term loan B2 due 2006 at Caa1, senior implied at Caa1 and senior unsecured long-term issuer rating at Caa3.

S&P says Apple unchanged

Standard & Poor's said Apple Computer Inc.'s reduction in expected revenues has no impact on the company's ratings or outlook. Apple's corporate credit rating is BB and the outlook is stable.

Cash balances and short-term investments of $4.3 billion as of March 30, 2002, and a strong financial profile are expected to provide sufficient liquidity to offset any near-term revenue or earnings weakness, S&P said.

Apple announced it expects to generate revenues of about $1.4 billion-$1.45 billion in the fiscal third quarter ending June 30, 2002, down from previous guidance of about $1.6 billion, S&P noted.

Moody's rates PCA notes B3

Moody's Investors Service assigned a B3 rating to the planned $160 million senior unsecured notes due 2009 to be issued by PCA International Inc.'s PCA International LLC subsidiary. The outlook is stable.

Moody's said the ratings reflect PCA's very high leverage relative to operating cash flow, which will make it challenging for PCA to meaningfully reduce debt at current operating levels; a need to invest cash in growth for the medium to long term; insufficient tangible asset coverage, indicating high potential for loss of principal in case of default; high fourth-quarter seasonality, which could cause bank borrowings and vendor financing to increase during the first part of the year; and historical operating losses from the institutional business which PCA hopes to turn around in order to help achieve its financial objectives.

Positives include PCA's position as sole provider of in-store photography services to Wal-Mart, backed up by history of operations as well as a long term license agreement; a pricing strategy which allows for satisfactory operating profitability while reducing the likelihood of a competitive threat; the improving profitability of the Wal-Mart business; and the expectation of growth related to Wal-Mart's own expansion and store renewal programs, Moody's added.

Moody's said it expects PCA will continue to operate at current levels and should be able to finance its growth through operating cash flow. However, the need to fund growth could leave very little cash from operations available for debt reduction, limiting the opportunity to reduce leverage significantly in the near term.

PCA's leverage is high from both balance sheet and operating perspectives. Total debt at closing will be just under one-times the prior year revenue, Moody's said. The rating agency expects total debt will continue to exceed total assets, and notes that approximately 35% of total assets consist of intangibles. PCA has been unable to cover its interest payments with EBIT and has had negative net income for the last four years as a result of the interest burden from its high debt level. Moody's expects EBITDAR to total fixed costs (including non-cash interest) to remain thin at about 1.3 times, and expects total debt to normalized EBITDA to remain somewhat below to the 2001 levels of 5.3 times.

S&P says AES unchanged

Standard & Poor's said AES Corp.'s ratings are unaffected by the retirement of Dennis Bakke as chief executive officer.

His successor Paul Hanrahan outlined a number of priorities in a conference call Wednesday that are credit-focused, including increasing liquidity, deleveraging the company through asset sales and equity issuances, and possibly selling or spinning off businesses in Latin America that are currently detracting from shareholder value.

"While the increased credit focus is encouraging, the future of the credit is dependent less upon plans and goals and more upon execution," S&P commented.

S&P raises USEC outlook

Standard & Poor's raised the outlook on USEC Inc. to stable from negative and confirmed its ratings including its senior unsecured debt at BB.

S&P said its action follows resolution of two uncertainties that had previously clouded USEC's near-term prospects. First, USEC has announced the signing of a memorandum of understanding with the U.S. Department of Energy providing for the clean-up of the portion of USEC's natural uranium inventory that had been contaminated with technetium prior to USEC's privatization in 1998. Second, USEC has announced that the U.S. and Russian governments have approved implementation of new, market-based pricing terms for the remaining 12 years of a contract under which USEC sources enriched uranium from the Russian company Techsnabexport Co. Ltd. (Tenex).

S&P said USEC had experienced protracted delays in obtaining modifications to the long-term contract under which it sources enriched uranium from Tenex. The new contract changes put pricing on a market basis, replacing a fixed-price approach that has been problematic for USEC.

Over the longer term, USEC's profitability could benefit from implementation of the revisions to the Russian contract, as well as from higher market prices and extensive cost-cutting efforts. But S&P said the need to increase spending in the development and implementation of a new production technology - which could ultimately entail an investment in excess of $1 billion - could well offset much of the improvement.

S&P cuts Legacy Hotels

Standard & Poor's downgrade Legacy Hotels Real Estate Investment Trust. The outlook is stable. Ratings lowered Legacy's C$100 million 5.93% senior unsecured notes due 2002, C$75 million 6.34% senior unsecured notes due 2004, C$50 million 7.08% senior unsecured notes due 2008, C$50 million 6.65% senior unsecured notes due 2005 and C$50 million 6.3% senior unsecured notes due 2003, all cut to BB+ from BBB-.

S&P said the downgrade reflects Legacy's weaker credit protection ratios and higher debt levels.

In addition, S&P said the credit enhancement provided by the trust's relationship with Canadian Pacific Ltd. was reduced with the spin-off of CPL's other subsidiaries, leaving only the hotel business now renamed Fairmont Hotels & Resorts Inc. Although Fairmont has a very strong balance sheet and has assisted Legacy during the post-Sept. 11 period by taking units in lieu of distributions, Fairmont does not match the financial size and strength that CPL had prior to its breakup.

S&P rates Berry Plastics loan B+, notes B-

Standard & Poor's assigned a B+ rating to Berry Plastics Corp. proposed $455 million senior secured credit facilities and a B- rating to its planned $275 million senior subordinated notes due 2012. Both ratings were placed on CreditWatch with developing implications, joining the company's existing ratings which have similar status.

Proceeds will be used to refinance existing debt.

In May, Berry announced that GS Capital Partners 2000 LP, a private equity investment fund managed by Goldman, Sachs & Co., had agreed to acquire Berry for about $869 million, including repayment of existing debt. If completed as proposed, the financing plan will include a $269 million equity contribution (including $175 million from Goldman Sachs, $81 million from J.P. Morgan Partners, and a $13 million management rollover equity), a $305 million term loan (under the new $455 million credit facilities), and proposed $275 million senior subordinated notes due 2012, S&P said.

Pro forma for the transaction, which is expected to be completed in July 2002, Berry is expected to remain very aggressively leveraged with total debt (adjusted for operating leases) to EBITDA of about 5.5 times, S&P said.

Upon successful completion of the transaction, S&P said it will likely affirm its ratings on Berry with a positive outlook.

The company's leading shares in niche markets, low-cost position, and consistent free cash generation are expected to support a gradual improvement to financial profile in the intermediate term, S&P added. The ratings would also incorporate the expected improvement in financial flexibility through enhanced liquidity under the proposed $100 million revolving credit facility (undrawn at closing), and a light debt amortization schedule until 2008.

S&P rates Six Flags' loan BB-

Standard & Poor's rated Six Flags Theme Parks Inc.'s new $1.05 billion senior secured credit facilities, which reduce near-term amortization requirements and extend bank maturities to 2008 and 2009, at BB-. In addition, the BB- corporate credit and senior secured debt ratings were affirmed and the BB- rating on the previous credit facilities were withdrawn.

The bank facility consists of a $300 million working capital revolver due 2008, a $150 million multi-currency revolver due 2008 and a $600 million term loan B due 2009. Security is a perfected first priority interest tangible and intangible assets, real property and capital stock.

Ratings reflect good geographic and cash flow diversity, relatively stable operating performance and the expectation that interest coverage will improve despite the company's acquisition orientation, S&P said.

However, financial risk is relatively high with pro forma adjusted EBIDTA coverage of total interest and debt-like preferred dividends of 1.7 times at March 31, S&P added.

The stable outlook reflects the expectation that operating performance will remain relatively stable in 2002 because of the shift in consumer preferences for close-to-home entertainment alternatives, S&P said.

Moody's cuts BGF

Moody's Investors Service downgraded BGF Industries, Inc.'s outstanding debt including $100 million 10¼% senior subordinated notes due 2009 to Caa3 from B3 and $50 million guaranteed senior secured revolving credit facility due 2003 to B3 from B1. The outlook remains negative.

Moody's said it lowered BGF because of concern over BGF's ability to comply with the revised financial covenants governing its amended senior secured revolving credit facility; the company's limited liquidity, with modest cash and $9 million available under the borrowing base governing the revolving credit facility as of March 31, 2002, the FY2002Q1 end; and Moody's expectation that a recovery in the company's electronic and composite markets, which accounted for 70% of FY2001 revenues, would be delayed longer than was previously estimated.

BGF is highly leveraged with debt to capitalization of 110.4% as of the end of the first quarter of fiscal 2002, Moody's said. Based on last-12-month EBITDA of $11.4 million, debt to EBITDA was 11.4 times.

However BGF benefits from its strategic position as a leading innovator and manufacturer of woven and non-woven glass fiber fabrics, composite fabrics and insulating felts; the company's impressive North American market share in glass fiber fabrics; the stabilization of the filtration business; and the company's reputable financial representation, Moody's said.

The negative outlook takes into account the prevailing belief that a recovery in telecommunications service provider spending now would not occur prior to 2003, and perhaps as late as 2004-2005, which would weaken demand in BGF Industries' electronic fabrics market, Moody's said.

Moody's lowers Solutia notes, rates new notes Ba2

Moody's Investors Service assigned a (P)Ba2 to the $250 million senior secured notes of Solutia Inc. and downgraded its senior unsecured notes and debentures to Ba3 from Ba2. The senior secured credit facility was kept at Ba1. All ratings remain under review for potential downgrade.

The new notes have a prospective (P) rating because proceeds will be held in escrow pending resolution of the credit facility refinancing.

Moody's said the continuing review for downgrade is because of its increasing concern over Solutia's liquidity due to the approaching maturity of its $800 million bank credit facility.

The (P)Ba2 rating on the senior secured notes reflects the weaker security package, which includes secondary liens, versus the existing bank facility, Moody's said. In addition, this rating reflects the likelihood that the already secured lenders will have an improved position relative to Solutia's other debt.

However both the secured bank facility and the secured notes have guarantees from certain operating subsidiaries, as well as a first and second lien, respectively, on certain assets and intra-company loans, from Solutia Inc. to the non-guarantor subsidiaries, Moody's noted. These non-guarantor subsidiaries generated nearly 60% of Solutia's consolidated EBITDA and account for the vast majority of Solutia's intra-company debt.

Hence, Moody's believes that the secured notes have significantly better security package than the existing unsecured notes and debentures. In addition, the modest level of debt in the near- to intermediate-term anticipated under the secured credit facility should further enhance the position of the secured notes in a distressed situation.

The downgrade of the existing senior unsecured bondholders to Ba3 reflects the company's weak liquidity position, as well as meaningful subordination to secured debt at Solutia Inc. and unsecured creditors at Solutia's non-guarantor subsidiaries, Moody's said.

Nonetheless, Moody's said it anticipates that the value of the company's assets should allow all bondholders to recover their principal.

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