Moody's upgrades Anteon

Moody's Investors Service upgraded Anteon International Corp. including raising its $143 million secured credit facility upgraded to Ba3 from B1 and $75 million 12% senior subordinated notes due 2009 to B2 from B3. The outlook is stable.

Moody's said the upgrade is in response to Anteon's improved financial condition, primarily a result of its successful initial public offering in March. Approximately $75.5 million of net proceeds were used to significantly reduce financial leverage.

The ratings also acknowledge the company's satisfactory margins, strong returns, and good liquidity, Moody's said.

Reliance on external sources of committed financing will likely prove unnecessary given Anteon's relatively stable internally generated cash flow, Moody's said although it added that it expects the company to maintain orderly access to committed financing.

Industry trends toward outsourcing and increasing federal spending continue to be favorable, the rating agency added.

Limiting the ratings are Anteon's relatively small size (approximately $750 million in revenues versus some competitors over $1 billion) and its historically acquisitive growth strategy, Moody's said. It also described the balance sheet as relatively weak given the absence of tangible equity.

S&P raises Advanced Accessory outlook

Standard & Poor's raised its outlook on Advanced Accessory Systems LLC to stable from negative and confirmed its ratings including its senior secured debt at B and Advanced Accessory Systems Capital Corp.'s subordinated debt at CCC+.

S&P said the revision reflects reduced near-term liquidity concerns stemming from better-than-expected sales and operating profits for the first half of 2002.

By mid-August 2002, the company had sufficient free cash flow to pay down all of the debt maturities coming due for the full year, about $11 million, S&P said.

The rating agency added that it expects Advanced Accessory's continuing operations to generate sufficient cash to pay down 2003 debt maturities totaling $12 million, assuming market conditions remain stable or improving.

By year-end 2003, the company expects to have paid off all outstanding senior debt of about $26 million, S&P added.

S&P says Tesoro unchanged

Standard & Poor's said Tesoro Petroleum Corp.'s ratings and outlook are unchanged on the announcement it will sell a refined petroleum products pipeline system to Williams Energy Partners LP for $110 million. S&P rates Tesoro's corporate credit at BB with a stable outlook.

The transaction, expected to close in mid-October, is part of Tesoro's $500 million debt-reduction plan targeted for completion by the end of 2003, S&P noted.

Moody's confirms Sports Authority, off upgrade review

Moody's Investors Service confirmed The Sports Authority, Inc.'s ratings, removed them from review for upgrade and assigned a positive outlook. Ratings affected include The Sports Authority's $335 million senior secured revolving credit facility rated B2.

Moody's said the ratings had been on review for possible upgrade pending a proposed offering of common stock, which has been indefinitely postponed.

However Moody's said the outlook is positive because it believes the company can continue to reduce leverage and improve debt protection measures at current performance levels.

Improving financial flexibility and coverage ratios could lead to a ratings upgrade over the next 12 months, Moody's said. However, ratings could stabilize or decline if The Sports Authority is unable to maintain a trend of improving comp store sales or if near term sales volatility impacts working capital usage or profit margins sufficiently to reduce cash flow available for debt reduction. Ratings could also be negatively affected if the company is unable to arrange for satisfactory ongoing liquidity or long term capital necessary to implement store improvement programs.

S&P puts Quantum on watch

Standard & Poor's put Quantum Corp. on CreditWatch with negative implications. Ratings affected include Quantum's $500 million unsecured revolving credit facility at BB and $250 million 7% convertible subordinated notes due 2004 at B+.

S&P said the watch placement reflects weakened operating performance, the result of the ongoing slump in spending by enterprise customers on information technology.

Revenues of $211 million in the quarter ended June 30, 2002 declined 13% sequentially, S&P noted.

Despite being at the beginning of a positive product cycle, Quantum is suffering from weak volume demand, pricing pressure in certain product areas, and increased tape media inventories in the channel, S&P said.

EBITDA turned negative in the June 2002 quarter to a minus $7 million, S&P noted. Additionally, Quantum announced that revenues will decline by as much as 10% in the quarter ending Sept. 30, 2002.

Moody's cuts Fairpoint

Moody's Investors Service downgraded Fairpoint Communications, Inc. including lowering its $68 million senior secured term loan due 2006, $75 million senior secured term loan due 2007 and $85 million senior secured revolving credit facility due 2004 to B2 from B1 and its $75 million senior subordinated floating-rate notes due 2008, $125 million 9.50% senior subordinated notes due 2008 and $200 million 12.50% senior subordinated notes due 2010 to Caa1 from B3.

Moody's said the action completes a review begun in October 2001 and follows Fairpoint's filing of second quarter 2002 financial statements.

The ratings incorporate the result of Fairpoint's recent exit from its CLEC business, called Fairpoint Communications Solutions Corp., and the associated financial restructuring, Moody's said.

Despite the effective removal of the Solutions overhang resulting from the restructuring, Fairpoint's core RLEC business remains highly leveraged with only modest cash flow growth prospects, Moody's said.

Fairpoint's RLEC cash flow growth has been traditionally driven by acquisition-related activity, however with no significant acquisitions since September 2001, Fairpoint's business has taken on a slower, more organic growth profile, Moody's said.

For the second quarter 2002, the company's RLEC operations recorded a 1% sequential revenue growth and a 3.8% sequential EBITDA decline, reflecting seasonality, flat access line growth, a decrease in traffic volumes and the impact of the soft economy on Fairpoint's rural subscriber base, the rating agency said.

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