S&P downgrades Enron, says bankruptcy likely

Standard & Poor's downgraded Enron Corp. again and said it sees a bankruptcy filing as "likely." Affected ratings include the senior unsecured debt, cut to CC from B-, the subordinated debt, cut to C from CCC, its preferred stock, cut to C from CCC-, and its trust preferred stock, cut to C from CCC-. It also downgraded Enron's units, among them Azurix Corp., including its senior unsecured debt to CC from CCC+; Northern Natural Gas Co., including its senior unsecured debt cut to CC from B-; Marlin Water Trust II, Osprey Inc. and Osprey Trust, all of which saw their senior secured debt cut to C from CCC+; Enron Capital LLC and Enron Capital Resource LP's preferred stock, cut to C from CCC-

The CreditWatch was changed to developing from negative.

S&P said its action reflects its expectation that after following the breakdown of the merger with Dynegy Inc., Enron's "burdensome debt restructuring requirements, negligible liquidity, and limited access to capital will likely cause Enron to seek bankruptcy protection."

S&P downgrades UnitedGlobalCom, United Pan-Europe

Standard & Poor's downgraded United GlobalCom Inc. and United Pan-Europe Communications NV. It also changed the CreditWatch to negative from stable.

Affected ratings include: United Globalcom Inc.'s senior secured discount notes and senior discount notes, both cut to CC from CCC; United Pan-Europe Communications' notes, discount notes, senior notes and senior discount notes, all cut to CC from CCC; UPC Distribution Holding BV's credit facilities, cut to CCC from B-, and UPC Polska Inc.'s discount notes and senior discount notes, both cut to CC from CCC.

S&P downgrades Huntsman Corp., Huntsman Polymers, still on negative watch

Standard & Poor's downgraded Huntsman Corp. and its wholly owned subsidiary Huntsman Polymers Corp. Affected ratings include Huntsman Corp.'s subordinated debt, cut to C from CCC- and Hunstman Polymers' senior unsecured debt, cut to C from CCC-. S&P kept the ratings on CreditWatch with negative implications.

S&P said it cut the ratings because of Huntsman's decision not to make the scheduled interest payments on its bonds due Dec. 1, 2001, and Jan. 1, 2002. There is a 30-day grace period but Huntsman is not expected to make these payments.

When the payments are missed, S&P said it will cut the ratings to D.

The rating agency said: "Huntsman's financial profile has deteriorated throughout the past year, under the weight of onerous debt levels and very weak liquidity, and the continuation of a severe operating trough in the domestic petrochemical sector. Earlier in the year, Huntsman disclosed that it had violated the financial covenants associated with its bank loans, thereby limiting sources of liquidity to cash on hand or the proceeds from potential asset sales. Recent efforts to obtain alternative sources of liquidity were unsuccessful. Huntsman has announced that it has received a $150 million commitment to allow the company to continue to operate until it completes its debt-restructuring plan."

S&P downgrades CompleTel

Standard & Poor's downgraded CompleTel Europe NV. Among the ratings reduced were the company's $75 million of zero-coupon bonds due 2009 and its €200 million of 14% high yield bonds due 2010, both cut to CC from CCC+.

Moody's downgrades Azurix, on review for further downgrade

Moody's Investors Service downgraded Azurix Corp.'s senior unsecured debt to B2 from Ba3 and put it and the Baa1 issuer rating of Azurix Europe Ltd. on review for further downgrade.

Moody's said it took the action following the downgrade of the companies' ultimate parent Enron Corp. and said the reduction reflects concerns about "the extent to which these two entities will remain fully insulated from the many financial challenges facing Enron, whose financial flexibility has been severely limited by a loss of investor confidence."

Moody's assigns Ba3 rating to Lyondell's new $350 million notes

Moody's assigned its Ba3 rating to Lyondell Chemical Co. $350 million senior secured notes.

Noting that Lyondell's new paper will rank pari passu with the company's existing bank credit facility and senior secured notes and debentures, Moody's stated that it "believes that the weak economic environment will keep demand for the company's key products near current levels and that debt protection measurements will not improve significantly in the near-term."

The release also expressed Moody's belief that "propylene oxide margins may not return to historical levels due to recent and planned capacity additions, which have outpaced demand growth.

"Lower operating rates will likely constrain margins through third quarter of 2003, after the Lyondell-Bayer PO-11 plant comes on-stream. Moreover, further deterioration is possible in 2002, if the economic environment weakens further and additional capacity comes on-stream, as planned, in Singapore."

The Houston-based chemical company manufactures propylene oxide and derivatives.

Moody's rates Appleton Papers plan deal B3

Moody's Investors Service assigned a B3 rating to Appleton Papers Inc.'s planned offering of senior subordinated notes. It also confirmed Appleton's existing ratings including the bank facility at Ba3. The outlook is stable.

The rating agency said its B3 assessment on the notes reflects their contractual subordination to a significant amount of senior secured debt.

Moody's rates KB Home's new notes Ba3

Moody's Investors Service assigned a Ba3 rating to KB Home's new offering of senior subordinated notes and confirmed the company's existing ratings, including the Ba3 rating on its senior subordinated notes and the Ba2 ratings on its senior notes. The outlook is positive.

Moody's said the ratings reflect KB Home's "long history, the progress it has made in improving gross margins under the KB2000 operating model (19.7% for fiscal 2000; over 20% estimated for fiscal 2001), its lead position in markets that it serves, the large backlog, the reduced levels of speculative inventory, and the company's success at reducing its average land supply to approximately three years."

Also helping the ratings, Moody's said, is the conversion of the Feline Prides in August 2001 through which the company received $190 million of proceeds from the common stock sale, boosting net worth to over $1 billion.

On the downside is KB Home's "aggressive acquisition strategy" and the accompanying integration risks, its still sizable concentration in California, its recent large share repurchase program and the cyclical nature of the homebuilding industry, Moody's said.

Fitch affirms Mississippi Chemical

Fitch affirmed Mississippi Chemical's senior secured debt rating of B+ and its senior unsecured debt rating of B-. The Rating Outlook is Negative.

Fitch said the ratings reflect recent financial performance as well as the long-term value of the company's current assets, domestic fixed assets and Trinidad-based assets.

It recently took Mississippi Chemical off Rating Watch Negative status but warned there is still potential for noteholders to be negatively impacted by restrictions associated with the senior secured credit facility that would be triggered by continued unfavorable commodity market volatility.

Fitch also cautioned that in the near term if Mississippi Chemical does not remain in compliance with covenants in its senior secured credit facility, the facility could be downsized to $150 million from $200 million. That could result in the company having to sell assets to pay down bank debt.

S&P puts Providian Financial on negative watch

Standard & Poor's put the ratings of Providian Financial Corp. on CreditWatch with negative implications.

Ratings affected include its senior unsecured medium-term note program at BB-, its subordinated medium-term note program at B and its convertible subordinated notes and zero-coupon convertible notes at BB-.

S&P also downgraded Providian Capital I's capital securities to CCC- from CCC+ and put them on CreditWatch with negative implications.

The rating agency also put Providian National Bank's bank notes rated BB+ on negative watch.

Fitch downgrades AES Drax, still on negative watch

Fitch downgraded AES Drax Holdings Ltd.'s senior secured bonds to BB+ from BBB- and Inpower Ltd.'s senior secured bank loan to BB+ from BBB- and cut AES Drax Energy Ltd.'s senior notes to B+ from BB. AES Drax Holdings Ltd. and Inpower ratings remain on Rating Watch Negative.

Fitch said it took the action because of problems with the insurance policies at the power plant.

In addition, reduced forward price forecasts for the England & Wales power markets have compounded what has been a weak year for Drax, Fitch said.

Moody's downgrades Pen Holdings, still on review for further downgrade

Moody's Investors Service downgraded Pen Holdings, Inc. and kept the ratings on review for further downgraded. Affected ratings include Pen Holdings' $100 million of 9.875% guaranteed senior notes due 2008, lowered to Caa2 from B3.

Moody's said the action is a result of the company's poor operating and financial results in the quarter ended September 30, 2001, and its limited liquidity as a result of development delays at its Fork Creek property, litigation payments made to Cheyenne Resources, Inc. earlier this year, and recently concluded amendments to its credit facility.

The rating agency noted Pen is attempting to sell its one-third interest in International Marine Terminals, expecting to raise $9 million by the end of the year. However, Moody's said that even if the sale goes through, proceeds must be used to repay the company's bank loans, "which does not address the $4.9 million senior note coupon payment due December 15, 2001."

Moody's rates AES New York Funding LLC bank loan Ba3

Moody's Investors Service assigned a senior secured bank loan rating of Ba3 to AES New York Funding LLC.

Moody's said the rating reflects the structural subordination of the debt and lower priority of claim to the cash flow of AES Eastern Energy, LP which provides the primary source of debt service payments to the company.

Also influencing the rating, is the high leverage of AES Eastern Energy and AES NY Funding separately and on a combined basis, Moody's said.

But support comes from the value of the collateral and the commitment to maintain a constant collateral coverage within a short time frame. Further supporting the rating is the cross default provision with the higher rated AES Corporation debt and the general covenant provisions of the loan, Moody's said.

Moody's downgrades Impsat Fiber

Moody's Investors Service downgraded Impsat Fiber Networks, Inc., affecting $650 million of debt including Impsat's $125 million of 12.125% guaranteed senior notes due 2003, its $225 million of 12.375% senior notes due 2008 and its $300 million of 13.75% senior notes due 2005, all cut to C from Caa3.

Moody's said the downgrade was a result of IMPSAT's recent statement that under its current business plan for fiscal year 2001 its cash flows and liquidity will be insufficient to satisfy its obligations beyond the end of 2001 and that the company may be required to restructure its balance sheet. As a result, the company believes these and other events raise substantial doubts about its ability to continue as a going concern for a reasonable period of time.

Moody's said it questions Impsat's ability to raise additional capital given the weakness in Latin America.

S&P cuts Avado Brands

Standard & Poor's downgraded Avado Brands Inc., including lowering its senior unsecured debt to CC from CCC. It affirmed Avado's subordinated debt at CC and its trust preferreds at C.

S&P said the action follows Avado's announcement it intends to delay the Dec. 1 interest payment on its 9.75% senior unsecured notes and the Dec. 15, 2001, interest payment on its 11.75% subordinated notes.

S&P said it will lower the senior unsecured debt ratings to D on Dec. 3, one day after the missed interest payment and the subordinated notes to D on Dec. 17.

S&P lowers J. Crew outlook

Standard & Poor's lowered its outlook on J. Crew Group Inc. and unit J. Crew Corp. to negative from stable. S&P also affirmed its ratings including the CCC+ on J. Crew Corp.'s senior subordinated notes due 2007, the CCC+ on J. Crew Group's senior subordinated discount debentures due 2008 and the B senior secured bank loan ratings on J. Crew Corp.

S&P said the revision reflects J. Crew's "deteriorating credit protection measures. The company's operating results were weak in the first nine months of 2001, and the company has announced that it expects its fourth quarter results will be off sharply. Based on the company's forecast that it will generate $55 million of EBITDA in 2001, EBITDA interest coverage will likely fall to about 1.5 times (x) in 2001 from 2.2x in 2000."

It added: "The ratings on J. Crew reflect the high business risk associated with its participation in the intensely competitive apparel retailing industry and leveraged balance sheet. These risks are partially mitigated by the company's good market position in catalog and store retailing."

S&P lowers Pen Holdings, on negative watch

Standard & Poor's downgraded Pen Holdings Inc.'s ratings, including cutting its senior unsecured debt to CCC from B and put the ratings on CreditWatch with negative implications.

S&P took the action after the company's third-quarter 10Q filing, "which references ongoing developmental problems at its Fork Creek mine that have led to diminished liquidity, raising concerns about the company's ability to meet its Dec. 15, 2001, $5 million interest payment."

S&P said it had expected the Fork Creek mine to begin generating positive cash flow during the second half of 2001, "but unforeseen developmental problems that included undulating seams, out-of-seam dilution, and lack of experienced labor have raised costs at the mine, delayed development, and impaired yield recovery. The mine is currently operating at only 50% of capacity and is in need of further capital to meet production targets of 3.5 million tons in 2002."

Availability on its credit agreement has been cut to $8.3 million from $15 million due to a covenant violation.

If Pen Holding can sell its one-third interest in International Marine Terminals it will generate $9 million, which S&P said should allow it to meet the interest payment.

S&P puts Teesside Power Financing notes on negative watch

Standard & Poor's put the ratings of Teesside Power Financing Ltd. on CreditWatch with negative implications. The company's notes are rated BB.

S&P said the action reflects "the potential for deterioration in the credit quality at the underlying project, Teesside Power Ltd. (not rated), the owner and operator of a 1,875MW gas-fired generating plant."

"Considerable uncertainty surrounds the status of Enron's purchase power contracts with Teesside Power Ltd., following the placement of some of Enron's European companies into administration. In addition, Standard & Poor's will need to ensure that funds in the cash collateral account, currently lent to Enron under the terms of the TPFL transaction, are replaced with a structure with sufficient credit quality to support liquidity in the TPFL structure," S&P said.

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