S&P cuts Teleglobe to junk

Standard & Poor's downgraded Teleglobe Inc. and kept it on CreditWatch with negative implications. Ratings affected include Teleglobe's senior unsecured notes, bank loan and debentures, all cut to B- from BBB+.

S&P said the downgrade is because of heightened concerns about Teleglobe's ability to obtain additional sources of funding given a reevaluation by BCE Inc. of Teleglobe's longer term strategic importance.

The downgrade also reflects heightened uncertainty regarding Teleglobe's ability to amend the terms under the fully drawn US$1.25 billion facility, which becomes due July 22, 2002, S&P said.

The new ratings are stand-alone for Teleglobe, S&P continued. Its credit profile has weakened considerably due to significantly lower revenue and EBITDA in 2001 due to a sharp decline in wholesale revenues from carrier customers. The ratings also take into account limited rating support due to the BCE relationship. Continued weakness in the sector places increasing uncertainty regarding the growth potential of Teleglobe's high-margin global enterprise business, which was expected to offset declines in the carrier segment.

S&P downgrades Dollar General to junk

Standard & Poor's downgraded Dollar General Corp. and removed it from CreditWatch with negative implications. The outlook is negative. Ratings affected include Dollar General's $200 million 8.625% senior unsecured notes due 2010 and $175 million bank loan due September 2002, both cut to BB+ from BBB-.

S&P said it lowered Dollar General because of its restatement of financial results, reduced financial flexibility and the challenges management faces in improving its financial and operating controls while expanding rapidly within a highly competitive industry.

Although the restatement did not materially impact cash flow for the restated years, it still points to inadequate financial controls, S&P said. These issues are being addressed by the new financial management team.

Store-level execution has been inconsistent, despite good historical same-store sales, in large part due to the demands of rapid store expansion, the rating agency added. To help improve execution, management is moderating the pace of growth somewhat and implementing numerous operational changes. The company will open about 600 stores in 2002, which is still aggressive but below 2000's record 750-plus store opening program.

Cash flow coverage for the restated years and for fiscal 2001 was adequate but near-term financial flexibility is somewhat constrained due to significant refinancing needs in 2002 including the maturities of $383 million in synthetic leases and a $175 million revolving credit facility in September 2002 as well as an anticipated shareholder litigation settlement, S&P said.

S&P downgrades Building Materials notes

Standard & Poor's downgraded the senior notes of Building Materials Corp. of America, confirmed its corporate credit rating at B+, removed the company from CreditWatch with negative implications and assigned a negative outlook. Notes downgraded to B from B+ are its $100 million 8.625% senior notes due 2006, $100 million 8% senior notes due 2007, $150 million 7.75% notes due 2005 and $155 million 8% senior notes due 2008.

S&P said it lowered Building Materials' notes because of the meaningful amount of priority debt relative to total assets.

The confirmation of the company's corporate credit rating reflects S&P's expectation that Building Material's credit quality will not be impaired by the Chapter 11 bankruptcy proceedings of the company's parent, G-1 Holdings Corp., nor by the asbestos litigation pending against it.

Moody's rates Kinetek's bank loan and notes B2

Moody's Investors Service assigned a B2 rating to Kinetek Industries Inc.'s $50 million senior secured revolver due December 2005, proposed $15 million 5% senior secured notes due May 2007 and proposed $11 million 10% senior secured notes due May 2007. Also, Moody's confirmed the ratings of parent company Kinetek Inc., including the Caa1 rating on its $270 million 10.75% series D senior unsecured notes due 2006, its B3 senior implied rating and its Caa1 issuer rating. The rating outlook was changed to stable from negative.

Negative factors reflected in the ratings include high debt leverage, a weak balance sheet, deteriorating operating performance and financial difficulties at the parent company, Moody's said.

Positive factors reflected in the ratings include Kinetek's strong niche market position and expertise in the specialty motor and motion control businesses and improved liquidity due to the refinancing of its credit facility, the release said.

The senior secured notes will be issued at a discount, according to Moody's, generating a total of approximately $20.3 million in proceeds, which will be used to pay down outstanding debt under the revolver and to purchase 80% of De Sheng Electric Motor Co., Ltd.

Following the financing, Kinetek's pro forma debt will total approximately $310 million, or six times 2001 EBITDA, Moody's said. Pro forma debt would represent about 108% of 2001 revenues. The balance sheet has goodwill accounting for about 55% of total assets and a tangible equity deficit of about $185 million. The net book value of property, plant and equipment was about $19.6 million at the end of 2001.

S&P rates Kinetek's notes B+

Standard and Poors' assigned a B+ rating with a negative outlook to Kinetek Industries Inc.'s $15 million 5% senior secured notes due 2007 and $11 million 10% senior secured note due 2007. Also, the long-term credit rating for Kinetek was affirmed.

Proceeds from the notes are expected to be used to pay down outstanding bank loan debt, S&P said.

"The corporate credit rating on Kinetek, a wholly owned non-restricted subsidiary of closely held Jordan Industries Inc., reflects its solid positions in small niche markets and its very aggressive financial profile," S&P explained.

According to S&P, EBITDA to interest declined to 1.7 times while total debt to EBITDA rose to about 5.6 times at Dec. 31, 2001. Although total debt to EBITDA may rise towards the 6 times area in the next couple of quarters, leverage is expected to average in the 4-5 times range over the business cycle. EBITDA to interest coverage is expected to average in the modest 2.0-2.5 times range.

Moody's lowers CPKelco Aps ratings; Negative outlook

Moody's Investors Service lowered CPKelco Aps' ratings. The outlook is negative. Downgraded ratings include its $50 million senior secured guaranteed revolver due 2006, $153.7 million senior secured guaranteed term A (comprised of $28 million, €99.1 million, ¥5 billion) due 2006, $191.6 million senior secured guaranteed term B due 2008 and $63.8 million senior secured guaranteed term C due 2008, all cut to B3 from B1, its €255 million senior subordinated notes due 2010 to (P) Ca from B3, its senior implied rating to B3 from B1 and its issuer rating to Caa1 from B2.

The downgrade, according to Moody's, reflects lower earning expectations, lower credit protection measurements, high leverage, negative tangible book equity, continuing acquisition integration risks and costs, high working capital needs, overcapacity in the low-end carrageenan markets and price competition.

"The negative rating outlook reflects the fact that it is unclear whether adequate levels of earnings and cash flow will be restored in the intermediate term to support the heavy debt burden," Moody's said.

As of Dec. 31, 2001, the company's ratio of debt to sales was 1.6 times and debt to EBITDA was 10.9 times.

According to the rating agency, the company amended its $50 million revolver in March 2002 to change the leverage ratio. The revolver is currently undrawn. "Moody's believes that most, if not all, of the $453 million intangibles may be written off, and a portion of plant, property and equipment may be written off (01 net PP&E totaled $398 million, which is almost equal to sales of $444 million)," Moody's said.

S&P takes Remington off watch

Standard & Poor's confirmed its ratings on Remington Products Co. LLC and Remington Capital Corp. and removed then from CreditWatch where they were placed Dec. 12, 2001 due to weaker-than-expected operating performance.

Remington's weak 2001 performance led to financial covenant defaults under its credit agreement for the fourth quarter of 2001, S&P said. An amendment to the credit agreement has since been completed, including waiving all necessary financial covenants for this period, adding new covenants, and loosening existing covenants.

S&P warned Remington's ratings could be lowered if its operating performance and credit ratios weaken further.

Debt to EBITDA was 6.6 times in 2001, up from 4.6 times in 2000. EBITDA interest coverage dropped to 1.2 times from 1.8 times.

S&P changes Panavision ratings

Standard & Poor's took various rating actions on Panavision Inc. and kept it on CreditWatch with negative implications.

Ratings affected include Panavision's corporate credit, raised to CCC from CC, its $100 million revolving credit facility, $90 million tranche A term loan and $150 million tranche B term loan, all cut to CCC from B, and PX Escrow Corp.'s $150 million 9.625% senior subordinated discount notes due 2006, raised to CC from C.

Moody's cuts Corn Products

Moody's Investors Service downgraded the $200 million senior unsecured notes and $340 million senior unsecured bank facilities of Corn Products International, Inc. to Ba1from Baa3 with a stable outlook, affecting $630 million of debt.

Moody's said the downgrade reflects the deterioration in Corn Products' debt protection measures, combined with higher debt levels following investments in international operations.

Corn Products also suffers from continuing weak industry fundamentals in its important US market, as well as challenges in historically more profitable markets such as Mexico and Argentina, Moody's said.

However the rating agency gives the company a stable outlook because it expects Corn Products to reduce its debt, strengthen its debt protection measures and improve its financial flexibilty in the near to medium term.

The stable outlook also anticipates that Corn Products will successfully recast its bank credit facility, lengthen the maturity schedule of its debt and reduce the degree of structural subordination in its capital structure by reducing debt at subsidiaries.

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