S&P: Dobson on negative watch

Standard & Poor's said it maintained the ratings of Dobson Communications Corp., including its B- corporate credit rating and CCC+ senior unsecured debt, as well as American Cellular Corp.'s B- corporate credit and senior unsecured debt, and related entities on CreditWatch with negative implications following Dobson's announcement on March 16 that it filed an application with the SEC to extend the filing of its 2003 10-K by two weeks.

The extension was requested to resolve an ambiguity in 2004 covenant language in the bank credit agreement of Dobson Cellular Systems, a Dobson subsidiary. Specifically, Dobson Communications referred to the calculation of the leverage ratio covenants and clarity on whether the covenants should be calculated based on the last four fiscal quarters of operation or on an annualized basis for the quarter ending March 31, 2004.

If the ratio is calculated on an annualized basis for the quarter ending March 31, 2004, Dobson and its subsidiaries may not be in compliance with the leverage ratio covenants. If the company is not in compliance, Dobson indicated that this could require its independent accountants to issue a "going concern" opinion on its financial statements for the year ended Dec. 31, 2003.

S&P said the company is requesting the lenders under the credit agreement to correct the credit agreement to eliminate the ambiguous and inconsistent language and clarify that the leverage ratios are to be calculated based on the last four quarters of operation. Based on this method of calculation, Dobson and its subsidiaries would be in full compliance with the leverage ratio covenants at March 31, 2004.

S&P revises Eletropaulo to SD

Standard & Poor's said it revised its local and foreign currency ratings on Eletropaulo Metropolitana Eletricidade de São Paulo SA to SD from D in its global scale, after the conclusion of Eletropaulo's BrR2.3 billion debt restructuring that began Sept. 30, 2003. The corporate credit rating assigned on the Brazil National Scale was also revised to SD from D, and the brCC rating on Eletropaulo's debentures issue was affirmed.

S&P said Eletropaulo is still analyzing alternatives to resolve the $2 million of the $100 million euro commercial paper transaction due in December 2002, which is the company's only debt still in default. Considering that Eletropaulo showed cash holdings of some BrR450 million at fiscal year end 2003, this pending debt poses no cash flow problem.

According to Eletropaulo, the length of time needed to resolve this issue relates to the difficulties to track and reach those defaulted investors, as the Commercial Paper market is largely spread out.

S&P lowers Delta Air Lines

Standard & Poor's said it lowered its ratings on Delta Air Lines Inc., including the corporate credit rating to B- from B+, and removed all ratings from CreditWatch, where they had been placed on Nov. 24.

Ratings lowered include Delta Air Lines Inc.'s senior secured debt to B- from B+, senior unsecured debt to CCC from B- and equipment trust certificates Series 1988A-G, Series 1989A-J, Series 1990I, Series 1990J, Series 1990K, Series 1991F-H, Series 1991L, and Series 1992A-F, all to B from BB-.

Ratings on selected aircraft-backed debt were lowered to a greater extent, based on S&P's review of default risk and recovery prospects for individual obligations. Ratings on bond-insured, AAA rated enhanced equipment trust certificates, which were not on CreditWatch, were affirmed.

S&P said ratings on Delta reflect financial damage from heavy losses over the past several years; a high operating cost structure; substantial debt, lease, and postretirement liabilities; and risks associated with the company's participation in the cyclical and price-competitive airline industry.

Positive factors are the company's solid market position in the U.S. domestic and trans-Atlantic markets and the work rule flexibility and productivity made possible by a mostly nonunion work force (only the pilots, among major employee groups, are organized).

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