Fitch cuts Enron to BBB-, still on negative watch

Fitch downgraded Enron's ratings including cutting its senior unsecured debt to BBB- from BBB+. It also cut the subordinated debt to BB from BBB and the preferred stock to B+ from BBB-. Enron's commercial paper was cut to F3 from F2. Also downgraded were Enron's pipeline subsidiaries, Northern Natural Gas Co. and Transwestern Pipeline Co., which Fitch cut to BBB- from A-. All the ratings remain on Rating Watch Negative.

Fitch said it will consider further downgrades if Enron is unable to make progress in reducing debt, if its wholesale marketing and trading business were to show signs of material deterioration, or if expenses and charges related to the disposition of non- core businesses and investments exceed present estimations.

Fitch said the downgrades reflect "the difficulties Enron faces in managing its liquidity position in the face of an erosion in investor confidence. This follows the recognition of a substantial diminution in value of its global merchant investments, which were partly financed with an aggressive use of off-balance sheet vehicles. Enron should be able to manage through this challenging environment, ultimately recognizing the values of the company's core businesses."

The rating agency added: "While its current cash position appears adequate, securing additional capital sources through asset sales or raising additional capital would be a favorable development."

Moody's cuts Emmis outlook to negative

Moody's Investors Service revised its outlook on Emmis Communications to negative and confirmed the company's ratings, including Emmis Operating's $1.3 billion of bank credit facilities rated Ba2, Emmis Operating's $300 million of 8 1/8% senior subordinated notes due 2009 rated B2, Emmis Communications' $200 million of senior discount notes due 2011 rated B3. Moody's downgraded Emmis Communications' $144 million of cumulative convertible preferred stock to Caa1 from B3.

Moody's said it cut the outlook because of the impact of the "persistently weak advertising market on Emmis' future performance, particularly given the company's already high leverage and modest cashflow coverage of interest and capital expenditures. The extension of a weak advertising market, the potential for weakness in local markets and a recessionary economy have put the company's current ratings in jeopardy."

While Emmis' television and radio revenues grew year over year, Moody's said this was primarily driven by acquisitions.

It added: "Emmis is not currently experiencing the benefits of diversity, because the company has suffered weakness across all of its operating segments."

Moody's also said it expects the company will need to amend the total leverage covenant in its bank facilities for the third and fourth quarters.

Moody's rates new ResCare notes at B2

Moody's Investors Service assigned a B2 rating to ResCare, Inc.'s planned offering of $150 million of senior notes due 2008. It also rated the company's new $80 million senior secured revolving credit facility due 2004 at Ba3. Outstanding ratings were confirmed, including the B3 rating on its 6.0% convertible subordinated notes due 2004. The outlook is stable.

Moody's said the ratings reflect "ResCare's high leverage and modest cash flow, the deterioration in operating performance due to increasing expenses and the company's heavy reliance on reimbursements from government sources."

The rating agency also noted "the high level of competition in the services market for individuals with mental retardation or other developmental disabilities (MR/DD) and for at-risk and troubled youths. Mitigating factors include the company's leading position in the MR/DD market, positive demand trends for services, the diversification of revenue streams geographically, the shift in strategy away from acquisitions, along with those risks associated with this strategy, and the increase in financial flexibility following the financing."

Moody's said it anticipates the company's performance will stabilize over the coming quarters.

S&P downgrades SpectraSite notes to CCC+ from B-

Standard & Poor's downgraded SpectraSite Holdings Inc.'s notes to CCC+ from B-.

Ratings affected include the $400 million senior notes due 2010, the $559.8 million senior discount notes notes due 2010, the $587 million 11.25% senior discount notes due 2009, the $225 million 12% senior discount notes due 2008, the $200 mil 6.75% senior convertible notes due 2010 and the $200 million 12.5% senior unsecured notes due 2010.

S&P cuts House2Home to D

Standard & Poor's downgraded House2Home Inc.'s $100 million of 5¼% convertible subordinated notes due 2004 to D from CC.

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