Moody's puts Royal Caribbean ratings on review, uncertain, on P&O deal

Moody's Investors Service on Tuesday placed the ratings of Royal Caribbean under review direction uncertain following the company's announcement that it had agreed with P&O Princess Cruises plc to combine operations under a dual listed company structure. The review will focus on the ability of the combined entity to achieve targeted cost savings, fund its shipbuilding program and a new joint venture, integration risks, as well as the potential for structural subordination since future creditors, but not existing debtholders, are expected to be cross-guaranteed under the new structure. Moody's notes the combined group will have greater scale, geographic diversity and higher earnings and cash flow. However, cruise industry conditions are already weak and are likely to remain so in light of significant new capacity coming on-line over the next several years. Additionally, the risk of travel disruptions caused by safety concerns, terrorist activity or political events has increased. Moody's noted that under the proposed structure, both Royal Caribbean and P&O will retain their corporate identities and continue as separate publicly traded companies.

S&P puts Royal Caribbean ratings on watch, positive

Standard & Poor's on Tuesday placed its long-term ratings on Royal Caribbean Cruises Ltd. were placed on watch with positive implications and put its ratings for P&O Princess Cruises PLC, on watch with negative implications. The negative CreditWatch listing for P&O Princess reflects a material increase in financial leverage, which the combined entity is likely to incur, compared with P&O Princess's current position. RCL, on the other hand, could benefit from an improvement from the combined entity's comparatively stronger debt protection measurements, S&P said.

Fitch rates MetLife notes at AA-

Fitch assigned a rating of AA- to MetLife, Inc.'s $500 million non-callable senior unsecured notes due Dec. 1, 2006 and $750 million non-callable senior unsecured notes due Dec. 1, 2011. The rating outlook is stable. The ratings reflect the inherent strength and diversity of Met's primary operating segments, solid balance sheet fundamentals, strong cash flow-generating power and financial flexibility and moderate use of financial leverage. Met targets long-term to total capitalization in the range of 20%-25%. While Fitch includes short-term debt for the purposes of calculating financial leverage, it also gives credit to more equity like preferred securities. Incorporating Met's pro forma financial leverage is consistent with the ratings assigned, Fitch said.

Moody's downgrades United Pan-Europe

Moody's Investors Service downgraded United Pan-Europe Communications NV and its subsidiaries, affecting $9.1 billion of debt securities. Among the reductions, Moody's cut UPC's senior unsecured notes to Ca from Caa3 and its subsidiary bank debt to B3 from B2. It also cut UPC Polska's senior unsecured bonds to Caa3 from Caa2. The outlook is negative. Moody's previously downgraded the company on Oct. 2, 2001.

Moody's said the most recent downgrade reflects the "increased certainty of a restructuring, as explicitly acknowledged by the company, and Moody's expectation that recovery prospects for senior noteholders will be minimal, as reflected in the company's adjusted ratings."

Moody's said the B3 senior bank facility rating reflects its belief that the collateral still provides an "adequate level" of asset coverage for senior lenders. UPC Polska's senior note rating reflects the "relatively stronger asset coverage."

Fitch to hold teleconference on retail

Fitch is hosting a teleconference on the retail sector on Tuesday Nov. 27, at 11 a.m. ET, featuring analysts Phillip Zahn and Sheila McNeely. Fitch will be discussing its overview of the retail sector for 2001 and there will be some discussion about how the retail sector will fare during the holiday season, as well the 2002 outlook for the sector.

S&P cuts ACT Manufacturing sub debt rating to CCC from B-

Standard & Poor's lowered its corporate credit and bank loan ratings on ACT Manufacturing Inc. to B-s from B+ and its subordinated note rating to CCC from B-. At the same time, the ratings were placed on watch with negative implications. The ratings action reflects the company's limited financial flexibility due to violation of bank loan covenants and operating losses that are likely to persist in the near term, resulting in deteriorating credit measures. Hudson, Mass.-based ACT provides electronic manufacturing services, primarily to the telecommunications and networking markets, S&P said.

On Nov. 9, 2001, the company entered into a limited waiver to the credit agreement with its lenders, waiving non-compliance by ACT of certain borrowing restrictions and reduces the revolving loan availability. S&P said it would review the financial effect of near-term financing plans to enhance liquidity, restructuring efforts, and operating performance prior to resolving the watch placement.

S&P keeps Enron debt on watch, negative

Standard & Poor's said Tuesday that its ratings on Enron Corp. (triple-'B'-minus/'A-3') will remain on watch with negative implications following the filing of the company's third-quarter SEC Form 10-Q report. The 10-Q contained information on a ratings trigger event involving an existing minority interest on Enron's balance sheet held by Citibank and a group of other banks that have the right to accelerate the sale of underlying assets, including a $690 million Enron note, to Nov. 26, 2001 from 2003, S&P said. At this time, the trigger event does not constitute an event of default. However, S&P said it does raise liquidity issues for Enron. Standard & Poor's believes, given the alignment of interests between Enron and the banks, that the company's efforts to renegotiate and extend the maturity of the obligation will be successful.

An expected additional infusion of $500 million of new private equity and around $800 million of imminent asset sale proceeds will further enhance liquidity in the relatively short term. As Enron's credit situation continues to stabilize, S&P sait it also expects future maturing obligations to be extended and margin requirements to ease, which will improve the company's liquidity even further. Enron's ratings remain on watch, negative, because of the near-term refinancing risk and Dynegy deal risk, but an update of the watch listing to positive is possible in the first quarter of 2002 if the resolution of those risks becomes clearer, S&P said.

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