Moody's cuts Teleglobe to junk, still on review

Moody's Investors Service downgraded Teleglobe Inc. three notches to junk and kept it on review for possible further downgrade. Securities affected are Teleglobe's $600 million 7.20% debentures maturing 2009, 7.70%, $400 million debentures maturing 2029, C$125 million 8.85% debentures maturing 2002, C$125 million 8.35% debentures maturing 2003 and 8.00%, C$100 million debentures maturing 2026, all cut to Ba3 from Baa3.

Moody's said it cut Teleglobe's ratings because of its continuing concern about Teleglobe's ability to improve its operating performance and its impact on BCE's willingness to provide the additional funding required until Teleglobe is self-financing.

Teleglobe's debt is not guaranteed by BCE and without additional support from BCE Teleglobe is highly unlikely to meet its obligations, Moody's said.

The company remains on review and Moody's is likely to take "further significant rating action" soon, absent near-term material support from BCE.

Moody's lowers Allegiance Telecom

Moody's Investors Service downgraded Allegiance Telecom Inc. and maintained a negative outlook. Downgraded ratings for Allegiance Telecom include, senior implied rating changed to B3 from B2, issuer rating changed to Caa2 from B3 and $205 million 12 7/8% notes due 2008 and $445 million 11¾% notes due 2008 changed to Caa2 from B3. Lowered ratings for Allegiance Finance Company Inc. include $500 million senior secured bank credit facility changed to B3 from B2.

Moody's said the ratings reflect the continuing troubles facing the emerging telecom sector. Allegiance Telecom has not yet turned EBITDA positive, the release said, and the company is not expected to see positive cash flow results for a few years.

"We consider that Allegiance has adequate liquid resources to support the largely scalable capex requirements of its completed 36 market network," the Moody's release explained. "Nevertheless, we are concerned that Allegiance's recent operating results have fallen short of our expectations and the negative outlook expresses our caution that continuing softness in the local telecommunications market may result in covenant pressure. The senior unsecured ratings have been notched down to adjust for the meaningful level of senior secured debt in the company's capital structure following a $350 million draw under the bank facility. Ratings could be lowered if operating performance becomes further impacted by the telecom sector's downturn or if the company would not have full access to the remaining commitment available under its bank facility."

Moody's confirms United Refining, negative outlook

Moody's Investors Service confirmed its ratings on United Refining Co. including its $180 million of 10.75% senior unsecured notes due 2007 at B3. The outlook is negative.

Moody's said the negative outlook reflects United Refining's higher effective leverage, its need for 2002 sector margins to sustain recovery in United's cash flow and liquidity, reduced direct ownership of retail assets and rising use of the restricted payments basket, and United's need to renew its revolver.

United displays a "bias to leverage" given its growth objectives, private ownership and capital needs for low sulfur gasoline and diesel fuel, the rating agency commented.

Fitch downgrades MetroGas

Fitch Ratings downgraded MetroGas SA's foreign and local currency ratings to DD from C.

Fitch said its action follows MetroGas' default on an interest payment for its $100 million of bonds on April 2. Although the grace period has not expired, the company said on March 25 it will not pay any principal or interest on its debt, Fitch noted.

The company's action follows the alteration of its concession agreement by the Argentine Public Emergency Law #25.561, which includes suspension of tariff adjustments and the tariff's pesofication, Fitch added. These changes along with the devaluation have materially affected the financial condition of MetroGas, given the mismatch between its income in pesos and its debt in hard currency.

S&P puts Intertek on positive watch

Standard & Poor's put Intertek Testing Services Ltd. on CreditWatch with positive implications.

Ratings affected include Intertek Finance plc's $203 million 10.25% subordinated notes due 2006 rated B-.

S&P downgrades Tenneco

Standard & Poor's downgraded Tenneco Automotive Inc. and kept the company's outlook at negative. Ratings affected include Tenneco's $500 million revolving credit facility due 2005, $450 million term loan A due 2005, $300 million term loan B due 2007 and $300 million term loan C due 2008, all cut to B from B+, and its $500 million 11.625% senior subordinated notes due 2009, cut to CCC+ from B-.

S&P said it lowered the ratings because of Tenneco's continuing poor operating performance and high debt levels.

"Despite extensive restructuring actions underway at the company, intermediate term credit protection measures will likely remain below levels factored into previous ratings, while the debt burden will remain substantial," S&P said.

The rating agency noted debt to EBITDA (adjusted to exclude restructuring and special charges and to include operating leases and accounts receivable sales) is currently about 5.5 times, which S&P described as aggressive given the challenging markets in which the company competes.

Tenneco has been restructuring operations for the past several years and is expected to benefit over time from these activities but near-term cash costs and significant operational changes will be offsets.

S&P puts Omega Cabinets on positive watch

Standard & Poor's put Omega Cabinets Ltd. on CreditWatch with positive implications and confirmed its A corporate credit rating on Fortune Brands Inc. after Fortune announced it will acquire Omega Cabinets for $538 million. Ratings affected include Omega Cabinets' $100 million 10.5% senior subordinated notes due 2007 rated B and its $57 million secured US term note facility due 2004 and $20 million secured US revolving credit facility due 2003, both rated BB.

The purchase is expected to be largely debt-financed, S&P said, but noted that adding Omega to Fortune Brands' existing kitchen and bath cabinet business, MasterBrand Cabinets Inc., will increase the company's sales in this business to over $1 billion annually.

S&P said it believes Fortune will likely support or refinance Omega's debt although the company has not announced plans.

S&P puts New World Restaurant on watch

Standard & Poor's put New World Restaurant Group Inc. on CreditWatch with negative implications.

Ratings affected include New World's $140 million senior secured notes due 2003 and $155 million senior secured notes due 2009, both rated B-.

S&P takes Dobson off watch

Standard & Poor's removed Dobson Communications Corp. from CreditWatch with negative implications and confirmed the company's ratings. The outlook is stable.

Ratings affected include Dobson Communications' $300 million 10.875% senior notes due 2010 rated B- and Dobson Operating Co. LLC's $925 million senior secured bank loan due 2008 rated B+.

Moody's rates Synagro notes B3, bank debt B1

Moody's Investors Service assigned a B3 rating to Synagro Technologies, Inc.'s proposed $150 million of senior subordinated notes due 2009 and a B1 rating to its $150 million senior secured credit facility maturing in 2007. The outlook is stable.

Moody's said the ratings reflect Synagro's leading position in the wastewater residuals management business; synergies that the company achieved through the acquisition of the Bio Gro division of Waste Management; the stability of the company's revenues stream; and strong equity sponsorship.

The ratings also reflect virtually unused revolving debt capacity; acquisition risk; moderate interest coverage; moderate leverage; and deeply negative tangible equity due to the large amount of intangible assets, at 37% of total assets, Moody's added.

Synagro has a fairly predictable revenue stream, given the longevity of its municipal contracts and the relatively low customer churn rate, as well as the potential for further internal growth and margin enhancement, Moody's said.

But it cautioned that if the company continues to pursue its acquisition-based growth strategy and increase leverage the rating could be negatively affected.

S&P takes Box USA off watch

Standard & Poor's removed Box USA Holdings Inc. from CreditWatch with negative implications, confirmed its ratings and assigned a negative outlook.

Ratings affected include Box's $170 million 12% senior notes due 2006 rated B.

Moody's puts New World Restaurant on review

Moody's Investors Service put New World Restaurant Group, Inc. on review for downgrade including its $140 million increasing rate senior secured notes due June 2003 rated B3.

Moody's said its action follows news that the chairman and chief financial officer have left the company, that the filing of the 10K for 2001 has been delayed and that the SEC has begun an informal investigation into those events.

Moody's said its review will consider the outcome of the SEC's investigation and the potential that information supplied to Moody's may not have been accurate.

The review also will consider the likelihood for replacing the 2003 notes. The company had intended to issue a $155 million 7-year senior secured note to replace the 2003 notes, but completion of the new deal is unlikely until the SEC resolves its concerns, Moody's said.

Moody's puts Omega Cabinets on upgrade review

Moody's Investors Service put Omega Cabinets, Ltd. on review for possible upgrade include its senior secured debt at B1 and senior subordinated notes at B3 and confirmed the A2/Prime-1 ratings of Fortune Brands and maintained the stable outlook on Fortune.

The action follows the announcement that Fortune will acquire The Omega Group for $538 million.

The confirmation reflects the improvements in Fortune Brands debt protection measures in the past year and the expectation that these measures will continue to improve in 2002, Moody's said.

Moody's added that Omega's ratings are on review for possible upgrade, pending resolution of how its debt will be handled following the acquisition.

S&P downgrades American Cellular

Standard & Poor's downgraded American Cellular Corp. and put the company on CreditWatch with developing implications. It had previously been on negative watch.

Ratings affected include American Cellular's $300 million revolver due 2007, $700 million term loan A due 2007, $350 million term loan B due 2008 and $400 million term loan C due 2009, all cut to CCC+ from B, and its $600 million of 9.5% senior subordinated notes due 2009, cut to CCC- from CCC+.

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