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Moody's cuts Foster Wheeler
Moody's Investors Service downgraded Foster Wheeler LLC including cutting its senior secured notes to Caa2 from B3, senior unsecured industrial revenue bonds to Caa3 from Caa1, Foster Wheeler Ltd.'s convertible subordinated bonds to C from Caa3 and FW Preferred Capital Trust I's trust preferred securities to C from Caa3. The outlook remains negative.
Moody's said the downgrade is because of Foster Wheeler's declining backlog, poor new award development, weakened asset coverage, low cash flow generation and the expectation of diminishing cash balances.
While Foster Wheeler's cash balances and unused capacity under its bank facilities are currently meeting working capital requirements, Moody's said it is concerned that anticipated fourth quarter needs could strain the company's domestic liquidity sources.
In addition, the company's debt remains high, cash flow generation remains modest and the business environment remains challenging, as reflected in the lack of substantial new business awards and a declining backlog.
Moody's also noted that while certain of Foster Wheeler's debt ratings recognize the benefit and limitations to senior noteholders of sharing certain collateral and subsidiaries' guarantees with bank creditors, as required by the indenture, the benefit has been negatively impacted by a variety of asset write-offs that could affect eventual asset coverage.
The negative outlook reflects Moody's ongoing concerns about Foster Wheeler's operating outlook and financial strength in light of weakness in its end markets, which could result in continued moderation of revenues, earnings and cash flow generation well into 2004.
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