S&P: Gap sales has no impact on rating, outlook

Standard & Poor's that The Gap Inc.'s (BB+/Stable/B) report that comparable-store sales dropped 12% in March has no effect on its credit rating or outlook.

S&P had expected the company to be very challenged near term as consumers have responded poorly to Gap's merchandising offering for more than two years and the company has had to mark down a significant amount of merchandise.

Gap's strong cash flow generation still provides adequate credit support at the current rating level.

Although S&P still expects Gap will face difficulties through the first half of 2002, the future credit profile will be determined by the extent of these difficulties and the potential for recovery in the second half of the year.

Fitch cuts Tribune senior debt to A-

Fitch Ratings cut the senior unsecured debt rating of The Tribune Co. to A- from A, subordinated debt to BBB+ from A- and commercial paper to F2 from F1. The outlook is stable.

The downgrade reflects deterioration in credit protection measures resulting from a combination of moderate-size acquisitions and investments as well as stock repurchases in 2001, in addition to the overall recessionary conditions in newspaper and television markets.

While consolidated revenues increased 7% in 2001, reflecting the mid-year 2000 completion of the Times Mirror acquisition, EBITDA declined 11% before restructuring charges. Pro forma EBITDA from publishing operations declined 26% on a 9% pro forma decline in revenues in 2001 and EBITDA from broadcasting operations fell 20% on an 8% revenue decline.

While debt levels were flat in 2001, cash-flow leverage increased significantly.

Although Tribune has implemented a plan to improve its credit profile, including conserving capital, reducing operating costs and applying free cash flow from operations to reduce debt, the expected degree of improvement is likely to keep the credit metrics well outside the'A range in the intermediate term.

Moody's puts Nextel on review for downgrade

Moody's placed the ratings of Nextel Communications Inc. and Nextel Finance Co. on review for possible downgrade, including the three convertible senior notes at B1 and convertible preferreds at B3.

The review will focus on Nextel's ability to grow cash flow to meet capital expenditure requirements and mounting debt service obligations, and to achieve free cash flow in a reasonable time frame.

Moody's noted that Nextel currently has a good liquidity position with over $3.4 billion in cash and an undrawn $1.5 billion revolving credit. However, the term loans begin to amortize in fourth quarter and the revolver begins to reduce. Further, the three outstanding discount note issues will require cash interest payments in 2003, and two of the preferred stock issues will require cash dividends as well.

This will substantially increase Nextel's cash requirements from current levels while capital expenditure requirements to maintain and improve its network are still quite high. Additionally, the leverage covenant in the credit agreement steps down rapidly later this year, reducing financial flexibility.

To meet these increasing cash requirements, Nextel will have to continue grow EBITDA at a rapid pace, which will prove challenging in the very competitive and maturing wireless marketplace.

Fitch affirms CenterPoint convertibles at BBB-

Fitch Ratings affirmed its ratings for CenterPoint Properties, including the $350 million senior unsecured notes due 2003-2005 at BBB and $125 million of perpetual and convertible preferred stock at BBB-. The outlook remains stable.

The ratings reflect positively on Chicago-based CenterPoint's local market expertise, focus on larger warehouse properties in submarkets and the depth and breadth of investor and tenant demand for Chicago industrial properties. It also acknowledges stable cash flow for the portfolio, low expense and capital expenditure requirements. Additional credit strengths include moderate 32% debt leverage, good access to debt and equity markets and good priority of bondholders in the capital structure due to minimal use of mortgage debt.

Fitch's primary concern for CenterPoint is portfolio concentration in the Chicago area.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.