Moody's cuts Adelphia, still on review

Moody's Investors Service downgraded Adelphia Communications Corp. and its subsidiaries and left the ratings under review for possible further downgrade. Downgraded ratings include Adelphia's senior secured bank debt, cut to Ba3 from Ba2, senior unsecured notes and senior subordinated notes of FrontierVision to B3 from B2, convertible subordinated notes to Caa1 from B3, convertible and exchangeable preferred stock to Caa2 from Caa1, senior unsecured issuer rating to B3 from B2 and senior implied rating to B1 from Ba3.

The downgrade reflects the company's over-leveraged balance sheet, loss of investor confidence, ensuing liquidity crunch and the lack of a near-term contingency plan, Moody's said.

"Importantly, the one notch downgrade reflects our belief that the company's many immediate obstacles, including the imminent requirement to file its financial statements in order to cure its current bank loan agreement defaults, the need to gain renewed access to undrawn bank lines in order to avert a liquidity crisis, and the need to satisfy both the NASDAQ and the SEC and maintain its common stock listing in order to preclude the put of convertible securities back to the company, will all be satisfactorily addressed in very short order," the release said. However, if the company problems are not fixed, ratings could be downgraded even further.

If the company files its 10-K, engages in an asset monetization program, improves and extends its liquidity and the Nasdaq and SEC reviews close, the Moody's review will probably end and the ratings will be confirmed, the release said.

Moody's lowers CSC Holdings outlook

Moody's Investors Service lowered its outlook on Cablevision Systems Corp.'s CSC Holdings, Inc. subsidiary to negative from stable. Affected ratings include CSC Holdings' senior unsecured notes and debentures at Ba2, senior subordinated notes and debentures at Ba3 and preferred stock at B1.

Moody's said it lowered the outlook primarily in response to growing concern over an apparent funding shortfall in 2003.

Moody's said it has previously drawn attention to "the company's increasingly constrained financial flexibility and management's seemingly increased willingness to accept added risk in the context of running its business."

"These concerns remain unabated since our previous downgrade of the company in February 2002," Moody's commented.

"While we continue to believe that the large capital investments associated with Cablevision's network rebuild are both proper and necessary, we are concerned that continuing capital expenditures will be financed in a manner which is detrimental to bond and preferred stock holders in particular. As we have noted before, the cancellation of a convertible preferred offering in 2001 removed an expected layer of junior capital that would have effectively precluded the funding shortfall while also improving the security of more senior creditors in the consolidated capital structure. Cablevision's use of senior bank debt to finance its capital investment program in 2002 has contributed to increasing leverage and continues to further constrain financial flexibility," the rating agency added.

Moody's cuts some Insight ratings

Moody's Investors Service downgraded some ratings of Insight Communications and its subsidiaries. Ratings affected include Insight Communications' $400 million (face amount) of 12¼% senior unsecured discount notes due 2011, cut to Caa1 from B3, and senior implied rating confirmed at Ba3, Insight Midwest's $500 million 10½% senior unsecured notes due 2010 and $200 million 9¾% senior unsecured notes due 2009 lowered to B2 from B1, Insight Midwest Holdings' $425 million senior secured revolver, $425 million senior secured term loan A and $900 million senior secured term loan B confirmed at Ba3, Coaxial's $55.87 million (face amount) 12 7/8% senior unsecured discount notes due 2008 confirmed at Caa1 and Coaxial Communications of Central Ohio's $140 million 10% senior unsecured notes due 2006 confirmed at B3. The outlook remains negative.

Moody's said the downgrades principally reflect its growing concern over the slower-than-anticipated growth of Insight's cash flow, particularly given the comparatively advanced stage of network development, Insight's well-clustered systems and that peak leverage was supposed to have been reached more than one year ago.

These considerations should have supported above-average performance levels against its peers, Moody's said.

In addition, when the Insight Midwest ratings were originally assigned and again last year when the Insight debt was rated, Moody's said it had expected to raise the senior implied and bank loan ratings to Ba2 by this time based on anticipated strong revenue and cash flow growth from new services. That combined with reduced capital spending at a much earlier stage than other similarly rated credits should have supported a pronounced deleveraging trend.

"As previously indicated, however, the company has somewhat perplexingly not performed in accordance with this set of expectations," Moody's said.

Because of this underperformance, the company is now "somewhat weakly positioned" at a Ba3 senior implied rating rather than well positioned previously.

Moody's lowers American Cellular

Moody's Investors Service downgraded American Cellular Corp., concluding a review begun on April 11. Lowered ratings include American Cellular's senior implied to Caa1 from Ba3, senior secured bank credit facility to B3 from Ba3 and senior subordinated notes to Caa3 from B2. The outlook is negative.

"The downgrades reflect the deterioration of the credit over the past year and the lack of financial support from the company's 50% shareholder, AT&T Wireless (senior unsecured Baa2)," Moody's said. The Caa1 senior implied rating reflects the increasing likelihood that the company will default on its obligations and that its assets and cash flows cannot support its debt obligations, the rating agency added. The B3 rating on the secured credit facility reflects Moody's opinion that the senior lenders have adequate collateral coverage of their loans, while the Caa3 rating on the subordinated notes reflects their junior position in the capital structure and the little residual value left to satisfy these obligations after the senior bank lenders' claims have been met.

The negative outlook reflects the possibility of future downgrades if the company does not obtain relief from its lenders and its shareholders do not inject enough equity into the company to delever the balance sheet.

American Cellular had about $924 million of outstanding bank debt and $700 million of subordinated debt in February 2002. EBITDA from remaining assets were $156 million for leverage of 10.4x for the last four quarters. In order for the company to be free cash flow breakeven, EBIDTA has to grow by over 12% in 2002 to cover an annual interest expense of about $125 million and expected capital expenditures of over $50 million. In addition, the company has to amortize $925 million in bank debt.

S&P puts Petroleum Geo-Services on watch

Standard & Poor's put company Petroleum Geo-Services ASA on CreditWatch with negative implications. Ratings affected include Petroleum Geo-Services' senior unsecured debt at BBB-, subordinated debt at BB+ and PGS Trust I's $125 million trust preferred securities rated BB.

S&P said it put Petroleum Geo-Services on watch after the company said the sale of its Atlantis oil and gas operations to Sinochem has been delayed.

The Atlantis sale is important to Petroleum Geo-Services because it is a precondition to closing its merger with Veritas DGC Inc., which S&P said it believes would be highly beneficial to Petroleum Geo-Services as it would materially consolidate the seismic industry.

This would provide the basis for a secular uplift in the company's profitability and cash flow. In addition, the Veritas transaction would deleverage Petroleum Geo-Services, S&P said.

Fitch cuts Imagen Satelital to DD

Fitch Ratings downgraded the foreign currency rating of Imagen Satelital SA to DD from C, affecting $85.1 million of debt including the company's $80 million senior unsecured notes due in 2005. The DD rating indicates the company is in default and that the recovery rate is expected to be in the range of 50%-90%.

Fitch said the action follows Imagen Satelital's missed payment of $4.4 million of interest due May 1 on the notes.

S&P cuts Abraxas

Standard & Poor's downgraded Abraxas Petroleum Corp. and put it on CreditWatch with negative implications. The company was previously on CreditWatch with developing implications. Ratings affected include Abraxas' $188.8 million 11.5% senior notes due 2004, cut to SD from CC and its $63.5 million 12.875% first lien notes due 2003 at CCC-. The corporate credit rating was cut to CC from CCC-.

S&P said the action follows Abraxas' announcement it will defer payment of its $11 million interest payment due May 1.

The rating and CreditWatch actions reflect the inability of Abraxas to fund debt maintenance through its operations and the need for the liquidation of assets to manage debt and interest payments, S&P said.

"If there is not operational improvement or significant asset sales achieved, defaults on interest or debt repayment are likely to occur in the future," the rating agency added.

S&P rates Sanitec notes B

Standard & Poor's assigned a B rating to Sanitec International SA's €260 million 9% subordinated bonds due 2012.

Moody's puts Giant on review

Moody's Investors Service put Giant Industries on review for a possible one notch downgrade. Ratings affected include Giant's $150 million 9% senior subordinated notes due 2007 and $100 million 9.75% senior subordinated notes due 2003, both at B2.

Moody's said the review will assess whether the current ratings are compatible with Giant's future operating challenges and pro-forma financial structure after it acquires BP Amoco's 62,000 barrel/day Yorktown, Va. refinery.

Yorktown could become an important diversification away from Giant's exposures to declining regional crude oil production in the Four Corners region of the U.S. and rising competition from an existing refined product pipeline and two potential refined production pipelines that would feed more refined product into the Southwest region, Moody's said.

However Giant would carry substantially escalated debt in a volatile sector; it would need to demonstrate that Yorktown can reasonably meet its processing, cost, and margin performance expectations in its first year outside BP's system; and it would need to demonstrate healthy debt reduction after a fairly heavy pro-forma capital spending budget, particularly at Yorktown, the rating agency added.

S&P upgrades Omega Cabinets

Standard & Poor's upgraded Omega Cabinets Ltd., raising its subordinated debt to A- from B.

S&P said the action follows Fortune Brands' recent acquisition of Omega, completed on April 12.

Fortune Brands announced plans to eliminate Omega's outstanding public debt and Omega's intention to exercise its option to redeem the outstanding senior subordinated notes due 2007 totaling $100 million, S&P added.

S&P takes Syratech off watch

Standard & Poor's removed Syratech Corp. from CreditWatch with negative implications, confirmed its ratings and assigned a negative outlook. Ratings affected include Syratech's $130 million senior unsecured revolving credit facility due 2002 at B- and its $165 million 11% senior unsecured notes due 2007 at CCC.

S&P said the ratings reflect Syratech's weak financial profile and participation in the highly competitive and somewhat mature tabletop and giftware markets, as well as the seasonal Christmas products market.

Positives include Syratech's well-recognized trade names, good market positions and a broad distribution network.

Still, credit protection measures continued to decline during 2001 as a result of weaker-than-expected operating performance, reflecting the generally weak retail environment. EBITDA coverage of interest was less than 1.0 times, S&P said. Leverage was very high, with total debt to EBITDA about 11 times.

While new management's efforts to reduce costs, improve manufacturing processes and introduce new products could lead to some improvement in operating performance during 2002, S&P said it expects Syratech's credit measures will remain weak in the near term.

S&P said it is concerned Syratech will continue to draw on its recently amended bank revolving credit facility in 2002 to fund operating needs in excess of normal working capital requirements.

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