S&P upgrades XTO Energy

Standard & Poor's upgraded XTO Energy Inc. The outlook is now stable. Ratings affected include XTO's $125 million 9.25% senior subordinated notes due 2007 and $175 million 8.75% senior subordinated notes due 2009, both raised to BB- from B+.

S&P said it raised XTO's ratings because the company achieved a sufficiently improved capital structure during 2001 and because of management's commitment to maintaining debt leverage near its 50% target. At year-end, XTO's adjusted debt leverage was 52% compared to 62% at year-end 2000, according to S&P estimates.

The rating agency noted XTO has aspirations to reach investment-grade.

Moody's puts Tesoro on review for downgrade

Moody's Investors Service put Tesoro Petroleum Corp. on review for possible downgrade. Ratings affected include Tesoro's $175 million revolving credit facility due 2006, $85 million term loan A, due 2006, $90 million delayed draw term loan due 2006 and $450 million term loan B due 2007, all rated Ba2, and its $300 million 9% senior subordinated notes due 2008 and $215 million 9.625% senior subordinated notes due 2008, both rated B1.

Moody's said its review was prompted by Tesoro's announcement it has agreed to acquire for cash the Golden Eagle refinery and associated retail stations and working capital from Valero Energy Corp. for an initial $1.1 billion, followed by a potential contingency payment of up to $150 million payable over the 2003-2008 period if industry spreads exceed specified levels. Tesoro intends to fund the acquisition largely with debt, supplemented with an issue of at least $250 million of equity.

Moody's said the proposed funding would raise Tesoro's debt/capitalization to 65% on a pro forma basis.

The rating agency said its review will look at the significant enhancement of Tesoro's business platform from the addition of a major, complex refinery in the relatively attractive California market, the earnings profile of the assets through industry cycles, the level of leverage resulting from the acquisition, which closely follows Tesoro's debt-financed $800 million acquisition of refining and associated assets from BP plc in September 2001 and Tesoro's business strategies and investment needs once the assets are acquired.

Moody's noted Tesoro already has a high level of debt for its ratings, faces challenging sector conditions while pursuing an aggressive growth strategy through strategic acquisitions and internal expansion, the potential for additional cash acquisitions in the Rocky Mountain and Western regions and future capital spending to meet clean air regulations and mandated low sulfur diesel and gasoline specifications.

S&P puts Tesoro on negative watch

Standard & Poor's put Tesoro Petroleum Corp. on CreditWatch with negative implications. Affected ratings include Tesoro's $300 million 9% senior subordinated notes due 2008 and $215 million 9.625% senior subordinated notes due 2008, both rated BB-, and its $175 million senior secured credit facility bank due 2006 and $450 million senior secured credit facility due 2007, both rated BBB-.

S&P said its action follows Tesoro's announcement it plans to acquire the Golden Eagle refinery from Valero Energy Corp. for about $1.1 billion plus a market-based earn-out of up to $150 million over the next five years.

S&P said the acquisition will add "a very attractive asset" for Tesoro, further diversifying cash flow and strengthen its niche position in high-margin West Coast locations, the new debt would raise leverage to levels where a weaker rating is appropriate.

Moody's downgrades Insilco

Moody's Investors Service downgraded Insilco Holding Co. and its Insilco Technologies, Inc. unit. The outlook is negative. Ratings affected include Insilco Holding's $138 million 14% senior discount notes due 2008, lowered to C from Caa2, its $73 million 15% PIK senior exchangeable redeemable preferred stock, lowered to C from Caa2, Insilco Technologies' $120 million 12% guaranteed senior subordinated notes due 2007, lowered to Ca from Caa1, and Insilco Technologies' $229 million guaranteed senior secured credit facilities lowered to Caa2 from B2.

Moody's said it lowered Insilco's ratings due to weak performance and difficult industry conditions, which have resulted in negative cash flow and rising debt levels.

Insilco has extremely high leverage, zero interest coverage, debt-to-revenues in excess of 100% and negative return on total assets, Moody's said.

"Insilco's performance steadily deteriorated with each quarter of 2001. Management attributes Insilco's problems to a number of external factors, including: weakness in the US economy; ongoing financial issues with emerging telecom service providers; and conservative capital spending by larger, well-capitalized telecom service providers. These factors have created a significant reduction in demand by Insilco's customers for end products," the rating agency added.

Moody's said it believes the company's bank lenders may suffer a partial loss and that in the event of a default the loss for other investors would be severe.

Moody's rates new McMillin notes B2

Moody's Investors Service assigned a B2 rating to McMillin Cos., LLC's planned issue of $60 million senior secured notes due 2009 and confirmed the company's existing ratings, including its $32.4 million 13% senior notes due 2006 at B2. The outlook is stable.

Moody's said its assessment of McMillin reflects the company's geographic concentration, increased competition in its markets, its holding company and LLC structure, its dependence on earnings from residential land and commercial real estate ventures which are perceived to have greater risks than the homebuilding operations, and increased leverage to its balance sheet as a result of the proposed offering.

On the positive side, Moody's noted the company, while profitable on a consolidated basis, is considerably larger, better capitalized, and more profitable when viewed on a total enterprise basis, i.e., after a pro forma consolidation of its off-balance sheet joint ventures.

McMillin has also ended its former practice of providing loan guarantees for its joint venture debt, with such guarantees having totaled $42.6 million at the time of McMillin's initial rating in 1998, Moody's said.

The rating agency also noted its 41-year history, strong brand name recognition, and long-standing relationships with suppliers, subcontractors, and governmental agencies.

S&P confirms MGM Mirage, Park Place, Mandalay

Standard & Poor's said it resolved the CreditWatch status for MGM Mirage, Park Place Entertainment Corp., and Mandalay Resort Group, confirming the ratings of all three. Mandalay was given a stable outlook while MGM Mirage and Park Place were given negative outlooks. S&P also raised the outlook on Harrah's Entertainment Inc. and its Harrah's Operating Co. Inc. unit to stable from negative.

Ratings affected include Mandalay's $200 million senior subordinated notes due 2003, $200 million senior subordinated notes due 2013, $275 million 9.25% senior subordinated notes due 2005, $500 million 10.25% senior subordinated notes due 2007 and $300 million 9.375% senior subordinated notes due 2010, all rated BB-; its $200 million 6.45% senior notes due 2006, $150 million 7% senior debentures due 2036, $150 million 6.7% senior debentures due 2096 and $200 million 9.5% senior notes due 2008, all rated BB+; Park Place's $400 million 7.875% senior subordinated notes due 2005, $500 million 9.375% senior subordinated notes due 2007, $400 million 8.875% subordinated notes due 2008, and $350 million 8.125% senior subordinated notes due 2011, all rated BB+; its $1.5 billion revolving credit facility due 2003, $650 million 364 day bank loan, $300 million 7.95% senior notes due 2003, $425 million 7.5% senior notes due 2009 and $400 million 8.5% senior notes due 2006, all rated BBB-; MGM Mirage's $300 million 6.95% senior secured notes due 2005, $2 billion revolving credit facility due 2005, $800 million 364 day revolving credit facility, $200 million 6.875% senior secured notes due 2008 and $850 million 8.5% senior secured notes due 2010, all rated BBB-; its $710 million 9.75% senior subordinated notes due 2007 and $400 million 8.375% subordinated notes due 2011, both rated BB+; and Harrah's Entertainment's senior unsecured debt at BBB- and subordinated debt at BB+.

S&P said it put the three gaming companies on CreditWatch when it began a review of the impact of the Sept. 11 terrorist attacks and the slowing economy. It changes Harrah's outlook to negative on Sept. 24,

For Mandalay, Park Place and MGM Mirage, S&P said its confirmations indicate the rating agency expects their financial profiles will recover enough over the next 18 months to support existing ratings.

For MGM Mirage and Park Place Entertainment, S&P expects ongoing debt-reduction programs will lead to improved credit measures at cash flow levels the same as or only modestly better than those seen in 2001.

For Mandalay, S&P said it assigned a stable outlook because the company has an additional financial cushion for its rating. S&P also expects operating performance will gradually improve as 2002 progresses.

However the two companies were given negative outlooks because S&P considers the balance sheets to be significantly weak for the rating although they are expected to improve over several quarters amid an improving operating environment and efforts to reduce debt.

For Harrah's, S&P said fourth quarter operating performance was stronger than anticipated, and it believes credit measures will remain supportive of current ratings over the intermediate term.

S&P added that overall it is assuming a modest economic recovery that accelerates as 2002 progresses. In Las Vegas, the rating agency anticipates the operating environment will continue to improve although remaining well below that of a year ago.

Fitch cuts Goodyear to junk

Fitch Ratings downgraded The Goodyear Tire & Rubber Co.'s senior unsecured debt to BB+ from BBB. The outlook was changed to stable from negative.

Fitch said it lowered Goodyear because of the company's "continued weak profitability, which is expected to persist over the near future, and limited progress on meaningful debt reduction."

However the rating agency believes that over the intermediate to longer term developing positive industry fundamentals should benefit Goodyear's operating results.

Operating performance was weak for the first nine months of 2001 due to lower volume - production fell for 10 straight towards the end of 2001 - and price/mix shortfalls outside of North America, Fitch said. The rating agency anticipates no improvement for the rest of 2001 and going into 2002.

Although better pricing in North America helped, it was not enough to compensate for a 1.7% decline in overall tire sales for the nine months to Sept. 30, 2001, Fitch said. The result was a 37% decline in EBIT versus the comparable period in 2000.

"Credit statistics have also exhibited a steady decline over this time frame with the continued under-performance to the historical norm," Fitch said.

Fitch cuts NATG notes to D

Fitch Ratings downgraded NATG Holdings, LLC's $150 million 12.75% senior subordinated notes to D from CC and removed them from Rating Watch Negative. NATG is a wholly owned subsidiary of Orius Corp.

Fitch said it took the action after Orius' senior secured lenders blocked payment of interest on the notes, causing the company to miss the scheduled payment on Feb. 2.

S&P raises HCA to investment grade

Standard & Poor's upgraded HCA Inc. to investment grade, lifting the ratings to BBB- from BB+. It also revised the outlook to stable from positive.

S&P said it raised HCA because of its favorable operating performance and S&P's increased confidence HCA will adhere to a financial policy consistent with investment-grade credit quality.

Helping HCA's performance has been a pruning of non-core businesses and non-strategic or weaker performing facilities along with operating initiatives and a more favorable reimbursement environment.

Operating margin has improved to over 19% in 2001 from 17% in 1999, S&P said, adding it expects that gain to be sustained.

Cash flow continues to be strong, the company has ended its recent share-repurchase programs and it has more manageable debt maturities, allowing it to fund its growing capital expenditure needs and provide large discretionary cash flow after 2002, S&P said.

Moody's put Brightpoint on review for downgrade

Moody's Investors Service put Brightpoint, Inc. on review for possible downgrade. Ratings affected include Brightpoint's senior secured revolving credit facility at Ba3 and its subordinated notes at B2.

Moody's said it began the review in response to declines in profitability, limited visibility going forward as wireless industry growth begins to decelerate and an increase in financial leverage.

Despite Brightpoint's efforts to improve profitability by restructuring its operations and replacing its revolving credit facility, the outlook for growth in the global handset market is weak, Moody's said.

The rating agency said it is concerned about increases in financial leverage during 2001 and the strain that the continued poor outlook for new handsets will put on Brightpoint's finances.

"Moody's plans to discuss with Brightpoint's management its expectations for operations following the completion of the restructuring and its plans regarding the use of cash to buy back its subordinated, convertible notes prior to the put option date of March 11, 2003," Moody's said.

Moody's upgrades Hollywood Entertainment

Moody's Investors Service upgraded Hollywood Entertainment's existing ratings and assigned a B1 rating to its proposed five-year secured term loan and revolving credit facilities. Ratings raised include Hollywood Entertainment's $250 million senior subordinated notes due November 2004, lifted to Caa1 from Caa3. The outlook is stable.

Moody's said it raised Hollywood Entertainment's ratings because of its improved liquidity profile following the refinancing of the existing bank facility with its onerous amortization requirements.

"The upgrades reflect the improvements to Hollywood's capital structure as a result of a more appropriate amortization schedule for its bank debt, which granted the company needed financial flexibility; and by the expected sale of a meaningful amount of equity, which is a prerequisite for the new bank facility to close," Moody's said.

S&P puts Northern Natural Gas on developing watch

Standard & Poor's changed its CreditWatch on Northern Natural Gas Co. to developing from negative and upgraded a series of notes.

Ratings affected include Northern Natural Gas' $100 million 6.875% senior notes due 2005 guaranteed by Enron Corp., upgraded to CC from D, its $150 million 6.75% senior notes due 2008, rated CC and its $250 million 7% senior notes due 2011, also rated CC.

S&P rates new Jacobs Entertainment notes B

Standard & Poor's assigned a B rating to Jacobs Entertainment, Inc.'s new offering of $125 million 11.875% senior secured notes due 2009.

S&P downgrades Kaiser Aluminum

Standard & Poor's dowgnraded Kaiser Aluminum & Chemical Corp. and kept it on CreditWatch with negative implications.

Ratings affected include Kaiser's $225 million 9.875% senior notes due 2002, cut to CC from CCC, its $400 million 12.75% senior subordinated notes due 2003, cut to D from CC, and its $175 million 10.875% senior notes series C due 2006, cut to CC from CCC.

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