S&P cuts Amerco

Standard & Poor's downgraded Amerco and put it on CreditWatch with developing implications. Ratings lowered include Amerco's corporate credit rating, cut to SD from BB-, its $100 million 7.135% bond-backed asset trust certificates series 1997-C to D from BB-, its $175 million 7.85% senior notes due 2003, $250 million medium-term notes series C, $100 million medium-term notes series B, $200 million 8.8% senior notes due 2005 and $275 million senior notes due 2009 to CC from BB-, and its $150 million preferred stock series A to C from B-.

S&P said the downgrade is in response to Amerco's temporary suspension of payment of the $100 million maturity of its series 1997-C bond-backed asset trust.

The company was unable to complete a planned $275 million public unsecured debt offering, proceeds of which were to be used to pay the maturity. The company had indicated on Oct. 10 that "it believed it had sufficient cash flow and liquidity to meet its existing debt service requirements and to repay other obligations when due."

Amerco's financial flexibility has weakened significantly over the past several months, S&P said. In June, the company entered into a $205 million bank facility, half the size of the $400 million facility it replaced. The company also had to contribute $76 million of equity to its insurance operations to meet regulatory requirements. In addition, Amerco has another $175 million of debt maturing in May 2003.

The company also stated it has hired a financial advisor to assist it in recapitalizing its balance sheet, and that it has entered into negotiations to restructure certain of its debt, S&P continued.

The CreditWatch reflects uncertainty regarding the company's ultimate success in achieving these goals, S&P said. If the company is unsuccessful, it would very likely default on other financial obligations, which could result in a Chapter 11 bankruptcy filing. If Amerco is successful, its ratings could be raised modestly.

Moody's cuts Amerco

Moody's Investors Service downgraded Amerco including cutting its senior unsecured debt to Caa2 from Ba3. The outlook is stable.

Moody's said the action follows Amerco's decision to "temporarily suspend" the principal payment due on a 1997 bond-backed asset trust note.

Amerco elected not to make the scheduled payment on this bond although the company had recently stated that it had sufficient "cash flow and liquidity to meet its existing debt service requirements," Moody's noted.

Amerco has retained an advisor to assist it in implementing a financial restructuring which, in Moody's view, could potentially include further payment defaults and/or a filing for protection under Chapter 11 of the U.S. Bankruptcy Code.

The rating reflects Moody's expectation that, even in the event of a bankruptcy filing, the asset values should provide reasonable recovery for debtholders.

Fitch cuts Amerco

Fitch Ratings downgraded Amerco's senior unsecured debt to DD from B+ and preferred stock to D from B-. All ratings are removed from Rating Watch.

Fitch said the downgrade follows Amerco's announcement that it suspended payment of its series 1997-C bond backed asset trust. The company had a $100 million bond issue due on Oct. 15.

A DD rating indicates default but that potential recoveries on the defaulted securities could range between 50% and 90%, Fitch said.

In addition, AMERCO announced that it had retained Crossroads, LLP as its financial advisor to assist in assessing its strategic alternatives as the company moves to strengthen its financial position, Fitch noted.

Moody's puts Venetian Casino on upgrade review

Moody's Investors Service put Las Vegas Sands, Inc. and Venetian Casino Resorts, LLC on review for possible upgrade. Ratings affected include the co-issuers' $850 million 11% second mortgage notes due 2010 at Caa1 and $75 million senior secured revolving credit facility due 2007, $50 million senior secured term loan A due 2007 and $250 million senior secured term loan B due 2008, all at B2.

Moody's said the review is in response to Venetian's improved EBITDA performance despite a sluggish economy, competitive pressure on room rates, continued competition in the high-end segment, and increasing competition in the convention market.

Moody's said it expects that the company will generate between $170 million and $180 million of EBITDA for fiscal year 2002, between 7% and 8% higher than in fiscal 2001.

Further improvements in EBITDA from existing operations combined with the cash flow contribution from the Phase 1A hotel tower opening scheduled for June 2003 could result in lower leverage by the end of fiscal year 2003, the rating agency added.

Moody's cuts PG&E National Energy subsidiaries

Moody's Investors Service downgraded three subsidiaries of PG&E National Energy Group, Inc., affecting $1.2 billion of debt. Ratings lowered include · PG&E Gas Transmission Northwest's senior unsecured debt, cut to Baa3 from Baa2, USGen New England, Inc.'s passthrough certificates and syndicated bank credit facility, cut to Ba3 from Baa3, and Attala Generating Co., LLC's senior secured debt, cut to Ba3 from Baa3.

Moody's said the downgrade reflects the weaker credit profile of PG&E National Energy Group, which Moody's assesses at B1 for its senior unsecured debt, on review for possible downgrade.

Fitch rates Legrand bank loan BBB-

Fitch Ratings assigned a BBB- rating to Legrand SA's planned €2.12 billion senior secured credit facilities. Fitch also cut Legrand's senior unsecured debt to BB+ from A. All ratings are on Rating Watch Evolving.

The facilities have been arranged to finance the leveraged buy-out of Legrand from Schneider Electric SA by Wendel Investissement and Kohlberg Kravis Roberts & Co. LP.

Fitch said it lowered the senior unsecured debt to reflect the expected change in Legrand's financial structure, which would no longer be consistent with an investment grade category.

The evolving watch status will be resolved after the a ruling by the European Court of Justice ruling on Schneider's appeal against the E.U. Commission's decision to veto its merger with Legrand, after it acquired Legrand in January 2001. Approval is a condition of the LBO going ahead. The ratings will be confirmed if Schneider's appeal is dismissed and assuming that the financing structure of the buy-out proceeds as currently envisaged.

After completion of the LBO, Legrand's total net debt/EBITDA is projected to increase to 4.8x, Fitch said.

Legrand's leading global market positions, strong product portfolio and high, stable operating margins of around 20%, coupled with the management team's experience and commitment to product development were all positive factors in Fitch's assessment that the senior unsecured rating should be at the top end of the sub-investment grade rating scale. Additionally, the cash flow sweep mechanism within the senior secured credit facilities should facilitate a meaningful reduction in total leverage over a reasonably short time horizon.

S&P cuts AES Drax

Standard & Poor's downgraded AES Drax and kept it on CreditWatch with negative implications.

Ratings lowered include AES Drax Energy Ltd.'s £135 million 11.25% bonds due 2010 and $200 million 11.5% bonds due 2010, both cut to C from CC, AES Drax Holdings Ltd.'s £200 million 9.07% bonds due 2025 and $302.4 million 10.41% bonds due 2020, both cut to CC from B, and InPower Ltd.'s £905 million bank loan due 2015, cut to CC from B.

S&P cuts Energy Group

Standard & Poor's downgraded The Energy Group Ltd. and kept it on CreditWatch with negative implications.

Ratings lowered include Energy Group's $200 million 7.375% guaranteed notes due 2017 and $300 million 7.5% guaranteed notes due 2027, both cut to CC from B+.

S&P cuts TXU Europe

Standard & Poor's downgraded TXU Europe Ltd. and kept it on CreditWatch with negative implications. Ratings lowered include TXU Europe's £800 million bank loan due 2006, cut to CC from B+, TXU Eastern Funding Co.'s $1.5 billion bonds due 2009 and £275 million 7.25% notes series 1 due 2030, both cut to CC from B+, and TXU Europe Capital I's $150 million preferred stock, cut to C from B-.

S&P said the action reflects the heightened potential for TXU Europe to be placed into administration in the near term.

The company is currently investigating the possibility of renegotiating contracts with its creditors, including lenders, to reduce ongoing liabilities in order to remain operational. Failing that, the break-up and sale of the business is likely, S&P said.

The rating agency said it believes renegotiation will be difficult to achieve and believes a break-up or sale is more likely. In that case, the realizable asset value of the company appears unlikely to exceed the amount of outstanding liabilities. The likelihood of ultimate default for bondholders has therefore significantly increased, S&P said.

Moody's cuts Outsourcing Solutions

Moody's Investors Service downgraded Outsourcing Solutions. The outlook is negative. Ratings lowered include Outsourcing Solutions' $75 million senior secured credit facility, $125 million senior secured term loan A due 2005 and $275 million secured term loan B due 2006, cut to Caa1 from B2, and $100 million guaranteed senior subordinated notes due 2006, cut to Ca from Caa1.

Moody's said it lowered Outsourcing Solutions because of the weak economy's effect on the predictability of recovery rates for the company's receivable portfolios and that it may experience lower recovery rates.

Incorporated in the ratings are the company's recent financial performance, its high leverage, debt maturity schedule, and whether the company can adequately manage its way around systematic shocks that may occur in the current economic environment, Moody's added.

Outsourcing Solutions has scheduled debt maturities of $37.5 million for 2003 versus only $17.5 million in 2002. Moody's said it believes that the increase in debt maturities for 2003 may come at a time when the company's fundamental business is still weak.

Moody's noted that its ratings also consider potential recovery rates in the event of default. Of the company's total assets of $648.2 million, goodwill accounted for $422.1 million. Additionally, its property plant and equipment was only $46.2 million. Outsourcing Solutions had cash of $10.6 million and accounts receivable of $72.4 million as of June 2002.

S&P rates Dex Media East loan BB-, notes B

Standard & Poor's assigned a BB- rating to Dex Media East LLC's planned $100 million 6 year revolving credit facility, $690 million 6 year delayed draw term A loan and $700 million 6.5 year term B loan and a B rating to its $350 million senior notes due 2009 and $700 million senior subordinated notes due 2012. The outlook is stable.

S&P said the ratings reflect Dex Media East's substantial pro forma debt levels, with debt to EBITDA in the mid 6 times area, and a meaningful debt amortization schedule.

In addition, the company faces mature industry conditions, revenue concentrations in the Denver and Minneapolis metropolitan areas, a short operating history at current profitability levels, and no track record operating as an independent company, S&P said.

Dex Media East's relatively stable revenues and EBITDA throughout the advertising revenue cycle temper these factors. Also, with modest capital expenditure requirements, free operating cash flow generation is healthy and fairly predictable, S&P added.

S&P said the stable outlook reflects its expectation that Dex Media East's financial position will strengthen to levels more appropriate for the ratings over the next couple of years as debt is reduced with the company's free operating cash flow.

S&P puts Pilgrim's Pride on watch

Standard & Poor's put Pilgrim's Pride Corp. on CreditWatch with negative implications. Ratings affected include Pilgrim's Pride's $120 million bank loan due 2005, $115 million bank loan due 2008 and $285 million bank loan due 2011, all at BB, and $200 million 9.625% notes due 2011 at BB-.

S&P said the action follows Center for Disease Control and Prevention's announcement that one food product and 25 environmental samples at Pilgrims Pride's Wampler Foods plant in Franconia, Pa. tested positive for Listeria.

On Oct. 13, Pilgrims Pride recalled 27.4 million pounds of its Wampler Foods ready-to-eat deli products. The recall affected less than 1% of the company's total poultry production, or 7% of its turkey production. However, the CDC announcement raises larger concerns about this problem, S&P said.

S&P said it believes there is now a higher level of uncertainty regarding the effect on Pilgrim's Pride's financial performance. Moreover, at this time, damages to the Wampler and other brands cannot be determined.

Over time, S&P said it expects a significant portion of the costs associated with the recall to be mitigated by insurance proceeds although the timing and amount of insurance proceeds is uncertain. Furthermore, legal and recall-related expenses will exacerbate already weak credit measures for the current rating over the near-term.

Moody's upgrades Hard Rock Hotel

Moody's Investors Service upgraded Hard Rock Hotel, Inc. The outlook is stable. Ratings raised include Hard Rock Hotel's $120 million 9.25% senior subordinated notes due 2005 to Caa1 from Caa2 and its $36 million senior secured reducing revolving credit facility due 2004 to B1 from B2.

Moody's said the action is in response to Hard Rock's improved balance sheet despite the challenges brought on by the effects of the Sept. 11, 2001 terrorist attacks, a slowing economy, and increased competition.

Moody's said it expects year-end 2002 debt/EBITDA to be less than 4.5x, down from about 5.0x in fiscal year 2001 and 5.6x in fiscal year 2000. The leverage improvement is from a combination of absolute debt reduction and gradual improvement in operating cash flow.

Moody's added that it believes Hard Rock's stable operating performance over the past year confirms the strength of the company's strong market niche and widely recognized name brand.

S&P keeps Doane Pet on watch

Standard & Poor's said Doane Pet Care Co. remains on CreditWatch with negative implications including its senior secured debt at B+ and subordinated debt at B-.

S&P said the CreditWatch listing continues to reflect Doane's limited cushion under its bank loan financial covenants and credit protection measures that have fallen below S&P's expectations.

The company's financial performance has been affected by its inability to pass along higher raw material costs and softer volumes in this highly competitive sector, S&P noted. While the company implemented a restructuring plan to reduce its cost structure, streamline product offerings, and increase operating efficiencies, Doane will remain challenged to improve its financial performance given that the reduced bank financial covenant requirements that are in effect expire March 31, 2003.

Doane recently retained a financial adviser to assist with the possible sale of its European business, net proceeds of which are expected to be used to reduce the company's outstanding bank debt, S&P continued. While the planned transaction would likely improve the company's financial profile, the amount and timing of any transaction is uncertain.

Moody's rates GCI loan Ba3

Moody's Investors Service assigned a Ba3 rating to GCI Holdings Inc.'s proposed $225 million senior secured bank credit facility and confirmed its existing ratings including $121 million bank credit facility at Ba3 and GCI Communications Inc.'s $180 million 9¾% senior unsecured notes due 2007 at B2. The outlook remains negative.

Moody's said the ratings are supported by the stability and defensibility of GCI's cable business, which presently commands a dominant market share within Alaska and, to a lesser degree, by the strength of GCI's long-distance business which shares market dominance with one other major carrier.

Few competitors and high barriers to entry to its isolated, yet economically resilient operating territory, have buffered GCI from the full impact of the troubles facing the long distance sector in the lower 48 states, Moody's noted.

Nevertheless, GCI is not immune from these sector-wide problems, which include heightened pricing pressure, flat traffic growth and soft customer spending, Moody's said.

The negative outlook signals indicates that Moody's expects further spill-over of these problems into the Alaskan market place.

In addition, Moody's said it is concerned about the higher debt profile implicit in the proposed bank facility, as well as the overhang relating to the bankruptcy of its largest customer, WorldCom.

S&P puts Interface on watch

Standard & Poor's put Interface Inc. on CreditWatch with negative implications. Ratings affected include Interface's $125 million 9.5% senior subordinated notes series B due 2005 at B and $150 million 7.3% senior notes due 2008 and $175 million 10.375% notes due 2010 at BB-.

S&P said its action follows Interface's announcement that continued weakness in the commercial sector during the third quarter ended September 2002 led to volume pressures in several of its business segments, including broadloom, interior fabrics, and raised access flooring.

The company will record a net loss for the period, primarily because of unabsorbed overhead costs, and S&P said it expects that credit measures may fall below expectations for the rating.

Interface also announced that it will take a restructuring charge to rationalize manufacturing operations and reduce its workforce. Interface plans to suspend its bond repurchases and dividend payments in order to comply with covenants contained in its bond indentures, S&P added.

Moody's confirms HCA, outlook remains positive

Moody's Investors Service confirmed HCA Inc. and maintained its positive outlook, affecting $6 billion of debt. Ratings affected include HCA's senior unsecured notes, debentures and medium-term notes at Ba1.

Moody's said its confirmation follows the announcement that HCA has entered into an agreement to acquire the 14-hospital not-for-profit healthcare system Health Midwest of Kansas City, Mo. for $1.125 billion.

Moody's said that despite higher debt levels associated with this transaction, improving operating and free cash flow will allow HCA to maintain credit metrics that are comfortable for the current rating level and the positive rating outlook.

Although Moody's believes that HCA's financial flexibility is reduced by this transaction, the company should realize intermediate to longer-term benefits of improved cash flow and diversity of earnings.

Moody's also said it believes HCA remains committed to staying within range of its financial targets and that it will therefore adopt a prudent approach to acquisitions and refrain from additional share repurchases.

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