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 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 rates Airgas loan BB

Standard & Poor's assigned a BB rating to Airgas, Inc.'s $100 million term bank loan due 2006.

Moody's cuts Hexcel

Moody's Investors Service downgraded Hexcel Corp. including lowering its $340 million 9¾% senior subordinated notes due 2009 to Caa2 from Caa1, its $47 million 7% convertible subordinated notes due 2003 and $26 million 7% convertible subordinated debentures due 2011 to Caa3 from Caa2 and its $339 million senior secured credit facilities to B3 from B2. The outlook remains negative.

Moody's said it lowered Hexcel because of an increase in its financial risk profile created by the high level of debt and the expected continued weakness in the company's commercial aerospace and electronic markets, as reflected in the nearly 20% decline in first quarter 2002 revenues.

Based on its order book and the latest OEM production forecasts, the company now expects its commercial aerospace revenues to drop 25-30% in 2002 versus 2001, a decline larger than management's initial evaluation of the impact of the Sept. 11 attacks which indicated a revenue drop of about 20%, Moody's noted.

Further, Hexcel's electronics segment has felt the effects of the severe industry downturn, and the attendant inventory correction throughout the supply chain, since the end of the first quarter of 2001, Moody's said.

However the rating agency also said it recognizes Hexcel's "significant and early effort to adjust its cost structure to the dramatically lower business levels."

Moody's said it believes that the company's near-term liquidity position is adequate. Access to its revolving credit has been improved due to a first quarter amendment revising financial covenants consistent with the company's anticipated financial performance through the year 2002. Credit availability, though, was reduced with the revolver commitment cut to $220 million from $235 million, with a further reduction to $212 million on or before September 30, 2002. As of March 31, 2002, the company had undrawn revolver and overdraft availability under its senior credit agreement of about $65 million.

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.

S&P rates Marina District Finance's loan B+

Standard & Poor's assigned a rating of B+ to Marina District Finance Co. Inc.'s $630 million secured bank facility. The facility is guaranteed by the parent company, Marina District Development Co. LLC. In addition, a corporate credit rating of B+ and a senior secured debt rating of B+ were assigned to Marina District Development. The outlook is stable.

Marina District Development was formed by Boyd Gaming Corp. and MGM Mirage for the purpose of designing, developing, constructing, owning and operating the Borgata, according to S&P. The total Borgata project cost is expected to be $1.04 billion and will be funded with up to 60% bank debt and 40% equity. The $630 million credit facility represents the entire bank debt needed to finance the project. The loan consists of a $442.5 million term A due in Dec. 2007 and a $187.5 million bridge facility, which is expected to be refinanced through a term B of the same amount also due Dec. 2007. The loan is secured by a first security interest in all assets of Marina District Finance and Marina District Development.

Ratings for Marina District Development reflect the company's conservative capital structure, considerable progress in construction, a low percentage of remaining construction costs and a meaningful contingency remaining in the project budget, the release said. Ratings also reflect the anticipated high quality of the Borgata, experienced joint venture partners and improved access to the Marina District.

Negative factors affecting the ratings are start-up risks and reliance on a single source of cash flow, according to S&P.

"The stable outlook reflects the expectation that Borgata will generate adequate cash flow to maintain credit measures consistent with the ratings after it ramps-up," the rating agency said. "The strength of the joint venture partners mitigates many of the "start-up" challenges that are often associated with large casino resorts."

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