Moody's raises BSkyB outlook

Moody's Investors Service raised its outlook on British Sky Broadcasting plc to positive from stable including its long-term debt at Ba1.

Moody's said the outlook change follows BSkyB's recently published interim results, and reflects the group's strengthened competitive position in UK Pay-TV, its steadily growing DTH subscriber base and improving operational performance.

The positive outlook also takes account of management's strategic focus on growing and maximizing the profitability of its subscriber base, rather than on growth through acquisition, Moody's noted.

Finally, the prospect of rising free cash flow generation, and the company's stated commitment to apply this to debt reduction are also important factors in the outlook change, Moody's added.

Moody's said BSkyB's DTH subscribers have risen to 6.56 million and that its target of 7 million DTH subscribers by December 2003 looks achievable, even if competitive challenges could re-emerge in the medium term.

In the first six months of the current financial year, free cash-flow of £142 million was reflected in a reduction in net debt to £1,386 million at December 2002, Moody's said.

Moody's cuts Ericsson

Moody's Investors Service downgraded Telefonaktiebolaget LM Ericsson's long-term debt to B1 from Ba2, affecting €5 billion of securities. The outlook is negative. The downgrade concludes a review begun on Feb. 6.

Moody's said it lowered Ericsson because of the severe contraction in the company's revenue flow during the fourth quarter with no material indications of a near-term stabilization, the resulting large cash burn during 2002, which Moody's said it believes will increase once cash releases from working capital are exhausted, and the need for additional downsizing should the current rate of business decline of above 30% extend well into 2003.

The negative outlook for the ratings reflects the low visibility of telecom operator spending and the potential for a persistent high rate of decline for Ericsson's revenues that could cause erosion of the company's high cash reserves, Moody's said.

Moody's said the action was based primarily on its review of Ericsson's public fourth quarter earnings release and various presentations to analysts and reflects Moody's expectations for market and company development.

Moody's said it is concerned that Ericsson's revenues may continue declining by more than 30% through the most part of 2003. A stabilization may not set in before next year.

This scenario would result in a need for additional restructuring measures for Ericsson, which because of their severity, carry material execution risk, the rating agency said. It would also cause a high net cash burn from operations, restructuring, and repayment of maturing debt since the potential for further cuts in working capital is limited.

S&P confirms Alpharma, off watch

Standard & Poor's confirmed Alpharma Inc.'s ratings and removed it from CreditWatch with negative implications. The outlook is negative. Ratings affected include Alpharma's $125 million 5.75% convertible subordinated notes due 2005 and $170 million 3% convertible notes due 2006 at B and Alpharma Operating Corp.'s $175 million senior secured term A loan due 2007, $425 million senior secured term B loan due 2008 and $300 million senior secured revolving credit facility due 2007 at BB- and $200 million senior subordinated notes due 2009 at B.

S&P said it put Alpharma on watch on July 30, 2002 in response to a downward revision of earnings, a result of both increased competition in the animal health sector and a production slowdown at Alpharma's Baltimore manufacturing facility.

But since then the company's financial performance has been steadily improving and funds from operations has been increasing quarter-to-quarter, S&P said. Furthermore, Alpharma faces no near-term debt maturities and was in compliance with its debt covenants as of Sept. 30, 2002.

S&P cuts Piccadilly Cafeterias

Standard & Poor's downgraded Piccadilly Cafeterias Inc. including cutting its $71 million 12% senior secured notes due 2007 to B- from B. The outlook is negative.

S&P said it lowered Piccadilly because of weak operating performance, the result of prolonged poor sales trends in the cafeteria-style sector of the restaurant industry. In the first half of fiscal 2003 same-store sales fell 3.9% while traffic decreased 6.6%. This followed a 4.0% decline in same-store sales and a 7.0% drop in traffic in fiscal 2002.

The cafeteria sector has struggled to attract a younger segment of the population, S&P noted. Piccadilly's sales have also been negatively affected by a reduction in shopping mall traffic related to the general economic downturn. About half of the company's stores are located in shopping malls.

Lease-adjusted EBITDA coverage of interest is less than 2.0x, and leverage is high with lease-adjusted total debt to EBITDA of 4.0x for the 12 months ended Dec. 31, 2002, S&P noted. The company reduced balance-sheet debt through a series of sale-leaseback transactions, replacing the debt with off-balance-sheet operating leases and more recently through $9.9 million excess cash flow offer payment.

Fitch cuts Nash Finch

Fitch Ratings downgraded Nash Finch including cutting its bank facility to B+ from BB and its subordinated notes to B- from B+. The ratings remain on Rating Watch Negative.

Fitch said the downgrade is due to general weakness in the company's operating environment and in particular competitive pressures on its independent and company-owned retail stores.

The ratings were initially placed on Rating Watch Negative following the company's announcement that it was under an informal inquiry by the SEC for practices related to Count-Recount (an industry practice related to vendor allowances) and was postponing the release of its third quarter earnings, Fitch noted. Since that time, the company has not filed third quarter financial statements and the SEC has changed its inquiry to formal from informal. Further, on Feb. 13, Nash Finch was notified by the trustee for the $165 million 8.5% senior subordinated notes due 2008 that a technical default had occurred under the Indenture as a result of the company's failure to file certain financial statements with the SEC.

The company is planning to meet with the SEC's Office of the Chief Accountant in order for the company's accounting of its Count-Recount practices to be confirmed. Once the Office of the Chief Accountant makes a ruling, Nash Finch will likely be able to file financial statements.

Nash Finch will remain on Rating Watch Negative while it is in technical default with its bondholders of its 8.5% senior subordinated notes due 2008, Fitch said. No interest payments have been missed.

S&P says Foster Wheeler unchanged

Standard & Poor's said Foster Wheeler Ltd.'s ratings are unchanged including its B corporate credit rating with a negative outlook on new the company has agreed to sell its environmental management services business to Tetra Tech Inc. for approximately $80 million in cash.

The transaction will modestly improve Foster Wheeler's liquidity profile, albeit at the expense of losing a relatively stable stream of earnings, and a likely increase in leverage on a debt to EBITDA basis, S&P said.

The negative outlook reflects near-term concerns that continued weakness in Foster Wheeler's backlog could lead to working capital usage as advanced payments on power projects are utilized, further deteriorating the company's poor liquidity profile, and potentially leading to declines in earnings, which could affect bank financial covenants, S&P said.

S&P cuts British Energy

Standard & Poor's downgraded British Energy plc including cutting its £109.86 million 5.949% bonds due 2003, £134.59 million 6.202% bonds due 2016 and £163.44 million 6.077% bonds due 2006 to D from C.

S&P said the action follows British Energy's announcement that significant creditors, including bondholders, have accepted a distressed exchange offer for their outstanding liabilities.

S&P said it lowered the senior unsecured debt to D because it considers the terms proposed for the restructuring to be coercive because bondholders could either accept new bonds as part of the restructuring with a considerably lower face value or try to claim principal back through administration.

The agreement of certain of British Energy's creditors to a standstill agreement allows the continued payment of interest on bonds but not principal, and the existing 2003 bond is not expected to be repaid at its maturity on March 25, 2003.

S&P puts Kemper on watch, cuts Lumbermens

Standard & Poor's put Kemper Insurance Cos. on CreditWatch with negative implications and downgraded Lumbermens Mutual Casualty Co.'s $100 million 8.45% surplus notes due 2097, $200 million surplus notes due 2037 and $400 million 9.15% surplus notes due 2026 to CCC from B+.

S&P said the watch placement it because it believes Kemper will be significantly challenged to meet the rating agency's expectations in terms of earnings, capital adequacy, and future interest payments on the surplus notes.

S&P cuts aircraft-backed debt of 11 airlines

Standard & Poor's lowered selected aircraft-backed debt of 11 U.S. airlines. Most ratings lowered and other ratings, which were confirmed, were removed from CreditWatch with negative implications. Corporate credit and non-aircraft backed debt were not affected.

S&P said the downgrade reflect further deterioration in aircraft values, and thus collateral coverage for many issues of aircraft-backed debt.

The declines in asset protection varied from case to case, as did other important considerations, such as the likelihood of an airline choosing to continue debt payments on each particular debt issue in bankruptcy and the relative risks borne by various classes of debt within enhanced equipment trust certificates.

The bankruptcies of US Airways Inc. and United Air Lines Inc. in the second half of 2002 and those airlines' wide-ranging attempts to negotiate reduced payment terms on aircraft-backed debt have undermined an already weak market for some aircraft models (particularly for Boeing models introduced in the 1980s), S&P added.

A potential war between the U.S. and its allies and Iraq, and the deepening financial problems of American Airlines Inc., the world's largest airline, are casting a further shadow over prospects for airlines and aircraft values, S&P said.

Many of the downgrade issues were junior classes of securities in multiclass enhanced equipment trust certificates, or secured by planes that are in oversupply (e.g., B737-300, B757-200, B767, B747-400, MD80 series) and/or are judged unlikely to be retained at current rates by an airline in bankruptcy.

Ratings lowered and removed from CreditWatch with negative implications are:

* America West Airlines Inc. equipment trust certificates passthrough certificate series 1996-1A to BBB from BBB+, passthrough certificate series 1996-1B to BB from BB+, passthrough certificate series 1997-1A to BBB- from BBB+, passthrough certificate series 1997-1B to B+ from BB, passthrough certificate series 1998-1B to BB from BB+, passthrough certificate series 1998-1C to BB- from BB, passthrough certificate series 1999-1C to BB- from BB, passthrough certificate series 2000-1C to BB- from BB and passthrough certificate series 2001-C to B+ from BB;

* American Trans Air Inc. equipment trust certificates passthrough certificate series 1996-1A to BB from BB+;

* Atlantic Coast Airlines Holdings Inc. equipment trust certificates passthrough certificate series 1997-A to BBB- from BBB+, passthrough certificate series 1997-1B to B+ from BB, passthrough certificate series 1997-1C to B from B+;

* Continental Airlines Inc. equipment trust certificates, passthrough certificate series 1996-A to A- from A+, passthrough certificate series 1996-B to BB+ from BBB+, passthrough certificate series 1996-C to BB from BB+, passthrough certificate series 1996-2A to BBB+ from A+, passthrough certificate series 1996-2B to BB from BBB+, passthrough certificate series 1996-2C to BB- from BB, passthrough certificate series 1997-1A to A- from A+, passthrough certificate series 1997-1B to BB+ from BBB+, passthrough certificate series 1997-1C1 to BB from BB+, passthrough certificate series 1997-1C2 to BB from BB+, passthrough certificate series 1997-2A to BB from BBB-, passthrough certificate series 1997-4A to A from AA-, passthrough certificate series 1997-4B to BBB from A-, passthrough certificate series 1997-4C to BB from BBB-, passthrough certificate series 1998-1A to A from AA-, passthrough certificate series 1998-1B to BBB- from A-, passthrough certificate series 1998-1C to BB from BBB-, passthrough certificate series 1998-2A to BB from BBB, passthrough certificate series 1998-2B to BB- from BB, passthrough certificate series 1998-3A1 to A from A+, passthrough certificate series 1998-3A2 to A+ from AA-, passthrough certificate series 1998-3B to BBB from A-, passthrough certificate series 1998-3C1 to BB from BB+, passthrough certificate series 1998-3C2 to BB from BB+, passthrough certificate series 1999-1A to A from AA-, passthrough certificate series 1999-1B to BBB from A-, passthrough certificate series 1999-1C to BB from BBB-, passthrough certificate series 1999-2A-1 to A from A+, passthrough certificate series 1999-2A-2 to A+ from AA-, passthrough certificate series 1999-2B to BBB from A-, passthrough certificate series 1999-2C-1 to BB from BBB-, passthrough certificate series 1999-2C-2 to BB from BBB-, passthrough certificate series 2000-1A-1 to A- from A+, passthrough certificate series 2000-1A-2 to A from AA-, passthrough certificate series 2000-1B to BBB from A-, passthrough certificate series 2000-1C-1 to BB from BBB-, passthrough certificate series 2000-1C-2 to BB from BBB-, passthrough certificate series 2000-2A-1 to A- from A+, passthrough certificate series 2000-2A-2 to A+ from AA-, passthrough certificate series 2000-2B to BBB from A-, passthrough certificate series 2000-2C to BB+ from BBB-, passthrough certificate series 2001-1C to BB+ from BBB, floating enhanced aircraft trust securities 2000-B to BB from BB+;

* Delta Air Lines Inc. equipment trust certificates, passthrough certificate series 2000-1A-1 to A+ from AA, passthrough certificate series 2000-1A-2 to A+ from AA, passthrough certificate series 2000-1B to BBB+ from A, passthrough certificate series 2000-1C to BBB- from BBB+, passthrough certificate series 2001-1A-1 to A+ from AA+, passthrough certificate series 2001-1A-2 A+AA+, passthrough certificate series 2001-1B to BBB from A+, passthrough certificate series 2001-1C to BBB- from A-, passthrough certificate series 2002-1C to BBB from BBB+;

* Federal Express Corp. equipment trust certificates, passthrough certificate series 1997-1A to A+ from AA, passthrough certificate series 1997-1B to BBB+ from A-, passthrough certificate series 1998-1A to A+ from AA, passthrough certificate series 1998-1B to BBB+ from A-, passthrough certificate series 1999-1A to A+ from AA, passthrough certificate series 1999-1B to BBB+ from BBB+

* Northwest Airlines Inc. equipment trust certificates, passthrough certificate series 1996-1A to BB+ from BBB, passthrough certificate series 1996-1B to BB from BB+, passthrough certificate series 1996-1C to BB- from BB, passthrough certificate series 1996-1D to B+ from BB-, passthrough certificate series 1997-1A to BB+ from BBB-, passthrough certificate series 1997-1B to BB from BB+, passthrough certificate series 1997-1C to BB- from BB, passthrough certificate series 1999-1A to BBB+ from A, passthrough certificate series 1999-1B to BB+ from BBB-, passthrough certificate series 1999-1C to BB from BB+, passthrough certificate series 2000-1C to BB+ from BBB-, passthrough certificate series 2001-1A-1 to A+ from AA-, passthrough certificate series 2001-1A-2 to AA- from AA, passthrough certificate series 2001-1B to BBB from A-, passthrough certificate series 2001-1C to BB+ from BBB-, passthrough certificate series 2002-1C1 to BBB from BBB+, passthrough certificate series 2002-1C2 to BBB from BBB+, European enhanced equipment trust 2001-2A to AA from AA+, European enhanced equipment trust 2001-2B to BBB-from BBB+, NWA Trust No. 1 equipment trust certificates senior aircraft notes series A to BB- from BB;

* Southwest Airlines Co. equipment trust certificates, passthrough certificate series 2001-1A1 to AA+ from AAA, passthrough certificate series 2001-1A2 to AA+ from AAA.

Ratings lowered and still on CreditWatch with negative implications are:

* American Airlines Inc. equipment trust certificates, passthrough certificate series 1999-1A-1 to A+ from AA, passthrough certificate series 1999-1A-2 to A+ from AA, passthrough certificate series 1999-1B to BBB+ from A-, passthrough certificate series 1999-1C to BBB- from BBB, passthrough certificate series 2001-1A1 to A- from A, passthrough certificate series 2001-1A2 to A from A+, passthrough certificate series 2001-1B to BBB- from BBB, passthrough certificate series 2001-2A1 to AA- from AA, passthrough certificate series 2001-2A2 to AA- from AA, passthrough certificate series 2001-2B to A from A+, passthrough certificate series 2001-2C to BBB+ from A-, passthrough certificate series 2002-1C to BBB- from BBB+;

* United Air Lines Inc. equipment trust certificates jet equipment trust, series 1994-A to CCC+ from B-, jet equipment trust, series 1995-A to B- from B+, jet equipment trust, series 1995A-B to CCC from CCC+, jet equipment trust, series 1995B-A to CCC+ from B, passthrough certificate series 1997-1A to BB- from BB, passthrough certificate series 2000-1B to B- from B+, passthrough certificate series 2000-2B to B from BB-, passthrough certificate series 2000-2C to CCC+ from B-;

* US Airways Inc. equipment trust certificates enhanced equipment trust certificates series 1996-A to B+ from BB.

Ratings unchanged but remaining on CreditWatch with negative implications are:

* American Airlines Inc. equipment trust certificates passthrough certificate series 2001-1C at BB, passthrough certificate series 2001-1D at BB-, passthrough certificate series 2001-2D at BB+;

* United Air Lines Inc. equipment trust certificates jet equipment trust, series 1994A-B1 at CCC, jet equipment trust, series 1994A-B2 at C, jet equipment trust, series 1995A-C at CCC-, jet equipment trust, series 1995A-D at CC, jet equipment trust, series 1995B-B at CCC, jet equipment trust, series 1995B-C at CCC-, jet equipment trust, series 1995B-D at CC, passthrough certificate series 2000-1A-1 at BBB-, passthrough certificate series 2000-1A-2 at BBB-, passthrough certificate series 2000-2A-1 at BBB-, passthrough certificate series 2000-2A-2 at BBB-, passthrough certificate series 2001-1A-1 at BBB-, passthrough certificate series 2001-1A-2 at BBB-, passthrough certificate series 2001-1A-3 at BBB-, passthrough certificate series 2001-1B at BB, passthrough certificate series 2001-1C at B-, passthrough certificate series 2001-1D at CCC;

* US Airways Inc. equipment trust certificates enhanced equipment trust certificates series 1996-B at CCC, passthrough certificate series 1998-1A at BBB+, passthrough certificate series 1998-1B at BBB-, passthrough certificate series 1998-1C at B, passthrough certificate series 1999-1A at BBB+, passthrough certificate series 1999-1B at B, passthrough certificate series 2000-3C at B, passthrough certificate series 2001-1C at B.

Ratings confirmed and removed from CreditWatch with negative implications are:

* America West Airlines Inc. equipment trust certificates passthrough certificate series 1996-1C at BB-, passthrough certificate series 1996-1E at B, passthrough certificate series 1997-1C at B, passthrough certificate series 1998-1A at BBB+;

* Continental Airlines Inc. equipment trust certificates passthrough certificate series 1997-2B at BB-, passthrough certificate series 1997-2C at B+, passthrough certificate series 1997-3A at A-, passthrough certificate series 1997-3B at BBB, passthrough certificate series 1997-3C at BB+, passthrough certificate series 2001-1A-1 at A+, passthrough certificate series 2001-1A-2 at AA-, passthrough certificate series 2001-1B at A-, passthrough certificate series 2001-2D at BB-;

* Federal Express Corp. equipment trust certificates passthrough certificate series 1997-1C at BBB, passthrough certificate series 1998-1C at BBB, passthrough certificate series 1999-1C at BBB;

* Northwest Airlines Inc. equipment trust certificates passthrough certificate series 1999-2A at AA-, passthrough certificate series 1999-2B at A-, passthrough certificate series 1999-2C at BBB-, passthrough certificate series 1999-3B at BB+, passthrough certificate series 1999-3C at BB, NWA Trust No. 1 equipment trust certificates subordinated aircraft notes series B at B+, NWA Trust No. 2 equipment trust certificates senior aircraft notes, series A at AA-, mezzanine aircraft notes series B at A-, mezzanine aircraft notes series C at BBB;

* Southwest Airlines Co. equipment trust certificates passthrough certificate series 2001-1B at A+.

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