Moody's cuts Kennametal to junk

Moody's Investors Service downgraded Kennametal Inc. its senior unsecured debt to Ba1 from Baa3. The outlook is stable based on the probability that the company will generate enough cash to lower its debt level over time.

According to Moody's, the downgrades come despite the fact that the company has improved its cost structure through "operational efficiencies" and "business repositioning" because "overall indebtedness remains elevated" and consolidation by competing companies may force Kennametal to undertake acquisitions that could impose greater operating and financial risks.

Ratings that were lowered to Ba1 include: a $700 million senior unsecured revolver due 2002 and a €212 million senior unsecured revolver due 2003.

Moody's puts American Safety Razor on downgrade review

Moody's Investors Service put American Safety Razor Co.'s ratings on review for possible downgrade due to weak operating results in the company's core businesses, "challenged liquidity position" and "absent available credit lines".

Specifically, the ratings on review are: the B1 senior implied rating, the B1 rating on a $25 million senior secured revolver due 2005, the B1 rating on the $90 million senior secured term loan due 2005, the B2 rating on the $69 million 9 7/8% senior notes due 2005 and the B3 senior unsecured issuer rating.

According to Moody's, "the company has still to amend and reinstate its bank lines" and therefore has no liquidity beyond its current cash and operational cash flow.

"Moody's review will focus on the breadth of ASR's ongoing liquidity options, especially with regard to the re-instatement of its term and revolving bank lines," the release said. The review will also focus revenue and cash flow performance in the currently competitive market.

The release concluded by saying that the company's senior notes may need to be treated as current if the credit facilities are not amended.

S&P rates Isle of Capri notes B

Standard & Poor's assigned a B rating to Isle of Capri Casinos Inc.'s upcoming offering of $200 million senior subordinated notes due 2012 and a BB- rating to its $250 million revolving credit facility due 2007 and $250 million term B loan due 2008. The outlook is stable.

S&P said the ratings reflect Isle of Capri's diverse portfolio of casino assets, relatively steady operating performance, lower than expected capital spending levels and improving credit measures.

Negatives are competitive market conditions, the company's aggressive growth strategy, and its high debt levels, S&P added.

Isle of Capri's EBITDA was $167 million for the nine months ended Jan. 27, 2002, a 5% increase over the year before, driven by solid performance in the Kansas City, Black Hawk and Davenport properties, S&P said. Pro forma for the proposed note issue and bank facility refinancing, EBITDA coverage of interest expense is around 2.5 times and total debt to EBITDA around 4.5 times, both adjusted for operating leases.

S&P downgrades Interep

Standard & Poor's downgraded Interep National Radio Sales Inc., including lowering its $100 million senior subordinated notes due 2008 to CCC- from CCC, and kept the ratings on CreditWatch with negative implications.

S&P said its action reflects increased concern about Interep's limited liquidity and financial flexibility.

Earnings have been under considerable pressure because of the significant decline in national radio advertising over the past year and further weakness following the Sept. 11 terrorist attacks, S&P said.

The rating agency also said Interep's financial obligations will remain relatively high in 2002 when considering net contract buyouts payable and interest expenses.

Existing cash and marketable security balances will not be sufficient to cover operating and financial needs while cash flow remains challenged, S&P added. As a result additional capital will be needed by midyear, and S&P said it is concerned that the company might have difficulty securing the necessary funding in light of the weak advertising environment.

Moody's downgrades Weigh-Tronix

Moody's Investors Service downgraded Weigh-Tronix LLC including lowering SWT Finance BV's €100 million 12.5% senior subordinated notes due 2010 guaranteed by Weigh-Tronix to C from Caa3.

Moody's said its action reflects growing concerns about Weigh-Tronix's ability to support its current debt burden in light of its ongoing underperformance, the continued weak outlook in the company's end-markets and the absence of an immediate resolution of negotiations with its senior secured lenders.

A debt restructuring is "highly likely," Moody's said.

The rating agency described liquidity as very tight, with $5.5 million in cash at the end of February and adjusted EBITDA of $3.8 million for the quarter ended Dec. 31, 2001. The next €6.25 million semi-annual interest payments due on June 1, 2002 will likely represent a significant drain on cash flows, Moody's said.

Moody's downgrades Shop at Home

Moody's Investors Service downgraded Shop at Home, Inc. including lowerings its $75 million senior secured notes to B3 from B2. The outlook is stable.

Moody's said its action follows the announcement that Shop at Home is no longer pursuing its previously announced high yield financing.

The rating agency said the B3 assessment reflects the company's increased liquidity pressure following the cancellation of its proposed financing, as well as the value of its television stations relative to its obligations.

Shop at Home is trying to raise capital to improve its financial flexibility so it can negotiate more favorable carriage contracts and increase its direct sourcing of product, Moody's said.

At Dec. 31, 2001, the company had $20 million of cash and $20 million in inventory and receivables, against $30 million of short term accruals and no availability under its bank facility. EBITDA was negative for the first six months of the fiscal year, as it has been for each of the last two fiscal years. Moody's said it expects Shop at Home to rely on its cash balances to meet near term interest payments and other expenses.

Moody's puts DDi convertible on review for downgrade

Moody's Investors Service placed under review for possible downgrade the ratings of Dynamic Details Inc. and its parent, DDi Corp., including the Ba3 rating on Dynamic Details' $47.5 million term A loan due 2004, $87.8 million term B loan due 2005 and $75 million revolving credit facility due 2004, the B3 rating on DDi Capital Corp.'s $16 million 12.5% senior discount notes due 2007 and the B3 rating on DDi's $100 million 5.25% convertible subordinated debentures due 2008.

Dynamic Details' announcement of a prospective operating loss in first quarter after losses in third and fourth quarters prompted the review, Moody's said.

The review will take into account the company's operating plan for the remainder of 2002, an anticipated protracted recovery in the company's markets and the flexibility afforded under its bank facility.

Moody's is concerned the company's facilities closures may not be sufficient to adjust to reduced demand for its services from high tech and telecom OEMs. More expense cuts may be required, but Dynamic Details has expressed determination to scale its labor force and physical infrastructure to be positioned for a sharp rebound.

However, these sectors, particularly telecom where the company has sizable exposure, do not appear likely to be as resilient as the company suggests, Moody's said.

The review also will focus on the most recent amendment to Dynamic Details' bank facility and assess its ability to comply with the amended covenants, particularly in light of ongoing liquidity requirements. The company closed 2001 with cash, cash equivalents and marketable securities in excess of $45 million. The balance sheet is highly leveraged, and after adjusting for goodwill and other intangibles, consolidated tangible net worth is negative.

S&P rates Northwest airline notes B+

Standard & Poor's assigned a B+ rating to Northwest Airlines Inc.'s offering of $300 million 9.875% senior unsecured notes due 2007. The rating is on CreditWatch with negative implications.

S&P cuts Pinnacle Holdings to D

Standard & Poor's downgraded Pinnacle Holdings Inc.'s corporate credit rating to D from CC.

The action follows Pinnacle's announcement it missed the interest payment on its 5.5% convertible subordinated notes due March 15, 2002.

Pinnacle's C senior unsecured rating and CC secured bank loan rating on its subsidiary, Pinnacle Towers Inc., remain on CreditWatch with negative implications.

Moody's rates new Goodman notes B2, bank debt Ba3

Moody's Investors Service assigned a B2 rating to Goodman Global Holdings, Inc.'s proposed $150 million guaranteed senior unsecured notes due 2009 and a Ba3 rating to its $546.5 million senior secured credit facilities. The outlook is stable.

Moody's said its assessment reflects Goodman's leading market position as the second-largest by volume U.S. manufacturer of central air conditioning and heating products for residential and light commercial use, its ability to produce a full line of low-cost energy-efficient products with significant economy of scale, an established and geographically diversified distributor network and the recent divestiture of its capital-intensive Amana Appliance subsidiary.

Negatives include Goodman's still high albeit reduced debt level, a weak balance sheet with negative tangible equity, its complex and closely held corporate structure that may result in higher-than-usual volatility in its equity base, the highly competitive nature of the residential HVAC market, enduring pricing and margin pressures, and an expected lower level of new home construction and remodeling activities as a result of the slowing economy, Moody's said.

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