S&P downgrades Williams Communications, on negative watch

Standard & Poor's downgraded Williams Communications Group Inc. and put the ratings on CreditWatch with negative implications. Ratings affected include $500 million seven-year secured senior term loan bank loan and $500 million six-yearr senior secured reducing revolving credit facility, both lowered to CCC+ from B; its $1.5 billion 10.875% senior notes due 2009, $575 million 11.7% senior redeemable notes due 2008, $425 million 11.875% senior reedemable notes due 2010 and $575 million 11.7% senior redeemable notes due 2010, all lowered to CCC- from CCC+; and its $250 million redeemable cumulative convertible preferred stock, lowered to CC from CCC-.

S&P said its action is based on increased concerns that Williams Communications may be challenged to adequately fund its business plan beyond 2002.

Williams needs "substantial" revenue and cash flow growth to meet its operating and heavy debt servicing needs, S&P said. However, growth has not met the rating agency's expectations due to the ongoing impact of the weak economy and poor fundamentals of the long-haul data business.

"Estimated cash and bank availability of $1.5 billion at the end of 2001 will have to fund operations and debt service into beyond 2002 because WCG is unlikely to generate free cash flow in the near term," S&P continued. "With debt service and capital expenditures likely to require up to $1 billion in 2002, the company may have to follow through with additional funding, asset sales, or expense reduction to improve its cushion against execution risks and weak industry fundamentals."

S&P is also concerned Williams Communications may be unable to comply with its adjusted EBITDA-to-interest coverage bank covenant in 2002 without an additional amendment.

S&P puts Foster Wheeler on negative watch, downgrades trust preferreds to D

Standard & Poor's downgraded FW Preferred Capital Trust I's $175 million of trust preferred securities to D from B- and put the ratings of parent Foster Wheeler on CreditWatch with negative implications. Foster Wheeler ratings affected include its $200 million of 6.75% notes due 2005, rated BB-, its $270 million revolving credit facility due 2003 at BB- and its $200 million convertible subordinated notes due 2007 rated B.

S&P said the downgrade of FW Preferred Capital Trust I follows the company's announcement it will defer the Jan. 15 dividend payment on the preferred stock for one quarterly period. If the company resumes paying the dividend but remain in arrears with respect to the skipped payments the rating will be raised to C, S&P said.

The rating agency said the CreditWatch listing on Foster Wheeler reflects its "heightened concerns regarding the firm's liquidity position and the potential for near-term bank covenant violations."

Foster Wheeler had $168 million of cash and equivalents and was in compliance with its fixed charge and leverage bank covenants at Sept. 30, 2001 but because the trust preferred interest payment was only about $4 million, "the deferral may imply that liquidity has weakened or that the company could be in violation of its bank covenants at Dec. 31, 2001, and may be preparing for a challenging negotiation with its senior lenders," S&P said.

Moody's downgrades Foster Wheeler, still on review

Moody's Investors Service downgraded Foster Wheeler Ltd., affecting $1.5 billion of debt, and kept the ratings on review for further downgrade. Ratings affected include Foster Wheeler's convertible subordinated bonds, lowered to B3 from B2, its senior unsecured notes and industrial revenue bonds, lowered to B1 from Ba3, its revolving credit facilities, also lowered to B1 from Ba3, and FW Preferred Capital Trust I's preferred securities, lowered to B3 from B2.

Moody's said its action follows Foster Wheeler's announcement it is deferring the $4 million dividend on 9% FW Preferred Capital Trust I Guaranteed Preferred Securities due 2029.

Moody's said it is concerned about Foster Wheeler's operating outlook, financial health and liquidity position in light of the ongoing severe downturn in its end markets, which has resulted in lower revenues, earnings and cash flow generation over the past several quarters.

A recovery in Foster Wheeler's end markets is not expected until late 2002 at the earliest, Moody's said.

The review will look at Foster Wheeler's competitive environment, which is still characterized by low levels of new project opportunities globally, severe price competition, smaller advanced payments and greater working capital requirements. Moody's will also examine the company's ability to generate earnings and cash flow from operations in the near-to-intermediate term and its ability to win new contract awards.

Foster Wheeler's current and future liquidity position will also be a key factor, Moody's said.

Moody's downgrades American Skiing

Moody's Investors Service downgraded American Skiing Co., affecting $280 million of debt securities. Ratings lowered include American Skiing's $120 million 12% senior subordinated notes due 2006, lowered to Ca from Caa3, its $96.7 million revolving bank credit facility due 2004, lowered to Caa1 from B2 and its $62.8 million senior secured term loan due 2006, lowered to Caa1 from B2. The outlook is negative.

Moody's said it lowered American Skiing on concerns that the impact of the Sept. 11 terrorist attacks has impaired the company's already weakened financial profile and restructuring efforts and will continue to have a negative effect.

The downgrade also reflects American Skiing's need to sell real estate and non-real estate assets in order to meet financial covenant tests and debt service requirements, Moody's said.

If American Skiing does not meet its asset sale targets "in the very near-term," the company will "most likely default," Moody's said.

The rating agency also noted that the company's mandatorily redeemable series A 10½% preferred stock is due in November 2002.

Moody's downgrades Vail Resorts

Moody's Investors Service downgraded Vail Resorts, Inc. including its $200 million of 8.75% senior subordinated notes due 2009 to B2 from Ba3. The outlook is stable.

Moody's said it downgraded Vail because the company's operating and financial performance, already impacted by the events of Sep. 11, remains vulnerable to weakened economic trends and continued travel concerns created by the tragedy.

The rating agency noted "Vail relies heavily on destination travel and operates primarily in Colorado, a market that has experienced significant pricing competition so far this year."

Moody's lower rating also incorporates Moody's concern that Vail will continue to make acquisitions to diversify its earnings base, and that leverage will likely increase.

However the outlook is stable because Moody's expects Vail will reduce capital expenditures in fiscal 2002 and that management will continue to aggressively manage operating expenses - although it added that the capital expenditure reductions are unlikely to continue for any extended period of time given the company's need to maintain its physical assets and reputation.

Moody's confirms Booth Creek

Moody's Investors Service confirmed Booth Creek Ski Holdings, Inc.'s ratings including its $133.5 million 12½% senior unsecured notes due 2007 at Caa1. The outlook is stable.

Moody's said it does not believe the uncertainty created by the Sep. 11 attacks will have a material negative impact on Booth Creek's cash flow and liquidity.

Helping Booth Creek's position is its regional properties that customers generally reach by driving, an improved financial profile, Moody's expectation the company will continue to generate cash flow after interest, taxes, and capital expenditures, and a relaxed long-term debt maturity schedule, the rating agency said.

The only scheduled long-term debt maturity is the 12½% notes due in 2007, Moody's added.

The confirmation anticipates Booth Creek will successfully renegotiate its $25 million bank credit facility that expires in March 2002 and that the company will continue to maintain only a relatively small percentage of its capital structure effectively senior to the senior unsecured notes, Moody's added.

Moody's downgrades Huntsman International

Moody's Investors Service downgraded Huntsman International LLC and Huntsman International Holdings LLC, affecting $3.4 billion of debt including Huntsman International's $2.1 billion senior secured credit facility, lowered to B2 from Ba3, its $1 billion senior subordinated notes due 2009, lowered to Caa1 from B2, and Huntsman International Holdings' $335.5 million accreted value senior discount notes due 2009, lowered to Caa2 from B3. The outlook is stable.

Moody's said the downgrade reflects Huntsman International's "weaker financial performance in 2001 due to the economic slowdown, anticipated continuing weakness in the markets for its products in the near to intermediate term given softened demand and overcapacity, high leverage and modest interest coverage, and the need to make significant term loan amortization payments due in 2002 and 2003."

The rating agency also said it is concerned about "potential management distraction from Huntsman International due to the weakened financial condition and the high risk of debt restructuring and/or bankruptcy of Huntsman Corporation, which defaulted in the payment of its bond interest on January 1, 2002."

But Moody's said it is no longer worried about the potential near-term use of cash from Huntsman International to support Huntsman Corp. because the contemplated Bain/ Blackstone transaction did not materialize.

Moody's rates new Compton notes B3

Moody's Investors Service rated Compton Petroleum's planned offering of 10-year senior subordinated notes at B3. The outlook is stable.

Moody's noted, however, that uncertain 2002 natural gas prices will influence underlying credit trends and that the ratings may not withstand aggressive use of Compton's revolver for acquisitions, particularly if natural gas and oil prices are weak.

Supporting the ratings are a record of methodically building key holdings, a seasoned management team and a board of directors consisting mainly of informed midstream and upstream oil and gas industry participants, Moody's said. In addition, the rating agency noted production momentum as shown by a significant 8% to 9% gain in fourth quarter 2001 production over third quarter 2001; diversification potential across four core areas; significant gas processing infrastructure control; a high fully-funded proven developed reserve component (85% of reserves) supporting the debt structure; a significant prospect inventory; and CMT's operation of 92% of its production.

On the negative side, Moody's said the company's modest scale, concentration of 57% of proven reserves and 52% of production in one region, rising unit production and reserve replacement costs and acquisition risk. It also noted that Compton spent a substantial part of historic capital outlays in the 2000-2001 up-cycle and the company's below-average reserve life on proven developed reserves.

S&P rates Compton Petroleum planned notes B-

Standard & Poor's assigned a B- rating to Compton Petroleum Corp.'s planned offering of $150 million 10-year senior subordinated notes due 2012. The outlook is stable.

S&P said its rating reflects below-average business risk from a strategy focused on growth through the exploration and development of its existing assets and acquisitions as well as Compton's focus on deep basin natural gas exploration and production.

The company's high total cost profile is due to its recent spending on up-front exploratory drilling and infrastructure development but S&P expects finding and development costs will trend lower beyond year-end 2001.

Moody's lowers Intrawest outlook to negative

Moody's Investors Service lowered its outlook on Intrawest Corp. to negative and confirmed the company's 10.5% senior notes due 2010 and 9.75% senior notes due 2010 at B1, affecting $335 million of debt. The action completes a review begun on Oct. 3, 2001 when Intrawest and three other ski companies were put on review for possible downgrade in response to the Sept. 11 terrorist attacks.

Moody's said Intrawest's operating and financial trends are still vulnerable to weakened economic trends and travel concerns but added that the company has "a strong backlog of real estate properties providing a somewhat predictable cash flow stream."

Year-to-date real estate revenue sales of $405 million are ahead of last year's full fiscal year real estate revenues and a significant amount of real estate pre-sales are due to close in fiscal year 2003, Moody's said.

It said Intrawest's "favorable" liquidity position will help it cope with cash flow volatility over the near-term. The company recently syndicated a three-year $300 million senior credit facility.

Moody's said it assigned a negative outlook because of uncertainty about Intrawest's real estate development and capital expenditure plans over the next 12 to 18 months. Moody's also expects deleveraging efforts to be materially delayed.

Fitch downgrades YPF to junk

Fitch downgraded YPF SA's senior unsecured foreign and local currency ratings to BB from BBB- and kept them on Rating Watch Negative. Fitch also lowered Repsol YPF's senior unsecured debt to BBB+ from A and Repsol International Capital BV's preference shares to BBB- from A-.

"While the situation in Argentina is one that remains characterised by a high degree of flux, a clear deterioration of the near- to medium-term prospects of the group is beyond doubt," Fitch said.

The rating agency said it is particularly concerned about the new government's apparent position on the energy sector "which is likely to end up carrying a material portion of the burden of the economic reform programme."

At least some of YPF's cash balances will likely have been affected by the new deposit controls, Fitch said, adding that the previous ratings incorporated expectations of continued gradual improvement in the leverage position, "improvements that are almost certain to be arrested in the short-term."

Moody's downgrades Railtrack bonds

Moody's Investors Service downgraded Railtrack plc, including lowering its £400 million 3.5% exchangeable bonds due 2009 to Ba1, and kept its ratings on review for further downgrade.

Moody's took the action after holders of the bonds voted to waive all defaults and potential defaults but effectively failed to enter into a standstill agreement. Under the loan agreement between the UK Secretary of State for Transport, Local Government and the Regions and Railtrack, the secretary of state may issue a stop notice prohibiting use of loan agreement funds to pay debt service to those creditors that have decided not to enter into the standstill agreement.

Moody's said it the risks to this class of bondholders have "increased materially as there is a possibility that SOS will issue such a Stop Notice with respect to the Exchangeable Bonds."

If this happens and the notice is not rescinded before March 18, 2002, Railtrack will miss the bond interest payment due on that date.

Moody's rates Farmland bank debt B1

Moody's Investors Service assigned a B1 rating to the $500 million senior secured credit facilities of Farmland Industries, Inc. The facilities consist of a $350 million senior secured revolver and a $150 million senior secured term loan. Among other ratings, Moody's assesses Farmland's $100 million 8% preferred stock at Caa3 but does not rate Farmland's subordinated debt program, which currently has approximately $535 million outstanding or the debt of some of its subsidiaries. The outlook is stable.

Moody's said the stable outlook is based on expectations that Farmland will continue to cut debt in 2002 through non-core asset sales and planned cost reductions and margin enhancements.

The rating agency said it expects the nitrogen fertilizer market to show some improvement in 2002 due to lower natural gas prices. But it added that petroleum refining margins have dropped from their extraordinarily high 2001 levels and beef markets may cyclically weaken, "which could present challenges to boosting cash flow available for debt repayment."

Ratings could be pressured if Farmland's continued deleveraging is deferred due to weaker than expected business conditions, lower than expected improvements in margins and costs, or delays in selling non-core assets, Moody's said.

Moody's downgrades Linc.net

Moody's Investors Service downgraded Linc.net, Inc.'s $240 million of senior secured credit facilities to B3 from B1. The outlook is negative.

Moody's said the downgrade is a result of Linc.net's decline in profitability over the last 12 months, its diminished financial flexibility and poor visibility in the telecommunications market for its infrastructure services in the near future.

Linc.net has not met Moody's expectations for revenue and EBITDA, the rating agency said.

Despite an amendment to its credit facility providing extra liquidity through an $8.5 million supplementary revolver and the infusion of an additional $10 million from its equity sponsors, Moody's believes poor liquidity coupled with a weak operating environment has greatly diminished Linc.net's financial flexibility going forward.

The rating agency believes there is a chance Linc.net could breach its financial covenants during 2002.

S&P puts America West on positive watch

Standard & Poor's revised its CreditWatch on America West Holdings Corp. and subsidiary America West Airlines Inc. to positive from developing. Ratings affected include America West Airlines' $75 million 10.75% notes due 2005 rated C and various classes of passthrough certificates excluding those that are insured by AAA rated Ambac Assurance Corp., which are not on CreditWatch.

S&P said it revised the CreditWatch after the Air Transportation Stabilization Board said America West has satisfied all conditions necessary for approval of $380 million in federal loan guarantees.

The approval will enable America West to receive $429 million in loan proceeds, expected by the end of the week, S&P noted. Without the new loan, America West would likely have had to file for Chapter 11 bankruptcy protection.

S&P said it will likely upgrade America West once the proceeds are received.

S&P rates Coinmach notes B

Standard & Poor's assigned a B rating to Coinmach Corp.'s planned $400 million of senior unsecured due 2010 and a BB- rating to its new $395 million secured bank facility. S&P also confirmed the company's existing ratings, including its senior unsecured debt at B and its senior secured debt at BB-. The outlook is stable.

S&P said the ratings reflect Coinmach's "position as the largest supplier of coin-operated laundry equipment services in the highly fragmented and regional laundry industry, with a strong presence in California, the New York metropolitan area, and the Mid-Atlantic, Southeast, and Southwest regions. The ratings also reflect the company's stable and fairly predictable cash flow stream. These factors are offset by a highly levered financial profile."

While Coinmach has participated heavily in the consolidation of the industry, S&P said it expects the company "to moderate its aggressive acquisition activity over the near term, and focus on internal growth instead."

S&P rates new TSI Telecommunication notes B-

Standard & Poor's assigned a B- rating to TSI Telecommunication Services Inc.'s planned offering of $245 million senior subordinated notes due 2012 and a B+ rating to its $100 million senior secured term A bank loan due 2007, its $200 million senior secured term B bank loan due 2008 and its $35 million senior revolving credit facility. The outlook is stable.

S&P said its ratings reflect TSI's high leverage, its niche position as an independent provider of wireless transaction processing, and its reliance on future growth in roaming transactions in a consolidating wireless telecommunications market.

However S&P said the company also benefits from its leading position as a clearinghouse for wireless billing transactions, high customer retention and profitability, free cash flow position and recurring revenues.

TSI's software currently manages all major wireless protocols, and customer retention is high, providing barriers to new entrants, the rating agency noted. But it added that TSI must remain at the forefront of new wireless protocols in order to maintain an advantage over competitors.

"While the company currently has a limited number of competitors, new, large entrants may be attracted by the company's margins," S&P said.

S&P rates US Oncology new notes B+

Standard & Poor's assigned a B+ rating to U.S. Oncology Inc.'s planned offering of $175 million senior subordinated notes due 2012 and a BB+ rating to its planned $100 million senior secured revolving credit facility due in 2006. The outlook is stable.

S&P said the bank debt is rated one notch higher than the corporate credit rating of BB because the rating agency has "reasonable confidence" of full recovery of the $100 million principal amount in the event of a default.

S&P said its assessment reflects U.S. Oncology's premier position in the center-based oncology treatment business offset by concerns about its concentration on a single disease and its transition away from its physician-practice-management business model.

U.S. Oncology's position in oncology treatment and research far exceeds its nearest competitors, S&P said. The rating agency noted cancer is the second leading cause of death in the U.S., accounting for one in five deaths, and the aging population and growing incidence are contributing to the demand for cancer treatment.

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