S&P puts Crown Cork on positive watch

Standard & Poor's put Crown Cork & Seal Co. on CreditWatch with positive implications and said it could raise its rating three notches including its senior unsecured debt at CCC.

S&P said the action follows Crown Cork's announcement that it plans to commence a refinancing plan to improve its constrained liquidity position and relieve pressures related to its onerous debt maturity schedule.

The refinancing plan, if completed as proposed, will substantially improve the company's financial profile, which is the primary limitation on the current ratings, S&P said.

S&P added that it expects that if the refinancing is completed as planned it will likely raise Crown Cork's corporate credit rating to BB- from B- and its senior unsecured ratings to B from CCC and will remove all ratings from CreditWatch.

These actions would reflect the meaningful enhancement to its financial flexibility, owing to its materially improved debt maturity schedule, S&P said.

It would also recognize the improvement in investor confidence, evidenced by the company's ability to access the capital markets, which had been severely diminished because of concerns regarding management's ability to accomplish its operational restructuring and refinancing plans, S&P added.

Moody's puts Fleming on review, cuts liquidity

Moody's Investors Service downgraded the speculative-grade liquidity rating of Fleming Cos., Inc. to SGL-3 from SGL-2 and put its other ratings under review for downgrade including its $800 million secured credit facility at Ba3, $355 million 10 1/8% senior notes due 2008 and $200 million 9¼% senior notes due 2010 at B2 and $400 million 10 5/8% senior subordinated notes due 2007, $150 million 5¼% convertible senior subordinated notes due 2009 and $260 million 9 7/8% senior subordinated notes due 2012 at B3.

Moody's said it believes Fleming has adequate liquidity but said it has a diminished cushion for operating cash flow to cover maintenance capital expenditures and working capital fluctuations and needs for additional bank covenant relief.

Fleming has already announced its intention to obtain a new or amended bank facility before the end of the first quarter of 2003, Moody's noted.

The company's unexpectedly poor operating performance during the fourth quarter of 2002 and Moody's concern that poor operating performance during 2003 may cause the company to fall short of previous expectations for balance sheet improvement, prompted the review of all long-term ratings, Moody's added.

Moody's upgrades Venetian, Las Vegas Sands

Moody's Investors Service upgraded co-issuers Venetian Casino Resorts, LLC and Las Vegas Sands, Inc. including raising their $850 million 11% second mortgage notes due 2010 to B3 from 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 to B1 from B2. The outlook is stable. The action completes a review begun in October 2002.

Moody's said the upgrade reflects the company's improved operating cash flow performance as well as the expected cash flow contribution from the $235 million Phase 1A hotel tower project that Moody's believes has a good risk/reward profile.

Once the tower is complete and begins generating a return, Venetian should be able to reduce total debt, a portion of which was incurred to pre-fund the Phase 1A project, Moody's added.

Moody's said it expects that Venetian's full year 2002 EBITDA will be between $180 million and $190 million which will effectively put Venetian back to a level of operating cash flow similar to what it experienced prior to the Sep. 11, 2001 tragedy. This improvement, combined with the expected cash flow contribution from the Phase 1A hotel tower opening scheduled for June 2003, should lower leverage by the end of fiscal year 2003 to a level below the maximum leverage ratio covenant contained in the secured bank loan agreement. The bank covenant requires that debt/EBITDA, including only portion of Phase 1A related debt, be at or below 6.25x by Sept. 30, 2003. Currently, debt/EBITDA is about 6.6x which includes the full $235 million of debt related to the pre-funding of the Phase 1A hotel tower.

S&P confirms American Tower, off watch

Standard & Poor's confirmed American Tower Corp. and removed it from CreditWatch with negative implications. Ratings affected include American Tower's senior unsecured debt at CCC, and American Tower International Inc., American Tower LP and American Towers Inc.'s senior secured debt at B and senior subordinated debt at CCC. The outlook is negative.

S&P said the removal from CreditWatch is due to American Tower resolving several near-term liquidity concerns by closing on the issuance of about $420 million in 12.25% senior subordinated discount notes due 2008.

Prior to the deal S&P said it had been concerned that American Tower would not be in a position to satisfy a put on a convertible note issue that could require up to about $200 million in cash in October 2003, meet about $200 million in bank debt amortization in 2004, and have adequate headroom under its annualized operating cash flow to pro forma debt service bank covenant.

However, by indicating that the company intends to use net proceeds from the new notes issuance to repurchase the convertible notes and pay down its bank term loan by at least $200 million, American Tower is on its way towards removing the three threats to near-term financial flexibility, S&P said.

Once the term loan is paid down, there will be greater headroom under the bank covenant because this would result in lower pro forma debt service going forward, S&P added. With no significant debt maturities until beyond 2005 and moderate free cash flow prospect, American Tower is not likely to have another liquidity issue in the next several years.

Over the longer term, American Tower will find it challenging to reduce its heavy debt burden due to weak tower industry fundamentals, S&P added. The company used substantial debt in the past several years to acquire and build towers with the anticipation that steep growth in cash flows, resulting from strong carrier demand for towers, would help to quickly deleverage. With wireless carriers projected to limit tower-related spending at least through 2004 due to capital constraint, flattening demand for wireless services, and availability of additional spectrum capacity resulting from recent network upgrades, the expectation that American Tower would be able to achieve substantial debt reduction through increased cash flows has become unrealistic.

Moody's rates Burns Philp loan B1, cuts notes

Moody's Investors Service assigned a B1 rating to Burns Philp's new senior secured credit facilities including its A$100 million senior secured revolving credit maturing 2007, A$1.3 billion senior secured term loan A maturing 2007 and $375 million senior secured term loan B maturing 2009 and a B3 rating to its planned $150 million senior subordinated notes due 2011 and downgraded its existing $400 million 9.75% senior subordinated notes due 2012 to B3 from B2. The outlook is negative. The action concludes a review begun on Dec. 16.

Moody's said the downgrades follow Burns Philp's unsolicited cash offer for all the shares of Goodman Fielder Limited. At the existing offer price of A$1.85/share, the acquisition cost would total A$2.4 billion ($1.4 billion), including fees and existing Goodman Fielder debt (about 7.5x estimated Goodman Fielder's EBITDA).

The addition of Goodman Fielder would nearly triple Burns Philp's revenues to A$3.9 billion ($2.2 billion) and add a strong regional portfolio of branded foods with relatively stable cash flow to Burns Philp's existing yeast and spice business, Moody's noted.

Burns Philp, however, intends to substantially debt-fund the acquisition, which would increase leverage to very high levels, Moody's warned.

In addition, integration of Goodman Fielder could be challenging, given Goodman Fielder's large size relative to Burns Philp and Burns Philp's limited knowledge of Goodman Fielder's business.

The negative ratings outlook reflects uncertainties about Goodman Fielder's underlying financial position combined with integration risks.

S&P puts Metris on watch

Standard & Poor's put Metris Cos., Inc. on CreditWatch with negative implications including its $100 million 10% senior notes due 2004 and $150 million 10.125% senior notes due 2006 at B.

S&P said the watch listing follows the credit card company's announcement of a $48.5 million loss for fourth quarter 2002.

With this loss and charge-offs continuing to run at elevated levels, S&P said it is concerned that Metris' funding may become increasingly limited.

The company's funding alternatives are already under pressure as management continues to shrink deposits in its bank subsidiary and the ratings of many of its ABS have been downgraded, S&P noted.

Moody's says Jefferson Smurfit swap likely has no impact

Moody's Investors Service said Jefferson Smurfit Group plc's announcement that it will exchange its 50% stake in the Canadian business of Smurfit MBI and €185 million for Smurfit-Stone Container Corp.'s European packaging assets will likely have no impact on Jefferson Smurfit's ratings. Moody's currently rates Jefferson Smurfit's €350 million 10.125% senior notes due 2012 and $545 million 9.625% senior notes due 2012 at B2, €250 million 15.5% subordinated notes due 2013 at B3 and €2.525 billion senior secured credit facilities, $250 million 6.75% guaranteed debt securities of Smurfit Capital Funding plc due 2005 and $292 million 7.50% guaranteed debt securities of Smurfit Capital Funding plc due 2025 at Ba3.

Moody's said it recognizes the strategic and operational benefits of the asset swap but said the impact of the transaction on the company's capital structure and cash flows have yet to be determined.

Full debt funding of the €185 million cash payment cannot be excluded. Debt-financing of the transaction would lead to marginally increased leverage for Jefferson Smurfit but potential increases in cash interest costs will likely be mitigated by the elimination of approximately €15 million per year of dividends previously paid by Smurfit MBI to Smurfit Stone.

At this point, Moody's said there will be change to the ratings.

However, the ratings will have to incorporate the net impact of the transaction on Jefferson Smurfit's consolidated cash flows and capital structure, including potential increases in debt leverage, as well as the overall performance of the business and the expected contribution of Smurfit Stone's European assets to the group's operations. In addition, the ranking of the new financing instrument relative to currently rated debt instruments within the capital structure may also have potential notching implications. The terms and conditions of the €250 million in subordinated notes prohibit any layering of debt between the €902 million in senior notes and the senior subordinated notes.

S&P upgrades MTS

Standard & Poor's upgraded MTS Inc. including raising its $100 million 9.375% senior subordinated notes due 2005 to CCC- from CC, removed it from CreditWatch with positive implications and assigned a negative outlook.

S&P said the rating action is based on MTS's improved liquidity position after obtaining a $100 million senior secured credit facility. The transaction eliminated the substantial near-term liquidity issues facing MTS and lengthened debt maturities until 2005.

Still, credit protection measures remain marginal, S&P said. The company's EBITDA coverage of interest was only 1.1x and funds from operations to total debt was 8.3% for the 12 months ended Oct. 31, 2002. Leverage is high with total debt to EBITDA at 8.3x.

MTS's, as well as other music retailers', profitability has suffered in recent years due to increased competition from discount stores and industrywide declines in music sales, S&P noted.

Store closings and cost cutting initiatives enabled the company to improve operating margins in fiscal 2002 (ended July 31) to 8.3% from 5.3% in fiscal 2001, S&P said. But margins declined to 6.4% for the first fiscal quarter of 2003 from 8.6% in the year-ago period due to declines in sales.

S&P said it believes MTS will be challenged to improve operating performance significantly in the near term due to weak conditions in the music industry.

S&P says Steel Dynamics unchanged

Standard & Poor's said Steel Dynamic Inc.'s ratings are unchanged including its BB- corporate credit rating with a stable outlook following the announcement of record earnings in the fourth quarter and full-year 2002.

The marked improvement in the company's profitability was largely due to reduced domestic steel production, which resulted from bankrupt steel companies temporarily idling facilities and contributed to higher selling prices and volumes, S&P noted.

However, concerns remain regarding the restart of much of the idled capacity and sluggishness of the economy, S&P said.

In addition, the company continues to spend aggressively on growth initiatives, precluding reduction of its heavy debt burden, S&P added. Most of the spending has been directed to the firm's new structural and rail mill at Whitley County, Ind. Uncertainties remain as to the successful ramp-up of the new facility, market penetration for its structural beam product and its ability to meet rail customers' strict performance characteristics.

Moody's rates Technical Olympic add on Ba3

Moody's Investors Service assigned a Ba3 rating to the $100 million add-on issue of senior notes of Technical Olympic USA, Inc. and confirmed the company's existing ratings, including its $200 million of existing 9% senior notes due 2010 and $220 million three-year revolving credit facility at Ba3 and $150 million 10.375% senior subordinated notes due 2012 at B2. The outlook continues to be stable.

Moody's said the ratings reflect Technical Olympic's newness as a combined entity and the associated integration risk which is intensified by an ongoing acquisition strategy, its still-heavy geographic concentration in Texas and Florida, and the uncertainty as to the plans of its ultimate owner, Technical Olympic SA of Athens, Greece, whose own management and requirements may be subject to change.

The ratings are supported by the increased size, scale, geographic diversification, and improved competitive position resulting from the combination in 2002 of Engle Homes, Inc. and Newmark Homes Corp. into Technical Olympic USA, Inc., Moody's said.

In addition, the ratings acknowledge the company's conservative land policy, the strong historical financial performance of the two predecessor companies (Engle and Newmark), and the satisfactory capital structure.

Fitch cuts Georgia-Pacific

Fitch Ratings downgraded Georgia-Pacific's senior unsecured debt to BB from BB+ and assigned a BB rating to its new 8 7/8% notes due 2010 and 9 3/8% notes due 2013. The outlook remains negative.

Fitch said the downgrade is based on the continuing poor market conditions prevailing in Georgia-Pacific's building products segment, an uncertain outlook for containerboard and packaging and the competitive environment in retail tissue.

In combination with ongoing asbestos exposure and a low probability of immediate asset sales, Fitch said it believes the company's de-leveraging efforts have been pushed back.

Operating cash flow for the current year should best 2002's results, and absent unpredictable events debt reduction in 2003 should be substantive, albeit less than in 2002 considering the sale of Unisource and the conversion of the premium equity participating security units, Fitch said.

Under normal circumstances, Fitch expects that debt would be reduced to just north of 4 times EBITDA by this year-end. A return to investment-grade financial metrics without a substantial improvement in Georgia-Pacific's markets could take some time.

Fitch puts Westar on negative watch

Fitch Ratings revised its Rating Watch status for Westar Energy to negative from evolving including its senior secured debt at BB+, senior unsecured debt at BB- and preferred stock and trust preferred securities at B+.

Fitch said the watch revision is driven by the markedly lower likelihood that the combined impact of regulatory action currently underway and Westar's response to these actions will lead to sufficient improvement in Westar's credit profile to merit an upgrade in the near-term.

Fitch's revised expectation is now that positive resolution of many of the challenges facing Westar would most likely result in a stabilization at current rating levels rather than a near-term upgrade.

The original rating watch evolving status reflected a range of possible outcomes surrounding Westar's response to the Kansas Corporation Commission's July 2001 order. The KCC order blocked certain transactions related to the proposed split-off of Westar's non-utility operations and required Westar to submit a financial plan to achieve a balanced capital structure, Fitch noted.

Fitch's primary concern remains that Westar's debt reduction efforts may prove insufficient to support the current ratings.

The negative watch also reflects concern that a potential lack of flexibility on the part of Kansas regulators may prove counter-productive to new management's efforts to divest non-utility operations and reduce debt, Fitch said.

Moody's puts Century Aluminum on review

Moody's Investors Service put Century Aluminum Co. on review for possible downgrade including its $100 million guaranteed senior secured revolving credit facility due 2006 at Ba3 and $325 million 11.75% first mortgage notes due 2008 at B1.

Moody's said the review is in response to Century's recent announcement that it has signed a letter of intent with Glencore to acquire the 20% ownership interest in the Hawesville aluminum reduction facility currently owned by Glencore for approximately $105 million.

The anticipated consideration will be a combination of cash and debt securities with a proposed breakdown of approximately $70 million in cash and $35 million of debt. Total cash consideration is expected to be funded from a combination of cash on hand and cash received from realizing the market value of a long-term sales contract with Glencore.

Moody's said its review will focus on the company's progress in completing the acquisition and the impact the ultimate financing for the acquisition will have on Century's current liquidity position and credit metrics.

S&P rates Technical Olympic notes B+

Standard & Poor's assigned a B+ rating to Technical Olympic USA Inc.'s $100 million 9% senior unsecured notes due 2010 and confirmed its existing ratings. The outlook is stable.

S&P said Technical Olympic's ratings acknowledge the company's substantial presence in several key homebuilding markets, the historical profitability of its two predecessor companies, and its relatively conservative capital structure.

These strengths are tempered by the risks inherent in the ongoing integration of two previously autonomous companies under one new senior management team.

The consolidated company has operated profitably with gross margins of 20.6% and homebuilding operating margins of 10.0%, S&P said. Both measures are slightly lower than those of rated peers. Inventory turnover is comparable to that for the peer group at 1.4x.

Technical Olympic's capital structure is relatively conservative with debt-to-total capital at 48%, S&P said. This figure may rise slightly as the company adds lots to its inventory base in selected markets.

Assets and liabilities will be well matched post-closing, as the weighted average maturity of all debt will be slightly over six years and there are no maturities until 2005, when the $220 million unsecured revolving line of credit expires.

Debt-to-EBITDA and EBIT/interest coverage were strong at 2.8x and 5.1x, respectively as of Sept. 30, 2002, S&P said.

S&P says Owens-Illinois unchanged

Standard & Poor's said Owens-Illinois Inc.'s ratings including its corporate credit at BB with a negative outlook are unchanged on the company's announcement that its 2003 earnings will be pressured by lower pension income and higher interest expense.

Despite these challenges, S&P said it expects that currently favorable prospects in Owens-Illinois' global glass container business, ongoing cost reduction initiatives and some modest price increases in certain markets, together with expectations of continued modest declines in its asbestos claims and payouts, should enable the company to maintain acceptable credit ratios and remain cash flow positive.

S&P raises Airgas outlook

Standard & Poor's raised its outlook on Airgas Inc. to positive from stable and confirmed its ratings including its senior secured debt at BB and subordinated debt at B+.

S&P said the outlook revision reflects the expectation that Airgas' financial profile will continue to strengthen as economic conditions improve.

Meaningful debt reduction has occurred, demonstrating the resilience of Airgas' cash flows despite challenging economic times, S&P noted. Accordingly, it is possible that the ongoing pursuit of strategic acquisitions will not hamper the strengthening of debt leverage measures to levels appropriate for a higher rating.

Industrial gas distribution has favorable business attributes: good growth prospects, solid internal funds generation and pricing characteristics, and consolidation trends that favor industry leaders, S&P said. About 55% of the $8 billion packaged gases and welding equipment market is consists of about 900 small, independent companies, which presents considerable consolidation opportunities. Airgas derives 45% to 50% of sales from welding equipment and safety supplies. These products have lower operating margins than gas distribution, but there is a significant overlap of customers.

Aggressive acquisition activity has been a key part of the company's growth strategy. With the February 2002 debt-funded acquisition of the majority of the U.S. packaged gas business of Air Products & Chemicals Inc. for $241 million, Airgas is past the roll-up phase. Consequently, acquisition outlays could be at a moderate level, with less reliance on debt financing.

Moody's puts Air2US on review

Moody's Investors Service put all series of Air 2 US aircraft enhanced equipment notes under review for possible downgrade including its $638 million series A enhanced equipment notes due 2020 at Baa2, $226.4 million series B enhanced equipment notes due 2020 at B1, $127.1 million series C enhanced equipment notes due 2020 at B3 and $76.1 million series D enhanced equipment notes due 2020 at Caa2.

Moody's said its review will focus on the probability and impact of non-payment of lease payments when due by American Airlines and United Air Lines, the two lessees in the transaction; volatility of lease revenues from possible releasing of the underlying aircraft pool in an environment subject to financial weakness and overcapacity; and the limited market for A300-600s, currently on lease with American Airlines.

S&P cuts AmeriCredit

Standard & Poor's downgraded AmeriCredit Corp., removed it from CreditWatch with negative implications and assigned a negative outlook. Ratings lowered include AmeriCredit's $175 million 9.25% senior notes due 2009 and $200 million 9.875% senior notes due 2006, cut to B+ from BB-.

S&P said the downgrade follows detailed discussions with management concerning asset quality, profitability, and liquidity issues.

AmeriCredit does not expect recovery rates to improve from the low of 40% in the December 2002 quarter based on continued weakness in used automobile prices, S&P said. Additionally, its annualized net loss rate for the next two quarters will now be in the 7% area.

Given the continued weakness in the used automobile market and the weak economy, the company's business model will continued to be tested during the next couple of quarters, S&P commented.

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