S&P sees no near-term liquidity pressure for Kmart

Standard & Poor's said it sees no near-term liquidity pressures for Kmart Corp.

The rating agency noted Kmart has "successfully passes its peak borrowing season, has access to its $1.5 billion revolving credit facility, and has no significant near-term debt maturities."

It also anticipates the bank facility, which matures in December 2002, will be successfully refinanced.

S&P issued its statement after a Prudential analyst put a sell recommendation on Kmart's stock. The resulting stock price decline has no impact on Kmart's credit rating or outlook, S&P said.

S&P cut Kmart to BB on Nov. 27 in response to what it said were disappointing operating results and weak credit measures. It added that its negative outlook continues to reflect concerns that "a turnaround in operating performance will be challenging."

S&P raises Charter Communications Operating bank loan to investment grade

Standard & Poor's upgraded Charter Communications Operating LLC's $5.2 billion senior secured credit facility to BBB- from BB+ and affirmed its BB+ rating on CC VIII Operating LLC's $1.45 billion senior secured credit facility. Both are wholly owned subsidiaries of cable television operator Charter Communications Inc. S&P also affirmed all other ratings on Charter and its subsidiaries. The outlook is stable.

S&P noted that the credit facilities of Charter Communications Operating and CC VIII Operating are being modified largely with respect to pricing and amortization terms. They remain secured by a first priority security interest in all equity of the respective cable systems with only a minor amount of debt or other liabilities ranking ahead of the facilities.

S&P said it raised Charter Communications Operating's bank loan to two notches above Charter's corporate credit rating based on the value of the underlying cable assets relative to the secured debt. If fully drawn, secured debt per subscriber would be in the mid-$1,200 area, only about four times annualized third quarter 2001 cash flow. S&P said that in a theoretical liquidation scenario the cable systems would reasonably be worth at least double the amount of the fully drawn bank facility, "giving secured creditors excellent prospects for full recovery."

The CC VIII Operating facility is rated one notch above Charter's corporate credit rating. While the loan-to-value ratio is not as great as for the Charter Communications Operating facility, at a maximum of $1,450 of secured debt per subscriber, CC VIII Operating LLC's secured creditors should expect full repayment in a simulated distress situation.

Moody's puts Xerox on review for downgrade

Moody's Investors Service put Xerox Corp.'s long-term ratings on review for downgrade, affecting $7.7 billion of debt securities. Ratings affected include Xerox's senior unsecured debt at Ba1, its subordinated debt at Ba2 and its preferred stock at Ba3; Xerox Credit Corp.'s senior unsecured debt at Ba1; Xerox Overseas Holdings Limited's senior unsecured debt at Ba1; and Xerox Capital (Europe) PLC's senior unsecured debt at Ba1.

Moody's said its review will look at "the prospects for improvement in core profitability and debt protection measures in 2002 and beyond" rather than the company's quarterly results.

At year end 2001, Moody's said, Xerox is expected to have approximately $3.9 billion of cash relative to $2.0 billion of public debt maturities in 2002 in addition to the need to refinance its fully drawn $7 billion senior unsecured revolving credit facility due October 2002.

S&P keeps Captain D's on watch

Standard & Poor's said Captain D's Seafood Restaurants remains remain on CreditWatch with developing implications including its senior secured debt at CCC+.

The announcement follows Captain D's receipt of a 90-day extension of its existing $135 million credit facility to March 31, 2002 from Dec. 31, 2001.

S&P said the CreditWatch listing reflects its concern regarding Captain D's ability to refinance the loan.

Poor operating performance has affected Captain D's parent Shoney's Inc., and further weakness could make it more difficult for Captain D's to refinance its pending debt maturities, S&P said.

S&P rates new Longview Fibre notes B+

Standard & Poor's assigned a B+ rating to Longview Fibre Co.'s planned offering of $185 million of senior subordinated notes due 2009 and a BB rating to its new $250 million three-year revolving credit facility. The outlook is stable.

S&P said the ratings reflect Longview Fibre's "below-average business position within cyclical forest products markets and an aggressive financial profile, partly offset by ownership of valuable timberlands."

The rating agency said Longview's timberlands should remain a reliable source of strong cash flows, even though they are concentrated in a single region and end markets are cyclical, and their market value is believed to considerably exceed the company's total debt.

However Longview's manufacturing operations are "less well positioned and have turned in weak results over the past few years," S&P said. The segment has been consolidating and Longview faces "significant competition from larger, financially stronger rivals."

S&P takes Advanced Accessory off watch

Standard & Poor's affirmed its ratings on Advanced Accessory Systems LLC and its AAS Capital Corp. unit and took the ratings off CreditWatch. The outlook was changed to negative. Affected ratings include Advanced Accessory Systems' $125 million of 9.75% senior subordinated notes due 2007 rated CCC+, its bank facilities at B and AAS Capital Corp.'s $125 million of 9.75% senior subordinated notes due 2007 rated CCC+.

S&P said its action follows Advanced Accessory's negotiation of an amendment to its credit facility, which increases borrowing capacity by $10 million and relaxed covenants.

S&P said its ratings "incorporate expectations that new business coming on stream and cost-containment efforts will enable the company to remain in compliance with the reset covenants and meet interest payments and debt maturities as they come due."

S&P cuts Archibald Candy to D

Standard & Poor's lowered its ratings on Archibald Candy Corp. to D, including cutting its $170 million of 10¼% senior secured notes due 2004, its revolving credit facility and corporate credit to D from B-.

S&P said its action follows Archibald Candy's failure to make the $8.7 million interest payment due Jan. 1 on the 10¼% notes.

S&P downgrades Flag Telecom, puts on negative watch

Standard & Poor's downgraded Flag Telecom Holdings Ltd. and its FLAG Ltd. unit and put the ratings on CreditWatch with negative implications. Ratings affected include Flag Telecom Holdings' €300 million 11.625% notes due 2010 and $300 million 11.625% senior notes due 2010, cut to B- from B, and FLAG Ltd.'s $430 million 8.25% notes due 2010 cut to B+ from BB-.

S&P said it lowered the ratings because of continued weak industry fundamentals and ongoing uncertainty regarding demand and pricing levels in 2002 and 2003.

The rating agency said Flag "performed well in 2001, largely due to presale activity on its trans-Atlantic cable. Also, relative to its peers, the company has operated with a lean corporate structure, a narrow business focus, and has had less bad debt exposure because of its high-quality customer base."

Nonetheless is has $1.2 billion of debt, faces "very challenging" business conditions and Flag Network Services is cash flow negative, S&P said.

Cash flow generation for 2002 and 2003 is "difficult to predict given sharply declining prices and lower demand levels from the company's carrier customers," the rating agency noted.

S&P cuts Polymer Group

Standard & Poor's lowered Polymer Group Inc.'s ratings, including cutting its $400 million 9% senior subordinated notes due 2007 to D from CC, its senior secured bank debt to CC from CCC and its $200 million 8.75% senior subordinated notes due 2008 to C from CC. Ratings not lowered to D remain on CreditWatch with negative implications and will be lowered to D on a payment default, bankruptcy filing or other debt restructuring.

The action follows Polymer's failure to negotiate an extension of the waiver of covenant defaults on its senior credit facility and the banks' exercise of their right to block the Jan. 2 interest payment on Polymer's 9% notes.

S&P commented: "Polymer's vulnerability stems from its inability to reduce its high debt levels due to challenging credit markets and economic conditions."

S&P upgrades Anchor Gaming notes

Standard & Poor's upgraded Anchor Gaming's 9.875% senior subordinated notes due 2008 to BB- from B and kept them on CreditWatch with positive implications. S&P also withdrew its BB- corporate credit and senior unsecured bank loan ratings on the company.

S&P said its action follows completion of Anchor's merger into International Game Technology.

IGT's ratings, including its senior unsecured debt at BB+, remain on CreditWatch with positive implications.

S&P rates Sanmina-SCI

Standard & Poor's assigned a BB+ corporate credit and senior secured bank loan rating to the new Sanmina-SCI Corp., raised the subordinated notes of the former Sanmina Corp. to BB- from B+ and lowered the subordinated notes of the former SCI Systems to BB- from BBB-. The outlook is stable.

Sanmina Corp. acquired SCI Systems Inc. in a stock transaction that closed on Dec. 6, 2001.

S&P said it raised Sanmina's rating in response to the improved market position of the combined company and its more diversified customer base. It lowered SCI because of "somewhat weaker credit measures for the prior rating and operational challenges associated with the merger."

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