Moody's rates Hasbro new convertibles at Ba3

Moody's Investors Service assigned a Ba3 rating to Hasbro, Inc.'s new offering of $225 million of convertible senior notes due 2021. The rating agency confirmed Hasbro's existing ratings and maintained the negative outlook.

The rating agency noted: "Hasbro is the second largest US toy company with a diverse portfolio of strong brands."

But it added that the Ba3 senior unsecured ratings and negative outlook reflect "the sharp deterioration in debt protection measures that the company experienced in 2000, and the view that financial flexibility is unlikely to return to levels consistent with an investment grade rating for some time. In addition, it reflects the effective subordination created by a secured bank facility put into place in early 2001."

Moody's commented: "In the last year, the company has moved away from a concentration on certain of its products, in an effort to create a more balanced portfolio. While the company's has made progress in its initiatives to reduce costs, focus on more stable businesses, and carefully manage inventory risk, the firm still faces many challenges which underpin the continuation of the negative outlook."

Raising further uncertainty for the "critical" 2001 Christmas season is the slowing economy and weak consumer confidence, Moody's said.

Fitch rates new Hasbro convertible at BB

Fitch assigned a BB rating to Hasbro, Inc.'s new $225 million 2.75% convertible senior notes due 2021. At the same time, Fitch affirmed its BB+ rating for Hasbro's $650 million secured revolving credit facility and its BB rating for Hasbro's $1.15 billion existing senior notes and debentures. The rating outlook remains negative, Fitch said, reflecting ongoing softness in the traditional toy business.

Hasbro's ratings reflect its strong market position as the second largest toy and game company and diverse product mix, with particular strength in games and boys' toys. Key brands include Pokemon, Tonka and Playskool as well as games such as Monopoly, Clue and Yahtzee. The rating also considers the company's weakened financial profile as well as uncertainty regarding the success of its strategic shift away from licensed properties and hot toys towards its core brands, Fitch said.

Hasbro announced a restructuring plan to refocus on its core brands and reduce its reliance on licensed product in late 2000, Fitch noted. As part of the restructuring, Hasbro closed certain domestic offices, consolidating its toy business. In addition, in third quarter Hasbro announced additional restructurings to shift certain of its Tiger businesses to the U.S. Toys business. Initial results from the restructuring appear favorable as operating profitability increased to 13.2% in the first nine months of 2001 from 11.8% in the same period last year, Fitch said, adding that profitability remains significantly lower than pre-2000 levels and the ultimate success of these initiatives remain uncertain. Softness in the toy business combined with losses stemming from its Hasbro Interactive and Game.com businesses weakened the company's financial profile significantly in 2000, Fitch said. More recently, weak sales at its Tiger unit have impaired the recovery in bondholder protection measures anticipated for 2001. Fitch said it expects the changes being implemented to improve Hasbro's business profile, but restoration of its credit measures may take some time.

S&P rates new Hasbro convertibles BB

Standard & Poor's assigned a BB rating to Hasbro Inc.'s new $225 million of 2.75% convertible senior notes due 2021.

Moody;s puts CommScope convertibles on review for possible upgrade

Moody's Investors Service on Tuesday placed the B3 rating on CommScope, Inc.'s $172.5 million 4% convertible subordinated notes due 2006 under review for possible upgrade. At the same time, Moody's withdrew the Ba2 and B2 ratings assigned respectively to CommScope's proposed guaranteed senior secured credit facility and proposed guaranteed senior subordinated notes due 2009, as they will neither be arranged nor issued.

On Nov. 16, CommScope acquired about an 18% ownership interest in a fiber optic cable venture, formerly part of Lucent Technologies' Fiber Optic Solutions business, with Furukawa Electric Co. of Japan. CommScope's participation, which is being funded through the issuance to Lucent of 10.2 million shares of CommScope common stock, is substantially smaller than the joint venture investment negotiated over the summer. CommScope's Ba3 senior implied and B3 senior unsecured issuer ratings were also placed under review. The original financing structure for CommScope's share of the Lucent acquisition revealed a proclivity by the company to compromise substantially its balance sheet strength in pursuit of an opportunity deemed as strategic. This precedent will make it difficult to restore CommScope's rating to its previous investment grade standing, the rating agency said.

Moody's said its review will take into consideration CommScope's existing capitalization and debt leverage; estimated free cash flow coverage of fixed charges for the company's fiscal year ending Dec. 31 and recent trends in domestic and international demand for hybrid fiber coaxial cable, the company's core business line and fiber optic cable. Recognition will also be given to the existing or potential structural subordination of the rated convertibles to debt issued at the company's operating subsidiary level, in light of management's willingness to augment its debt structure in pursuit of the transaction, as initially contemplated. An evaluation of the former Lucent fiber optic business, and the prospect of direct cash investment beyond a $30 million loan to the venture which will be carved out of the stock issuance to Lucent, will additionally be entailed in the analysis.

S&P puts NTT long-term ratings on watch, negative

Standard & Poor's on Tuesday placed its AA long-term credit ratings on Nippon Telegraph & Telephone Corp. and its 64%-owned subsidiary, NTT DoCoMo Inc., on watch with negative implications. The A-1+ short-term ratings on both companies were affirmed. The watch reflects concerns over the impact of a one-time payment of restructuring-related retirement costs on the consolidated financial profile of the NTT group, S&P said. The restructuring, which is essentially a salary reduction rather than a retirement scheme, will result in a significant increase in the group's debt burden in the near term, in exchange for longer term savings on labor costs. S&P said that its preliminary analysis appears to show that NTT's credit quality will be weakened by the plan, which is based on a largely debt-funded one-time payout to employees equal to about half of the potential savings on labor costs. The most likely outcome of a full analysis of the restructuring, which should be completed in the next few days, is that the long-term ratings on both NTT and NTT DoCoMo will be lowered, but by not more than one notch.

Given the weak performance of NTT's traditional fixed-line telephone service units, the credit quality of the group rests heavily on the very strong business position and financial performance of NTT DoCoMo, Japan's leading wireless telecommunications company. NTT DoCoMo's credit profile is arguably stronger than that of the rest of the group, but the close management and ownership links between the company and its parent diminish the prospects for a differentiation in its rating following the review.

S&P downgrades Kmart

Standard & Poor's downgraded Kmart Corp.

Ratings affected include the company's debentures, senior notes, notes and medium-term notes and its revolving credit facility, all cut to BB from BB+, and its trust convertible preferreds, cut to B from B+.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.