Moody's rates new Longview Fibre notes B2

Moody's Investors Service assigned a B2 rating to Longview Fibre Co.'s planned offering of $185 million senior subordinated notes. The outlook is stable.

Moody's said the ratings are supported by "the significant value represented by the company's fee timber resources and by the completion of capital spending initiatives and a recent dividend reduction that should augment free cash flow going forward and permit improvement in the company's financial profile."

However the rating agency said two of Longview's three segments - paper and paperboard and converted products - have been unprofitable on an operating income basis over the six-year 1996-2001 period, although they have generated positive EBITDA in each of those years.

"This has led to substandard returns over the period, especially considering the moderately heavy debt leverage employed," Moody's said.

Moody's downgrades Clubhaus notes, outlook still negative

Moody's Investors Service downgraded Clubhaus plc's £60 million of senior notes due 2009 to Caa3 from Caa2 and confirmed the company's £40 million senior bank facilities at B3. The outlook for all ratings remains negative.

Moody's said the downgrade follows Clubhaus' decision not to make the Dec. 1 interest payment on its senior notes.

Moody's said it revised the ratings to reflect its expectation that bondholders may suffer bigger losses than anticipated when Moody's downgraded Clubhaus on Nov. 9, 2001. Clubhaus recently wrote down its assets by a further £75 million.

Although the new valuations - conducted an independent firm - still imply "meaningful recovery prospects for bondholders, the revised ratings and continued negative outlook reflect the considerable uncertainty regarding the terms of the anticipated restructuring and the ultimate value bondholders may realise from Clubhaus' assets," Moody's said.

Moody's rates new Owens-Brockway notes B2

Moody's Investors Service assigned a B2 rating to Owens-Brockway Glass Container Inc.'s planned offering of $300 million notes and confirmed the ratings of parent Owens-Illinois, Inc. The outlook remains negative. Among the $5.4 billion of debt affected is Owens-Illinois' senior unsecured debt at B3 and the bank facilities of Owens-Brockway and other subsidiaries at B1.

Moody's said its assessment reflects" the strong competitive position of the company in the glass container industry, but also Owens-Illinois' high leverage, its thin free cash flow relative to its debt load and the threat to this free cash flow represented by rising asbestos litigation-related payments."

The rating agency noted that the new notes have somewhat lower quality collateral and guarantees compared to the existing bank debt.

Moody's noted that Owens-Illinois has built a strong market position in a sector where product differentiation is difficult to achieve by focusing on cost reduction initiatives and developing a manufacturing technological edge. Cost reductions have given Owens-Illinois one of the highest margins among large packaging companies while the technological innovation has allowed it to develop a stream of revenue through licensing agreements worldwide.

However Moody's said it expects free cash flow will continue to be constrained relative to debt level because of substantial capital spending in 1999 and 2000 and creeping asbestos-related litigation payments.

"Asbestos payments remain small relative to the company's operating income, because the company's exposure is limited to its ownership of a small company until the end of the 1950s," Moody's said. "However, the numbers of filings and of cases pending have risen since 1997. Recent bankruptcy filings by large companies and the resulting stay on asbestos claims against them are causing attorneys to more aggressively seek plaintiffs that might have a valid claim against companies such as Owens-Illinois that have the ability to settle claims more rapidly. Moody's believes that such payments by Owens-Illinois could continue to increase over the medium term, impacting free cash flow."

Moody's downgrades Courtyard by Marriott II

Moody's Investors Service downgraded Courtyard by Marriott II LP's $127.4 million of senior unsecured notes to B1 from Ba3. The outlook is negative.

Moody's said the action reflects the deterioration in the operating performance of Courtyard by Marriott II's high-end limited service lodging portfolio since September 2001.

Lodging companies in general have seen a challenging operating environment since the Sept. 11 terror attacks, Moody's said. Owners of lodging properties, especially in the higher price segments such as Courtyard by Marriott II have been particularly affected because of their high operating leverage as well as their dependence on business travel, the rating agency added.

While overall industry revenue per available room (RevPAR) trends have improved since September 2001, Moody's said it anticipates Courtyard by Marriott II will operate at least through the end of 2002 with significantly reduced debt service coverage levels that are not consistent with a Ba3 rating.

Moody's confirms Kvaerner plc

Moody's Investors Service confirmed the ratings of Kvaerner plc, affecting £109 million of debt including its 10.875% eurobonds due 2014 and 10.625% eurobonds due 2006 at B3. The outlook is stable.

Moody's said its action follows the definite exclusion of Kvaerner plc's debt from the refinancing program of its parent Kvaerner ASA.

Moody's said it expects Kvaerner plc's operating performance will stabilize and that the company will benefit from the removal of the financial pressure associated with its parents financial restructuring.

S&P upgrades Avado Brands

Standard & Poor's upgraded Avado Brands Inc. and confirmed its Avado Brands Financing I unit's preferred stock at C. The outlook is negative. Ratings affected include Avado's $125 million of 9.75% senior notes due 2006, raised to CCC from CC and its $100 million of 11.75% senior subordinated notes due 2009, raised to CC from D.

S&P said its action follows Avado's payment of interest on 11.75% senior subordinated notes. The payment was originally due on Dec. 15.

S&P added that Avado has limited financial flexibility. It has no bank facility and has had to sell assets to meet its cash needs, the rating agency continued. S&P believes Avado will need to obtain additional sources of capital to fund operations and service debt going forward.

S&P puts Infonet on negative watch

Standard & Poor's put Infonet Services Corp. on CreditWatch with negative implications. Affected ratings include Infonet's senior secured bank loan at BB.

S&P said the watch placement follows Infonet's announcement of revised financial guidance and its intention to repurchase up to $100 million of stock over two years. Infonet's anticipated revenues of $645 million and operating cash flow of $70 million for fiscal 2002 is "significantly lower" than S&P had expected.

S&P said Infonet's business has been "adversely affected by delays in the migration of the AT&T Unisource (AUCS) customers to Infonet's own network platform under an agreement with AUCS. Moreover, Infonet has cited application launch delays by customers and aggressive price competition as reasons for the downward revision in guidance."

Infonet could be downgraded more than one notch, S&P added, noting "the limited degree of visibility" for business prospects for the rest of fiscal 2002 and all of fiscal 2003 as well as the potential for further decline in worldwide economies.

S&P downgrades Formica

Standard & Poor's downgraded Formica Corp. and kept the ratings on CreditWatch with negative implications.

Affected ratings include Formica's bank facilities, lowered to CCC from B- and its $215 million of 10.875% senior subordinated notes due 2009, lowered to CC from CCC.

S&P takes Radnor off watch

Standard & Poor's took Radnor Holdings Corp. off CreditWatch with negative implications, confirmed its ratings and assigned a stable outlook.

Affected ratings include Radnor's $100 million of 10% senior notes due 2003 and its $60 million of 10% senior notes series B due 2003, both rated B-.

S&P downgrades AES Drax

Standard & Poor's downgraded AES Drax Energy.

Affected ratings include AES Drax Energy Ltd.'s £135 million 11.25% bonds due 2010 and its $200 million 11.5% bonds due 2010, both cut to B+ from BB-.

S&P confirmed AES Drax Holdings Ltd. including its £200 million 9.07% bonds due 2025 and its $302.4 million 10.41% bonds due 2020 at BBB- and InPower Ltd.'s £905 million bank loan due 2015, also at BBB-.

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