Moody's cuts National Equipment

Moody's Investors Service downgraded National Equipment Services, Inc. and maintained a negative outlook on the company. Ratings lowered include National Equipment's $402 million senior secured revolving credit facility due July 2003 and $82 million senior secured term loan due July 2003 to B3 from B2 and its $275 million of 10% senior subordinated notes due November 2004 to Caa3 from Caa1.

Moody's said it lowered National Equipment because of a continuing deterioration in the company's performance, protracted weak demand in the construction and industrial end-markets, and concerns over the company's ability to refinance its maturing debt obligations.

National Equipment's operating performance has been deteriorating as the industry fundamentals continue to worsen, Moody's noted. Sharp declines in non-residential construction spending and the still lackluster manufacturing sector have led to prolonged weak demand for rental equipment. The equipment rental industry's over-expansion prior to the downturn has resulted in substantial over-capacity in the industry, thus exacerbating weakening demand and resulting in falling rental rates and margins.

In the second quarter of 2002, for example, National Equipment's rental rates for scissors lifts fell

15% from a year ago, while rental rates for boom lifts were down 6% and rough terrain vehicles down 5%, Moody's noted. As a result, the company's dollar utilization rate also fell sharply, from 53% in the second quarter of 2001 to 46.5% in the second quarter of 2002.

Given the continuing slump in non-residential construction and the low level of manufacturing activities, Moody's said it expects utilization and rental rates to trend even lower in the next few quarters.

S&P cuts Magellan Health

Standard & Poor's downgraded Magellan Health Services, Inc. and kept the company on CreditWatch with negative implications.

Ratings lowered include Magellan's $150 million revolving credit facility due 2004, $183.3 million senior secured tranche A term loan due 2004, $183.3 million senior secured tranche B term loan due 2005, $183.3 million senior secured tranche C term loan due 2006 and $250 million 9.375% notes due 2007, all cut to B- from B, and its $625 million 9% senior subordinated notes due 2008, cut to CCC from CCC+.

S&P puts American Plumbing on watch

Standard & Poor's put American Plumbing & Mechanical Inc. on CreditWatch with negative implications including its $125 million 11.625% senior subordinated notes due 2008 at B- and its $95 million revolving credit facility due 2002 at BB-.

S&P said the action is in response to American Plumbing's announcement that it will generate about $31 million in EBITDA in 2002, down from previous guidance of $46 million.

The reduced EBITDA is due to weaker-than-expected profitability within the company's commercial construction operations and intensified competition in many of its key end markets, S&P noted.

As a result of the reduced cash generation and elevated debt levels, American Plumbing was forced to obtain another amendment to its bank credit facility, including reducing the total facility size to $90 million from $95 million, further straining liquidity in the near term, with just $18 million in availability at June 30, 2002, S&P added.

S&P cuts Genuity

Standard & Poor's downgraded Genuity Inc. and kept the company on CreditWatch with negative implications. Ratings lowered include Genuity's $2 billion senior unsecured revolving credit facility due 2005, cut to CC from CCC-.

S&P said the action follows Genuity's announcement in its second quarter 2002 10-Q that it had retained financial advisors and was in discussions with Verizon Communications Inc. and the banks to restructure its outstanding debt.

S&P said its CreditWatch listing indicates the strong likelihood that the company's creditors will receive less than full recovery given the company's negative cash flow and depressed valuations for telecommunications assets.

In addition, if the banks or Verizon decide to accelerate payment obligations under the respective credit facilities, it is likely that Genuity would need to seek Chapter 11 bankruptcy protection, S&P added.

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