Moody's rates PCA notes Caa1

Moody's Investors Service assigned a Caa1 rating to PCA International's upcoming offering of $200 million senior unsecured notes due 2009. The outlook is stable.

Moody's said the ratings reflect PCA's very high leverage relative to operating cash flow, which will make it challenging for PCA to meaningfully reduce debt at current operating levels.

Moody's also noted that PCA will need to invest cash in growth for the medium to long term, has insufficient tangible asset coverage, indicating high potential for loss of principal in case of default, experiences high fourth-quarter seasonality, which could cause bank borrowings and vendor financing to increase during the first part of the year, and has suffered historical operating losses from the institutional business which PCA hopes to turn around in order to help achieve its financial objectives.

Positives include PCA's position as sole provider of in-store photography services to Wal-Mart, backed up by history of operations as well as a long-term license agreement, a pricing strategy which allows for satisfactory operating profitability while reducing the likelihood of a competitive threat, the improving profitability of the Wal-Mart business and the expectation of growth related to Wal-Mart's own expansion and store renewal programs, the rating agency said.

Moody's said the stable outlook reflects its view that PCA will continue to operate at current levels and should be able to finance its growth through operating cash flow.

However, financing growth will leave very little cash available for debt reduction, making it unlikely that leverage will fall significantly in the near term, Moody's added.

S&P downgrades Knowles

Standard & Poor's downgraded Knowles Electronics Holdings Inc. and put the company on CreditWatch with negative implications.

Ratings affected include Knowles' $250 million senior secured credit facility bank loan due 2007 and $153.2 million 13.125% senior subordinated notes due 2009, both cut to CCC+ from B-.

S&P downgrades Pueblo Xtra

Standard & Poor's downgraded Pueblo Xtra International Inc. The outlook is negative. Ratings affected include Pueblo Xtra's $177.3 million 9.5% senior notes due 2003, cut to CCC- from CCC and its $43 million revolving credit facility due 2003, cut to B from B+.

S&P said it cut Pueblo Xtra because of concern about the company's ability to refinance its bank facility which matures in February 2003 and $177 million of senior unsecured notes due August 2003.

Although Pueblo has demonstrated some improvement in sales and EBITDA in recent quarters, credit protection measures and liquidity remain weak as the company faces increased competition and weakened economic conditions in its markets, S&P said.

In addition, the company disclosed in its 10-Q dated Feb. 23 that due to declining sales and profitability, and working capital deficits, the company "may be unable to continue as a going concern for a reasonable period of time," S&P noted.

S&P acts on Advantica

Standard & Poor's took various actions on Advantica Restaurant Group Inc. and removed it from CreditWatch with negative implications.

The corporate credit rating was cut to SD (selective default) from CC, the $592 million 11.25% senior notes due 2008 were cut to D from C and the $200 million bank credit facility due 2003 was confirmed at CCC+.

Moody's rates Petroleum Helicopters B1

Moody's Investors Service assigned a B1 rating to Petroleum Helicopters, Inc. pending $170 million of senior unsecured seven year notes.

Negatives for the rating are Petroleum Helicopter's small scale, 86% concentration of 2001 EBIT in the cyclical Gulf of Mexico oilfield support services sector, secular declining trends in Gulf of Mexico flight hours only partly due to asset rationalization, marginal cash flow so far from its emergency medical business, capital needs to expand service for the deepwater Gulf of Mexico segment, potential acquisition risk, substantial debt and pro-forma operating lease leverage relative to asset values, and still softening cash flow in the current down-cycle, Moody's said.

The company suffered operating losses in 1999 and 2000 but managed to increase prices 10% and 30% during 2001, Moody's noted. But the rating agency said Petroleum Helicopter's ability to avoid down-cycle losses and boost returns over the cycles depends on the durability of those price increases.

Moody's said it believes "it is premature to build those prices increases, achieved during the up-cycle, into the downcycle outlook."

S&P rates Philippine Long Distance notes BB-

Standard & Poor's assigned a BB- rating to Philippine Long Distance Telephone Co.'s upcoming $350 million bonds due 2012.

S&P puts Anteon on positive watch

Standard & Poor's put Anteon Corp. on CreditWatch with positive implications. Ratings affected include Anteon's $110 million six-year revolving credit facility and $60 million six-year term loan, both rated BB-, and its $120 million 12% senior subordinated notes due 2009, rated B-.

S&P said the positive watch reflects Anteon's improved financial profile and its expectations for continued improvement in profitability and cash flow.

S&P said it expects government-related business will remain substantial, as federal agency outsourcing continues to grow and new defense and security initiatives are implemented.

Operating margins could improve from current 7% levels over time with additional scale and operating synergies, S&P noted.

Anteon has also bolstered its capital structure by using the proceeds from its initial public offering and free cash flow to reduce debt levels, from the 5 times debt-to-EBITDA range to about 3 times, S&P said.

S&P keeps Foster Wheeler on negative watch

Standard & Poor's is keeping the B+ corporate credit rating for Foster Wheeler Ltd. on watch with negative implications, after the company recorded an added $46 million charge in the fourth quarter. Foster Wheeler said it will revise its 2002 forecast downward but its cash position at March 29 rose to $423 million from $224 million at yearend.

Foster Wheeler's independent auditor has given the firm a qualified audit opinion on 2001 financial statements, including "going concern" language, due to Foster Wheeler's continued negotiations to finalize a long-term amendment or waiver to its bank revolving credit facility, a lease and account receivable beyond April 30.

Should the company be unable to obtain waivers or long-term amended agreements beyond April 30, it is possible that creditors could accelerate payments, which could potentially lead to a default, S&P said.

However, should senior bank lenders pursue that strategy, their position in a default scenario would be pari passu to senior unsecured noteholders and other senior obligors.

As a result, S&P believes senior bank lenders have a meaningful economic interest to strengthen their position in the debt structure rather than pursue a debt acceleration scenario.

S&P rates Colonial capital securities BB

Standard & Poor's assigned a BB rating to Colonial Capital Trust III's $100 million of 8.32% capital securities.

Moody's rates TurnAlem Finance bond Ba2

Moody's Investors Service assigned a Ba2 rating to the upcoming issue of senior unsecured notes by TuranAlem Finance BV. The outlook is positive. The notes are guaranteed by OJSC Bank TuranAlem of Kazakhstan.

Moody's said the ratings are at the sovereign ceiling for Kazakhstan, reflecting the important role of TuranAlem in the country's banking system.

The rating also takes into account the high likelihood of support should it be necessary, says the rating agency. A group of foreign investors including EBRD, IFC, and Raiffeisen Bank of Austria is likely to offer BTA its global expertise and thus improve the quality of its operations, Moody's said.

Fitch rates Kazkommertsbank bond BB-

Fitch Ratings said it expects to assign a long-term rating of BB- to the forthcoming eurobond to be issued by Kazkommerts International BV and guaranteed by Kazkommertsbank.

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