Fleming "disappointed" with Moody's review

Fleming Cos., Inc. said it was "disappointed" that Moody's Investors Service decided to put the company under review for possible downgrade because of its links to Kmart Corp.

"Our assessment of risk associated with Kmart apparently leads us to a much different conclusion," Neal Rider, executive vice president and chief financial officer of Fleming, in a news release. "We look forward to the opportunity to provide Moody's with a full review of the relevant facts concerning our business arrangement with Kmart and intend to meet with them as soon as possible."

Fleming said its supply agreement with Kmart includes seven-day invoice and payment terms. As a result, receivables from Kmart currently vary between zero and $70 million, or less than 0.5% of Fleming's annualized sales. Fleming added that Kmart is current with payments.

Fleming reaffirmed its earnings expectations of 61 to 65 cents per share for the fourth quarter of 2001 and added that it expects to report that it reduced debt by $75 million from the third quarter.

During fiscal 2002, the company anticipates a further $100 million to $150 million reduction in debt.

Moody's upgrades ICICI above sovereign ceiling

Moody's Investors Service upgraded the long-term foreign currency debt of ICICI Ltd. to Ba1 from Ba2, allowing the company's rating to pierce the country ceiling for India. The ratings cover both senior and subordinated debt. The outlook is stable.

Moody's said the upgrade is a result of Moody's decision to some issuers' ratings to rise above their respective country ceilings.

ICICI's new ratings reflect its "inherent financial strength, its strong management as well as some asset quality concerns," Moody's said. The rating agency also said its assessment incorporates "the low risk that the particular institution's foreign currency bonds may be affected by a general moratorium on foreign currency obligations imposed by the Government of India."

The proposed merger between ICICI Ltd. and ICICI Bank will also help the credit profile by speeding the business diversification, Moody's said, adding that there will not be any immediate change in ratings once the merger closes.

Moody's downgrades Millenium Seacarriers

Moody's Investors Service downgraded Millenium Seacarriers, Inc.'s $100 million of 12% first priority ship mortgage notes due 2005 to Ca from Caa2. The outlook remains negative.

Moody's said the downgrade reflects Millenium's record of continued losses, weak cash flow and the current decreased market value of the fleet securing the notes.

Market conditions and charter rates for the drybulk shipping sector have deteriorated over the last several quarters and are not expected to improve near term, Moody's said.

S&P rates Jacobs Entertainment planned offering B

Standard & Poor's assigned a B rating to Jacobs Entertainment Inc.'s proposed $120 million offering of senior secured notes due 2009. Proceeds will be used to fund the pending acquisitions of Black Hawk Gaming & Development Co., Jalou LLC and Colonial Holdings Inc. The outlook is stable.

S&P said its ratings reflect Jacobs Entertainment's "small cash flow base, competitive market conditions, and high debt levels" tempered by Jacobs' "relatively stable cash flow base from its truck plaza and OTW operations, and good credit measures for the rating."

S&P noted operating performance at the two Black Hawk properties, The Lodge and Gilpin Hotel Casino, has remained relatively steady over the past few years despite increasing competition. The Lodge has benefited from its good location, from a niche market position, and by being one of two operators offering hotel rooms while The Gilpin has been negatively affected by the opening of additional properties and the increased competitive environment, S&P said.

S&P downgrades Farmland Industries

Standard & Poor's downgraded Farmland Industries Inc., including lowering its corporate credit rating to BB- from BB+ and its $100 million of cumulative preferred stock to B- from B+. All ratings were removed from CreditWatch. S&P also rated Farmland's proposed $500 million senior secured credit facility at BB. The outlook is negative.

S&P said the bank loan is rated one notch higher than the corporate credit rating because it is "reasonably confident" of full recovery of principal.

The downgrade was in response to "continuing challenging market conditions for agricultural-inputs, that have resulted in weak operating performance and the related impact on Farmland's financial measures," S&P said.

The rating agency noted management has "taken steps to improve operating performance by divesting non-core assets and focusing on its core business; improving margins through cost savings initiatives; reducing corporate expenses by about $40 million; and reducing debt by about $270 million in fiscal 2001." However S&P does not expect credit protection measures will improve to previous levels over the intermediate term.

S&P lowers Kmart four notches, on negative watch

Standard & Poor's downgraded Kmart Corp. four notches and put the ratings on CreditWatch with negative implications. Ratings affected include: Kmart's senior secured debt and senior unsecured debt, lowered to B- from BB and Kmart Financing I's $1 billion of convertible trust preferred stock, lowered to CCC- from B.

S&P said it lowered Kmart's ratings because of heightened concerns about Kmart's "loss of financial flexibility" in recent weeks.

The rating agency noted the drop in stock price has accelerated substantially since the beginning of 2002.

"While the company has faced ongoing challenges to its franchise, as reflected in recent operating and financial results, a recent loss of supplier and investor confidence is troubling," S&P commented.

Moody's lowers Norske Skog outlook to stable

Moody's Investors Service lowered its outlook on Norske Skog Canada to negative from stable affecting C$1.4 billion of debt including its senior unsecured notes at Ba2 and its senior secured bank facility at Baa3.

Moody's said its action reflects its expectation that Norske Skog's operating income and debt protection measures will continue to decline with falling newsprint and pulp prices through the first half of 2002. "The change in outlook also reflects rising concern over intermediate term liquidity," the rating agency added.

Moody's believes the company has sufficient liquidity to operate through the current downturn but is likely to need relief from the financial covenants in its bank facilities.

Moody's cuts Park Place to junk

Moody's Investors Service downgraded Park Place Entertainment's long- and short-term ratings to Ba1from Baa3 and to Not Prime from Prime-3 respectively, affecting $5.2 billion of debt.

Moody's said it lowered the ratings because already weak debt protection measures deteriorated in the wake of the Sept. 11 terrorist attacks and because of difficult market conditions in the Mississippi markets. The outlook is stable.

Although Park Place is the largest and one of the more geographically diversified companies in the gaming industry, it derives about 35% of its EBITDA from Las Vegas, which has been hurt by its reliance on fly-in customers, Moody's said. While visits to Las Vegas have rebounded since Sept. 11, "it is likely that leisure travel may remain at lower levels into 2002 due to lingering safety concerns regarding air travel, and the effects of the downturn on consumers' discretionary income," Moody's said.

Group booking is keeping pace with last year, but Moody's said it is concerned that attrition rates may be higher as a result of the effects of a weak economy on corporate travel budgets.

Moody's cuts MGM Mirage to junk

Moody's Investors Service downgraded MGM Mirage's long- and short-term ratings to Ba1 from Baa3 and to Not Prime from Prime-3 respectively, affecting $7.8 billion of debt. The outlook is stable. Ratings affected include the company's guaranteed senior secured bank facilities and its guaranteed senior collateralized notes, both lowered to Ba1 from Baa3, and its guaranteed senior subordinated notes, lowered to Ba2 from Ba1.

Moody's said the downgrade reflects the deterioration in the company's already weak debt protection measures due to the negative impact of the Sept. 11 terrorist attacks and the likelihood that credit statistics may not improve significantly for some period of time given the company's exposure to Las Vegas.

Before Sept. 11, MGM Mirage had made "steady progress" in reducing debt from its Mirage acquisition, Moody's said.

However "the immediate and substantial negative impact of the terror attacks" on its earnings caused a deterioration in the debt protection measures. Moody's expects debt to EBITDA of 5.2 times at the end of 2001 and EBITDA-capex to interest of about 1.8 times.

Although visits to Las Vegas has continued to improve, Moody's said "uncertainty remains with respect to the impact of the economic downturn, and lingering safety concerns on the levels of both business and leisure travel in 2002 that could result in a slow rebound in earnings."

MGM Mirage relies on Las Vegas for more than 70% of its EBITDA.

Moody's puts Dillard's on review for downgrade

Moody's Investors Service put Dillards's Inc. on review for possible downgrade. Ratings affected include Dillard's senior unsecured bonds, debentures, notes, reset put securities, bank credit agreement and issuer rating, all at Ba1, its subordinated debentures at Ba2, Mercantile Stores Co., Inc.'s senior unsecured notes and debentures at Ba1 and Dillard's Capital Trust I's capital securities at Ba2.

Moody's said it began the review because of "continuing softness" in Dillard's profitability and comparable store sales. It also noted the challenges management faces in significantly improving operating performance.

Moody's puts Fleming on review for downgrade

Moody's Investors Service put Fleming Cos., Inc. on review for downgrade, affecting $1.9 billion of debt. Included in the review are Fleming's $729 million bank loan rated Ba2, $355 million 10 1/8% senior notes due 2008 rated Ba3, $250 million 10½% senior subordinated notes due 2004 rated B2, $400 million 10 5/8% senior subordinated notes due 2007 rated B2 and $150 million 5¼% convertible senior subordinated notes due 2009 rated B2.

Moody's said it started the review after it downgraded Kmart Corp.

Kmart is Fleming's most important customer with more than 20% of sales, Moody's said.

While Moody's believes Fleming could sizable accounts receivable write-off and that there is no better substitute for Fleming's national distribution capabilities, the rating agency said "franchise difficulties at Kmart would represent a setback for Fleming's business plan."

Moody's rates new Jacobs notes B2

Moody's Investors Service assigned a B2 rating to Jacobs Entertainment, Inc.'s planned offering of $120 million senior secured notes due 2009. The outlook is stable.

Moody's notes that Jacobs Entertainment was formed to consolidate several companies already affiliated with Jeffrey P. Jacobs, chairman and chief executive officer of Jacobs Entertainment. The acquired companies include Black Hawk Gaming & Development Company, Inc., Colonial Holdings, Inc. and several truck plazas located throughout Louisiana.

Ratings on the new notes incorporate Jacobs' high leverage and limited diversity in terms of property level cash flow contribution, Moody' said.

Although the company has some geographic diversity, over 50% of total property level EBITDA comes from the Black Hawk gaming market, the rating agency noted. Lodge Casino accounts for about 44% of total property level EBITDA.

Moody's is also concerned about the company's exposure to the declining Reno, Nev. gaming market and the annual renewal and negotiation of the company's agreements with the Virginia Horseman's Benevolence and Protective Association and the Virginia Harness Horse Association.

Positives include the secured nature of the notes, a high EBITDA margin, good liquidity profile, and the strength of the Black Hawk, Colo., gaming market that continues to demonstrate positive growth in spite of new supply, Moody's said.

Moody's downgrades Gap, on review for downgrade to junk

Moody's Investors Service downgraded the long and short term ratings of Gap Inc. to Baa3 and Prime-3 respectively and left the ratings on review for further possible downgrade, affecting $2.1 billion of securities.

Moody's said it took the action because of "the continuing decline" in Gap's financial performance and "the expectation that the company will be challenged in the current operating environment to generate significant and sustainable improvement in sales and profitability in 2002."

Moody's said its continuing review will look at Gap's initiatives to boost sales and profitability in its concepts, primarily Old Navy and Gap adult, in face of intense competition, sated consumer apparel appetites and a weak economy.

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