Moody's puts NRG on review for possible downgrade to junk

Moody's Investors Service on Tuesday placed the corporate securities of NRG Energy Inc. and its senior unsecured debt rating of Baa3 under review for possible downgrade to junk following NRG's announcement Nov. 29 that it planned to acquire a 2,535 megawatt portfolio of generating assets from subsidiaries of FirstEnergy Corp. for $1.5 billion.

Moody's acknowledges the assets' strategic fit within NRG's U.S. business as well as the benefit of the FirstEnergy transition agreement. However, the $1.5 billion price is significant, and NRG must arrange $1.35 billion of new money to fund the acquisition. NRG currently plans to raise the money through a sale leaseback, cash from operations, short term debt, redeployment of capital from existing and contemplated projects and, possibly, additional funds from controlling owner Xcel Energy Inc. Moody's review will address NRG's ability to raise the net $1.35 billion necessary to finance the purchase and the acquisition's affect on NRG's projected base case and downside case cash-on-cash coverage ratios.

Moody's upgrades Anthem ratings

Moody's Investors Service on Tuesday upgraded Anthem Insurance Companies Inc. credit ratings, moving Anthem Casualty Insurance Group's Baa1 guaranteed senior notes upgraded to A3 and the A3 insurance financial strength rating was boosted to A2, along with other ratings. Since Moody's assigned the first surplus note rating of Baa3 in 1997, the rating agency said Anthem has improved the rigor and quality of its financial management, and, accordingly has produced higher quality earnings. In addition, the company has added members to its management team who have sharpened the company's strategic focus. Moody's said it also believes Anthem's demutualization, which closed on Nov. 2, will provide several benefits to the company, including greater access to capital and a more disciplined financial culture.

Moody's downgrades McLeodUSA

Moody's Investors Service downgraded McLeodUSA, affecting $4.2 billion of debt. Ratings affected include the senior unsecured debt, cut to Ca from B3, the senior secured debt, cut to Caa2 from B2, and the preferred stock, lowered to C from Caa2.

Moody's said it took the action because McLeodUSA's recent financial performance has not met Moody's expectations, the company's "relatively tight liquidity situation," and the likely impact of the recent agreement with Forstmann Little and McLeodUSA's secured lenders for a recapitalization, possibly through Chapter 11.

Moody's commented: "The senior unsecured rating reflects the low recovery value afforded to unsecured debt holders implicit in the planned equity for debt swap, yet the senior secured rating recognizes the improved pro-forma capital structure facing senior secured creditors."

Moody's assigns B2 to CSK Auto's new senior notes

Moody's assigned a B2 rating to CSK Auto Inc.'s planned $225 million senior unsecured notes due 2006. A Ba3 rating was assigned to CSK's proposed $325 million of senior secured credit facilities.

Noting that the actions affect approximately $640 million of debt securities, Moody's also confirmed its B3 rating of CSK's $81 million subordinated notes due 2006, as well as the company's B1 senior implied rating, and B2 senior unsecured issuer rating. The outlook is stable.

"The ratings reflect CSK's very high leverage, stemming from a series of debt-financed acquisitions which presented complex integration challenges during a stagnant market for auto parts; modest levels of free cash flow from operations; and little room for further slippage in operating performance," Moody's stated.

"The proposed financings eliminate CSK's most pressing financial challenge, namely heavy amortization of bank debt within the very near term. However, the 3-year term of the bank facilities will require the company to refinance its bank facilities within that timeframe. The public debt matures within five years."

Moody's said it expects the company's EBIT to interest to exceed 1 times for the full year 2001, and EBTIDAR to fixed costs to comfortably exceed 1.5 times for this year and next, the release stated.

The B2-rated senior notes mature in 2006, several months ahead of the company's subordinated notes, Moody's stated.

All of the rated debt issues are obligations of CSK Auto Inc., the operating company, and benefit from guarantees of operating subsidiaries and the parent company, CSK Auto Corp., the release noted.

Moody's downgrades Empresas ICA

Moody's Investors Service downgraded Empresas ICA Sociedad Controladora, SA de CV, affecting the company's $170 million of 5% convertible subordinated debentures due 2004 to Caa1 from B3 and its global medium term note program to B2 from B1. The outlook remains negative.

Moody's said the downgrade reflects "the company's continuing difficulties in generating positive earnings and revenue growth and the nascent liquidity pressures as the company relies on asset sales and cash reserves to pay down maturing short term debt."

The rating agency noted revenues have declined from 23.3 billion pesos in 1994 to 11.7 billion pesos in 2000. "Substantially reduced" figures are expected for 2001.

Moody's also noted Empresas ICA has only generated positive earnings in one year since 1997.

"Recent results have been impacted by the slow down in the Mexican economy, but the longer-term impact has been from the reduced number of construction projects in the region and the increased foreign competition," the rating agency added.

S&P puts CII on positive watch

Standard & Poor's put CII Technologies Inc. on CreditWatch with positive implications. Affected ratings include the BB- senior secured bank loan and the B- subordinated note ratings.

S&P took the action following the definitive agreement in which a Tyco International Ltd. subsidiary will acquire the parent CII Technologies Holdings Inc. and its subsidiaries for $310 million in cash.

S&P downgrades LDM Technologies

Standard & Poor's downgraded LDM Technologies Inc.; lowered ratings including the senior secured bank loan cut to B- from B and the subordinated debt cut to CCC from CCC+. The outlook is negative.

S&P said its actions reflect its expectation that LDM's "financial flexibility will become more constrained over the near term due to intensifying industry pressures, the scheduled fall-off of some existing business, and the continued delay of the launch of a significant new platform by a key customer."

LDM incurred "significant expenses" for the launch, originally scheduled for early 2001 and now expected in March 2002.

"Until this product launches, LDM is expected to face significant earnings pressures, which will be exacerbated by the winding down of some existing business and the continuation of difficult industry conditions. LDM is doing what it can to conserve cash in the near term and has initiated cost cutting actions and capital expenditures reductions," S&P said.

S&P upgrades Newport News from junk

Standard & Poor's upgraded Newport News Shipbuilding Inc., raising the company's debt to investment grade after its acquisition by Northrop Grumman Corp. The outlook, like Northrop's, is stable.

Ratings affected include the senior unsecured bank loan rating and senior unsecured debt, both raised to BBB- from BB and the subordinated debt, raised to BB+ from B+.

S&P downgrades Revlon's senior unsecured debt

Standard & Poor's downgraded Revlon Consumer Products Corp.'s senior unsecured debt to CCC from CCC+ and affirmed the company's other ratings including its B senior secured bank loan and CCC subordinated debt. The outlook is negative.

S&P said the action reflects Revlon's increased use of secured debt financing, "which essentially puts the unsecured notes in a more junior position."

The rating agency added: "The ratings reflect Revlon's weak financial profile, characterized by high debt leverage and a prolonged period of poor operating results. Despite its strong brand name, Revlon has been challenged in its efforts to reverse the decline in revenues and market share due to intense competition in the mass-market cosmetics industry, divestitures, and the ongoing reduction of inventory levels by retailers. Specifically, revenues have declined 40% to $1.35 billion for the trailing 12 months ended Sept. 30, 2001 from $2.25 billion in fiscal 1998."

S&P cuts Viskase to D

Standard & Poor's downgraded Viskase Cos. Inc. to D, including its senior unsecured debt, previously rated C.

The action follows Viskase's announcement that it failed to pay the interest and $163.1 million principal due on its 10.25% senior unsecured notes that matured on Dec. 1.

S&P cuts Dynea

Standard & Poor's downgraded Dynea International OY, including cutting its €240 million 12¼% notes due 2010 to CCC+ from B-. The ratings had previously been on CreditWatch developing. The outlook is now negative.

S&P cuts NationsRent

Standard & Poor's downgraded NationsRent Inc., lowering its bank loans to D from CC and its senior subordinated notes to C from CC. The notes remain on CreditWatch negative.

S&P rates new Horizon PCS notes CCC

Standard & Poor's rated Horizon PCS Inc.'s new issue of senior unsecured notes at CCC.

S&P rates Stone Energy new notes B+, upgrades outstanding debt

Standard & Poor's assigned a B+ rating to Stone Energy Corp.'s planned offering of senior notes due 2011.

The rating agency also upgraded Stone's outstanding debt, including raising its $100 million of 8¾% senior subordinated notes due 2007 to B+ from B and its $100 million revolving credit facility to BB from BB-.

Moody's downgrades Radio Unica

Moody's Investors Service downgraded Radio Unica Corp., affecting $178 million of debt. Ratings reduced include the $158 million (face amount) of senior unsecured discount notes due 2006, lowered to Caa3 from Caa1. Moody's withdrew the B3 rating on the company's $20 million senior secured revolving credit facility, which the company is considering extinguishing. The outlook is negative.

Moody's said the downgrade reflects Unica's "poor operating performance, limited liquidity, and the likelihood that the company will be unable to make its cash interest payments due in 2003 unless performance in 2002 is dramatically better than 2001 (from a loss of approximately $11 million over the trailing twelve months to a positive $19 million to cover interest)."

Unica's revenue and cash flow have fallen "significantly below" Moody's expectations, and the rating agency said it is concerned that without asset sales or an infusion of equity cash on hand will not be sufficient to offset cash flow losses and meet the company's debt service obligations.

The company is unable to draw on its bank loan and may cancel the facility, Moody's added.

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