S&P downgrades American Safety Razor

Standard & Poor's downgraded American Safety Razor Co. and changed the CreditWatch to developing from negative. Ratings affected include American Safety Razor's $69.3 million 9.875% notes due 2005, $25 million revolving credit facility due 2005 and $112.5 million term loan due 2005, all lowered to CCC from B.

S&P said the action is in response to American Safety Razor's noncompliance with financial covenants in its bank credit agreement, specifically, the the leverage, fixed charge and interest coverage ratios for the quarters ended Dec. 31, 2001 and March 31, 2002.

American Safety Razor has been negotiating with its lenders to obtain a waiver and to amend the covenants for the remainder of the life of the facility.

The ratings could be raised should the company obtain an amendment from its bank group waiving the loan covenant violations and loosening future financial covenants. Conversely, the ratings could be lowered should the company not reach an agreement with its bank group, resulting in an event of default under either the credit agreement or senior unsecured notes, S&P said.

Moody's downgrades Callahan NRW

Moody's Investors Service downgraded Callahan Nordrhein-Westfalen GmbH, affecting $4.1 billion of debt including its senior unsecured notes cut to Ca from Caa1. Moody's also lowered its subsidiary's €2.9 billion senior secured credit facility to Caa1 from B1. The outlook is negative.

Moody's said it lowered the ratings because of its heightened concern about Callahan's liquidity position, longer-term ability to adequately service its debt burden and the likely recovery prospects for bondholders in a downside scenario.

Given existing delays in the company's business plan and the relatively slow speed at which the company is releasing homes to marketing and in light of potential further delays (given the apparent reluctance of Level 4 operators to enter into agreements prior to resolution of the Deutsche Telekom cable asset sale), Moody's believes that it is increasingly likely that Callahan may be unable to meet its EBITDA covenant requirement over the next two years.

Absent a meaningful injection of equity, Moody's said it believes that it is highly likely that a restructuring of the company's balance sheet may be required.

Moody's lowers iesy

Moody's Investors Service downgraded iesy Hessen GmbH - formerly known as eKabel - affecting €1.4 billion of debt. Ratings lowered include iesy's senior unsecured bonds, cut to Ca from Caa1 and iesy Hessen GmbH & Co. KG's senior secured credit facility, cut to B3 from B1.

Moody's said it cut the ratings because of increased concerns about the company's ability to grow into its capital structure and Moody's opinion that iesy may be unable to resolve the anticipated bank covenant issues that are likely to result from the company's reduced growth prospects over the next several years.

iesy's ability to increase operating cash flow over the medium-term has been significantly reduced as a result of existing delays in the company's business plan and the subsequent announcement of additional delays in the launch of digital television - to the second quarter of 2003 from July 2002 - and telephony services - to the third quarter of 2003 from the first quarter of 2003.

Moody's said its concerns about the willingness of banks to allow for covenant amendments or shareholders willingness to provide incremental equity have increased given the company's weakened credit profile which is unlikely to sufficiently improve by early 2003, when covenant amendments are likely to be required.

Moody's expects recovery prospects for senior unsecured bondholders will be poor given the company's considerable debt burden, on-going cash needs, the potentially reduced universe of buyers for German cable properties given Liberty Media's current withdrawal from the market, the disappointing operating progress of German cable operators and the resulting likely reduction in asset values resulting and the significantly reduced asset valuations for European cable properties, as a whole.

S&P cuts United Pan-Europe notes

Standard & Poor's downgraded United Pan-Europe Communications NV's $252 million 11.25% senior notes due 2009, €101 million 11.25% senior notes due 2009, $200 million 10.875% senior notes due 2007 and €100 million 10.875% senior notes due 2007 to D from C.

The rating agency said the action follows the company's failure to make the scheduled interest payments on May 1.

S&P lowers USEC

Standard & Poor's downgraded USEC Inc. including cutting its $150 million senior unsecured bank loan and $500 million senior unsecured notes due 2009 to BB from BB+. The ratings are removed from CreditWatch with negative implications. The outlook is negative.

S&P said it cut USEC's ratings because it expects the company's earnings will be significantly weaker than previously supposed.

USEC has experienced protracted delays in obtaining modifications to a long-term contract under which it sources enriched uranium from the Russian company, Techsnabexport Co. Ltd.. The contract changes would put pricing on a market basis, replacing a fixed-price approach that has been problematic for USEC, S&P said. Previously, management had anticipated that a revised contract would be in place for calendar year 2002, but necessary approvals from the U.S. and Russian governments were not received. Management has recently indicated that government approvals should be forthcoming in the near future.

However, the contract modifications now contemplated would not take effect until calendar year 2003. In addition, a proposed provision whereby USEC would have been able to purchase certain material has been dropped. Partly as a result of these developments, USEC's profitability has deteriorated markedly, S&P noted.

Management has stated that net earnings for the fiscal year ending June 30, 2002, are expected to total only $9 million to $12 million, down from $ 41 million in fiscal 2001, and compared with a range of $35 million to $40 million indicated at the start of the year. Management has also suggested that earnings in fiscal 2003 are expected to remain at a weak level, S&P added.

S&P cuts some Quality Distribution ratings

Standard & Poor's downgraded some ratings of Quality Distribution Inc. and put the company on CreditWatch with negative implications. Ratings lowered include Quality Distribution's corporate credit rating, cut to CC from B+ and its $100 million 10% senior subordinated notes due 2006 and $40 million floating-rate senior subordinated term notes due 2006, both cut to CC from B-. The $75 million secured revolving credit facility due 2004, $100 million term loan due 2004, $95 million term loan due 2005 and $90 million term loan due 2006 remain at B+.

S&P said the action follows Quality Distribution's announcement of an exchange offer for its $140 million in subordinated notes.

Quality Distribution's ratings reflect its heavy debt burden, offset somewhat by its strong competitive position, albeit in a low margin capital intensive industry, S&P said.

Since the company's debt-financed acquisition of Chemical Leaman Inc. in 1998, Quality Distribution's already weak financial profile has been further hurt by the weak economy and reduced demand. As a result, its earnings and cash flow have weakened, and its equity account deficit has widened since the acquisition, totaling $135 million as of Dec. 31, 2001, S&P said.

Being privately held, Quality Distribution has limited financial flexibility and is solely reliant on its $360 million in secured bank facilities, S&P noted.

If successful, the exchange offer would likely result in reduced interest expense, but Quality Distribution would still suffer from a relatively heavy debt burden, S&P said.

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