Moody's cuts Calpine convertibles to B1

Moody's downgraded the debt ratings of Calpine Corp., including the 4% senior unsecured convertible notes due 2006 to B1 from Ba1 and the three convertible trust preferred issues to B2 from Ba2. The outlook is negative.

Moody's also assigned a Ba3 rating to Calpine's $2 billion of senior secured credit facilities. These facilities consist of $1.4 billion in revolving credit facilities expiring May 24, 2003, and a two-year $600-million term loan.

Security for the credit facilities includes Calpine's U.S. natural gas properties, equity in various power projects and Canadian natural gas assets. The downgrades reflect high leverage, limited financial flexibility, substantial ongoing capital expenditure requirements to complete a reduced building program and concerns about liquidity profile.

The senior unsecured notes have been notched below the senior implied rating of Ba3 to reflect the increasing proportion of secured debt as well as the substantial structural subordination to liabilities at subsidiaries. The $8 billion of senior unsecured notes are structurally subordinated to project financings and leases that total about $6 billion, and are effectively subordinated to usage under the $2 billion senior secured facilities.

The negative outlook reflects the possibility that the ratings could be further downgraded should Calpine's liquidity position further deteriorate or its cash flow fall below expectations.

Calpine's near-term liquidity continues to be tight even with $2 billion of senior secured facilities. Calpine plans to fund completion of 22 gas-fired power projects and 2 project expansions during 2002 and 2003. The company's 2002 estimated sources of funds depend on additional financings, asset sales and merchant power sales.

In addition to substantial debt maturities over the next two years, the $1.4 billion secured revolving credit will mature in May 2003.

Fitch cuts Williams Communications to D

Fitch Ratings downgraded Williams Communication Group Inc.'s senior unsecured rating to D from CC and the convertible preferred stock to'D from C. Williams Communications' senior secured credit facility was cut to C from CCC- and remains on negative watch.

The downgrade follows WCG's announcement to take advantage of a 30 day grace period on the interest payment due April 1on its senior redeemable notes and to suspend the quarterly dividend payment on its preferred stock.

Fitch is concerned that the facility will be in default, absent a waiver of cross default provisions contained in the terms of the credit facility within the next 30 days.

WCG has said it continues to negotiate with its bank group and other stakeholders to restructure its balance sheet. To that end, the negotiating window has been extended to April 26. The watch is likely to be resolved pending the outcome of WCG's ongoing discussions with its bank group.

S&P cuts Williams Communications to D

Standard & Poor's cut the corporate credit rating on long-haul data service provider Williams Communications Group Inc. to D as well as the convertible preferreds. Other ratings remained on watch with negative implications, following the company's decision to defer payment of about $91 million in interest due on April 1 on about $1.7 billion of debt and suspend quarterly dividend payment on its preferred stock.

The company indicated that it may seek bankruptcy if it is unable to restructure its debt. Tulsa, Okla.-based Williams Communications had total debt outstanding of about $5.9 billion at the end of 2001.

The ratings on WCG's bank loan and other debt issues will be lowered to 'D' on the default of interest payments, a bankruptcy filing, or a restructuring, which would be considered tantamount to default by S&P.

Moody's ups KT&G convertible to A3

Moody's Investors Service upgraded its foreign-currency long-term debt rating and foreign-currency issuer rating of Korea Tobacco & Ginseng Corp. to A3 from Baa2, including the $244.13 million of 0% convertible notes due 2006. The outlook is stable.

The upgrade reflects the upgrade of the Republic of Korea's foreign-currency country ceiling, which has constrained KT&G's foreign-currency debt and issuer ratings since the rating for KT&G is no longer constrained by the foreign-currency country ceiling.

The rating recognizes KT&G's strong franchise in the domestic cigarette market, its efforts to improve profitability, and its conservative financial profile. The ratings also reflect Moody's expectation that deregulation of the Korean tobacco market will increase competitive pressure from global peers over the long term.

Moody's confirms Charming Shoppes convertible at B2

Moody's Investors Service confirmed the debt ratings of Charming Shoppes, including the $96 million convertible subordinated notes due 2006 at B2.

The ratings reflect high leverage measures and modest operating profitability. Leverage increased since the acquisition of Lane Bryant in August 2001 and debt protection measures have suffered as a result, but also from the general downward trends in apparel retailers since the latter half of 2001.

The ratings are supported by a history of prudent financial management and the expectation that operating and leverage measures will begin to show a turnaround by mid- to late-2002.

Moody's said the rating outlook is negative, noting operational challenges in absorbing Lane Bryant and that the near-term performance outlook for apparel retailers remains negative. An inability to stabilize operating performance and debt protection measures by mid-2002 could lead to a ratings downgrade, Moody's said.

Indications that the company will be able to reduce leverage and improve operating performance in the near term could lead to a stable rating outlook.

S&P ups Caremark ratings

Standard & Poor's raised its corporate credit on pharmacy benefit manager Caremark Rx Inc. to BB+ from BB and upped the rating for its bank loan, long-term debt and convertible preferreds.

The near-investment grade ratings reflect solid financial performance and improving financial flexibility, partially offset by the continued fierce competition in the industry.

The outlook is positive, S&P said, given the company's solid prospects for continued strong earnings and cash flows, Caremark has increased financial flexibility to conduct a limited acquisition program. Management has publicly stated that it expects to be acquisitive in further building its specialty pharmaceutical distribution business.

However, S&P expects such acquisitions will be relatively limited in size, given the fragmented specialty pharmaceutical distribution market and conservatively financed. Continued growth of Caremark's cash flows and significant debt reduction may lead to a ratings upgrade within the next couple of years.

Moody's rates Dura Automotive notes at B1

Moody's assigned a B1 rating to the $250 million senior notes to be offered by Dura Operating Corp., the primary operating subsidiary of Dura Automotive Systems Inc. and confirmed the B3 rating for Dura Automotive Systems Capital Trust $55.25 million of 7.5% convertible trust preferreds due 2028

The rating outlook is stable.

Moody's cuts KPNQwest, assigns Caa3 to convertible

Moody's lowered the senior implied rating of KPNQwest N.V to Caa1 from B1 and lowered the unsecured ratings to Caa3 from B3, and assigned a B3 rating to the finalized Euro 525 million senior secured credit facility due 2006 and a Caa3 rating to the euro 210 million senior unsecured convertible notes due 2012. The outlook is negative.

Moody's puts Quest Diagnostics on review for upgrade

Moody's placed the ratings of Quest Diagnostics Inc. under review for possible upgrade, including the Ba1-rated $225 million of convertible debentures due 2021, following the announcement that Quest has reached an agreement to acquire Unilab Corp.

The possible upgrade reflects Quest's increasing scale and positive operating trends and consistently adequate cash flow.

Notwithstanding a significant increase in total debt to$1.8 billion from $820 million due to acquisitions, Moody's said Quest has demonstrated the sustainability of positive operating trends, including adequate cash flow generation. Also, Moody's noted the acquisitions will further solidify its leading market position.

In addition, the possible upgrade considers the company's commitment to deleveraging its balance sheet following these transactions.

S&P affirms Quest Diagnostics ratings

Standard & Poor's affirmed its corporate credit and senior unsecured debt ratings at BBB-on Quest Diagnostics Inc., including the 1.75% convertible notes due 2021, following Quest's proposed $1.1 billion purchase of Unilab Corp.

The investment-grade ratings continue to reflect Quest's leading position in the U.S. market for diagnostic testing services and its moderate debt burden, somewhat offset by its aggressive growth strategy.

The outlook is positive, S&P said, as it expects increased testing volume and geographical reach will improve the company's economies of scale and business position. Quest's ability to self fund its growth and continued success in integrating acquired operations could lead to a higher rating.

Moody's assigns Ba3 rating to American Greetings convertible

Moody's confirmed the long and short term ratings of American Greetings and assigned a Ba3 rating to the $175 million of junior convertible debentures due 2006.

The rating reflects the absence of significant client contract renegotiation expected in the coming two years, anticipated benefits from the restructuring completed in fiscal year 2002 and a current satisfactory liquidity position.

The outlook is negative.

Stagnation in the volume of greeting cards sold, as well as the strong bargaining power of large retailers contribute to uncertainty in future performance. Deterioration in operating performance due to possible widespread future Kmart store closings or other causes could place pressure on the ratings.

Fitch affirms Fleming convertibles at B+

Fitch Ratings affirmed Fleming Cos. Inc.'s ratings, including the B+ rated senior subordinated convertible notes due 2009. Fitch Ratings also assign a B+ rating to Fleming's pending $260 million senior subordinated notes due 2012, the proceeds of which will be used to redeem its $250 million 10.5% senior subordinated notes due 2004 when callable in June.

The outlook is negative, reflecting uncertainty as to the achievement of Kmart sales levels and the ultimate nature of Fleming's agreement with Kmart, as Fleming's contract with Kmart has not yet been confirmed in the bankruptcy process. Also of concern is the possibility for additional Kmart store closures, beyond those already announced.

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