S&P cuts US Unwired

Standard & Poor's downgraded US Unwired Inc. including cutting its $130 million secured bank loan to CC from CCC and $200 million senior subordinated discount notes due 2009 to C from CC and kept it on CreditWatch negative.

S&P noted the ratings were originally put on watch on April 15 because of concerns about dwindling liquidity and bank covenant compliance problems.

The latest actions follow US Unwired's announcement of a debt exchange offer for up to all of its 13.375% senior subordinated discount notes due 2009.

Given the discount to accreted principal value and the company's very high financial risk from its limited liquidity, the proposed transaction is viewed as a distressed exchange, S&P said. Completion of the offer would be considered tantamount to a default on original debt issue terms.

S&P says Rural/Metro unchanged

Standard & Poor's said Rural/Metro Corp. ratings are unchanged including its corporate credit at CCC with a negative outlook after the company said it would violate covenants under its credit facility.

The violation is a result of a non-cash charge, in the range of $35 million to $45 million, that will be reflected in the March quarter. The charge will correct pre-2000 miscalculations of allowances for doubtful accounts that have affected the company's current reserve estimates.

The company is pursing a restructuring of its credit agreement.

The very low, speculative-grade ratings continue to reflect an identifiable risk of default due to poor liquidity, S&P said.

Moody's cuts Concordia Bus

Moody's Investors Service downgraded Concordia Bus AB including cutting its 11% senior subordinated notes due 2010 to Caa1 from B3. The secured multi-currency term loan and credit facility at operating subsidiary Swebus AB was maintained at B1. The outlook is negative.

Moody's said the downgrade reflects Concordia's disappointing operating performance and weaker operating cash generation relative to Moody's expectations; absence of material improvement in contract portfolio returns which continue to limit financial flexibility to service sizable amounts of debt; challenges facing management to control core operating costs, which have historically undermined profitability growth; and concerns with respect to the prospect of cash flow improvements sufficient to meet interest bearing obligations including bank debt amortization, which starts in January 2004, unless the company disposes of non-core assets to focus business and support liquidity.

Positives continue to be the predictability of Concordia's core contractual urban bus service revenues; the positive aspects of Concordia's business model, which supports the development and management of the operations through the standardization of bus fleet and the use of operating leases to lower finance costs and minimize residual value risk; an expectation of timely improvements in portfolio returns better able to support the capital structure; an expectation that bus replacement capital expenditure will decline going forward as the average age of the fleet continues to fall; and improved cost management and the absence of material negative cost deviations as exhibited in the past.

Moody's said it believes that Concordia's liquidity is weak but remains adequate over the short term to meet initial debt amortization payments. The current minimal liquidity cushion would be enhanced should the company be able to sell identified non-core businesses at appropriate divestment multiple.

Concordia's operating performance and cash generation has been disappointing relative to original expectations and weak in consecutive years since Moody's original rating. EBITDAR margins have remained in the low to mid teens (including selected cost adjustments for fuel, electricity and contractual difficulties), with fourth quarter margins falling to 5.6%. Underlying EBITDA margins have also weakened to 5.2% for full year 2003 (6% 2002, 7.6% in 2001), Moody's said.

S&P cuts DDi

Standard & Poor's downgraded DDi Corp. including cutting its $300 million credit facility due 2003 to D from CC and DDi Capital Corp.'s $110 million 12.5% senior discount notes due 2007 to D from C.

S&P said the action follows DDi's failure to make the May 15 interest payment on its 12.5% senior discount notes maturing November 2007. The company remains in default on its senior credit facility after the forbearance agreement with senior lenders expired.

S&P upgrades Northern Offshore

Standard & Poor's upgraded Northern Offshore Ltd. including raising its $143.3 million 10% notes due 2005 to CCC- from CC. The outlook remains developing.

S&P said the upgrade reflects extended maturities on Northern Offshore's two bank loans and the company's Norwegian bond, which significantly alleviate the immediate refinancing risk.

Nevertheless, with the loan and bond maturity dates falling in June 2004 and October 2004, respectively, the debt maturity profile remains a major credit concern, S&P said.

Northern Offshore's liquidity is weak. The company's cash position is estimated at only $3 million - the same as at year-end 2002 - and the company will have to partly amortize an estimated $10 million of loans and pay $7.2 million in interest on its $143.3 million of debt, S&P noted.

Financial flexibility is also weak, as Northern Offshore's rigs have been laid up for several years and the targeted market for these rigs is currently depressed.

S&P cuts TGS IADB loan

Standard & Poor's downgraded Transportadora de Gas del Sur SA's $176 million 9.65% IADB B loan part due 2011 and $75 million fixed-rate IADB B loan issued through TGS SA to D from CC.

S&P said the action follows the failure to make the semiannual $8.5 million interest payment on the $176.0 million IADB B loan and the semiannual $3.8 million interest payment on the $75.0 million IADB B loan. Both payments were due May 15.

TGS' corporate credit ratings were lowered to D on March 19 following the company's failure to make a $100 million principal payment due March 18.

Additionally, TGS announced May 14 its decision to withdraw the restructuring proposal presented to its creditors on Feb. 24. The decision was based on the lack of acceptance from certain long-term creditors, which prevented TGS from reaching the required majorities for an out of court agreement ("acuerdo preventive extrajudicial").

Until now, TGS had been honoring part of the interest accrued on their indebtedness. However, until a settlement is reached with creditors, the company will postpone interest and principal payments on all its outstanding financial debt.

S&P cuts Mississippi Chemical

Standard & Poor's downgraded Mississippi Chemical Corp. including cutting its $200 million 7.25% senior notes due 2017 to D from CCC.

S&P said the downgrade reflects Mississippi Chemical's decision to file for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

In addition, Mississippi Chemical did not make its May 15 interest payment on its 7¼% senior notes.

The company's credit profile has deteriorated over the past few years due to a sizable debt burden and disappointing operating results, S&P noted. Debt levels are high as a result of several strategic investments. Operating margins over the past few years have reflected a number of challenges, including higher raw material and energy costs, oversupply conditions, poor demand patterns, and unfavorable inventory positions.

S&P rates Northwest convertible B-, on watch

Standard & Poor's assigned a B- rating to Northwest Airlines Corp.'s $150 million convertible senior unsecured notes due 2023 and put them on CreditWatch negative. Northwest's existing ratings including its senior secured debt at B+ and senior unsecured debt at B- remain on CreditWatch negative.

S&P noted that the convertible was the first unsecured debt offering by any large hub-and-spoke airline since the end of the war with Iraq, indicating renewed access to capital markets for these carriers.

Northwest Airlines's ratings reflects its satisfactory competitive position, substantial liquidity, and relatively good operating performance but are constrained by industrywide risks, an increasing debt and lease burden, substantial unfunded postretirement liabilities, still significant capital expenditure requirements, and few unencumbered aircraft that could support further secured borrowing, S&P said.

Northwest's liquidity remains good, with $2.15 billion of unrestricted cash at March 31, benefiting from a $217 million tax refund and basically unchanged from the total at the end of 2002, S&P said. In addition, the company expects to receive $219 million for reimbursement for security expenditures in May, in connection with the recent federal airlines aid legislation.

However, the company has no available bank lines and little unencumbered collateral for secured borrowing, S&P noted. Debt maturities total about $350 million in 2003, and cash capital expenditure needs are about $220 million (another $1.6 billion is covered by committed lease financing). In its most recent quarterly report, the company noted its lenders had amended the company's revolving credit agreement to defer the application of the fixed-charge coverage covenant until June 30, 2004.

Fitch cuts Mississippi Chemical

Fitch Ratings downgraded Mississippi Chemical Corp.'s senior secured credit facility to DD from CCC+ and senior unsecured notes to D from CCC-.

Fitch said the downgrade reflects Mississippi Chemical's recent Chapter 11 bankruptcy filing, missed interest payment for the 7.25% senior notes, weak operating performance and the uncertainty of cash flows available for debt obligation repayment.

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