Moody's cuts Encompass

Moody's Investors Service downgraded Encompass Services Corp. and kept it on review for possible further downgrade. Ratings affected include Encompass' $130 million senior secured term loan A due 2006, $170 million senior secured term loan B due 2006 and $300 million senior secured revolving credit facility due 2005, lowered to B1 from Ba3, its $335 million 10.5% senior subordinated notes due 2009, lowered to B3 from B2, and its $295.0 million 7.25% mandatorily redeemable convertible preferred stock, lowered to Caa1 from B3.

Moody's said the action was prompted by pressures on Encompass' profitability from a prolonged slow down in non-residential construction, continuing challenges in integrating its numerous acquired entities, the likelihood that it will violate its bank debt covenants by mid-year 2002 unless it obtains further modifications of its bank credit facility and the large asset impairment charge taken in the quarter just ended.

Encompass lowered its guidance for 2002 revenues to a range of $3.5 to $3.8 billion, which Moody's said was below its previous expectations.

Similarly, EBITDA guidance was reduced to a range of $155 to $195 million, and the goodwill charge of $452 million reduced book net worth to $221 million.

As a result, Encompass' credit profile, weakened by the poor 2001 operating results, will be further stressed during the coming year and this will prevent the company from complying with its current bank covenants, Moody's said. The company has begun discussions with its bank group to modify the covenants.

Although the company is not expecting difficulty in obtaining bank consent, this will be the second such modification in less than one year, and the amount of additional room to maneuver that the banks will permit the company is unclear at this time, Moody's commented.

S&P cuts SpectraSite

Standard & Poor's downgraded SpectraSite Holdings Inc. and put most ratings on CreditWatch with negative implications. Ratings affected include SpectraSite's notes and convertibles, cut to C from CCC+, and its bank loans, cut to CC from B+.

S&P said its action follows the company's tender offer to repurchase portions of five of its senior unsecured note issues at an average discount to current accreted value of about 65%.

The corporate credit rating and the five senior unsecured note issues affected under the tender offer were placed on watch with negative implications, and the senior secured bank loan and the rating on the convertibles were placed on watch with developing implications.

The maximum principal amount SpectraSite is seeking under its tender offer, assuming investors sell at the low end of the price range offered by the company, is about $960 million at the current accreted value, representing 66% of total accreted value of these issues.

S&P views the debt transaction as a distressed exchange because of the magnitude of the targeted debt tender combined with the company's highly leveraged capital structure and uncertain business prospects in its tower and network services businesses.

Therefore, the corporate credit rating will be lowered to SD and the affected senior unsecured debt issues will be lowered to D on completion of the transaction, S&P said

Fitch lowers Atlas Air notes

Fitch Ratings downgraded the unsecured debt of Atlas Air, Inc. to B from B+ and assigned a B+ ratings to its secured bank debt. It also lowered Atlas' equipment trust certificates. The outlook is negative.

Fitch said it cut Atlas because of the ongoing impact of a sharp decline in global air cargo demand on Atlas' ability to generate strong operating cash flow from its core ACMI (aircraft, crew, maintenance, and insurance) contract business.

Relative to its high level of fixed financing obligations, both debt service and aircraft lease payments, Atlas' cash flow generation outlook remains uncertain, Fitch said.

After enduring the effects of a year-long downturn in global air cargo demand, particularly in the trans-Pacific markets that Atlas aircraft have served extensively, the company is looking ahead to a gradual build-up in demand during the seasonally-strong second half of the year, Fitch said.

Still, Fitch said it believes that uncertainties related to a significant change in Atlas' product mix, together with the need to finance three new Boeing 747-400 freighters in late 2002, will weaken the company's credit profile over the next several quarters.

S&P rates Wyndham notes B-

Standard & Poor's assigned a B- rating to Wyndham International, Inc.'s new offering of $750 million senior secured notes due 2008 and a B- rating to its $600 million 5 year revolving credit facility and $1 billion 7 year term loan. The outlook is stable.

S&P said the ratings reflect Wyndham's very high debt leverage for its rating and expectations for limited discretionary cash flows available to reduce debt in the intermediate term.

Also incorporated in S&P's assessment is the company's geographically diverse and good quality portfolio of upscale hotels and resorts.

Wyndham's hotels compete in the upscale and upper-upscale price segment of the lodging market which have been hardest hit by the decline in lodging demand following the Sept. 11 terrorist attacks and the soft economy, S&P noted.

The company is also smaller and less recognized than many of its competing brands in the upper-upscale price segment, S&P said. Wyndham also has less brand and price-segment diversity than many of its peers such as Marriott, Hilton and Starwood.

Fitch cuts Seehafen Rostock

Fitch Ratings downgraded the senior unsecured rating of Seehafen Rostock GmbH to B- from BB and put it on Rating Watch Negative.

Fitch said its action is in response to company statements that it is seeking negotiations with its bondholders to change certain terms and conditions of the €50 million bond due 2009.

Rostock has 150 days from 31 December 2001 to deliver to the bond trustee a compliance certificate showing that fiscal-year 2001 financial covenants have been met, Fitch noted.

"It is likely that certain financial ratios have been breached and, given recent operating performance, higher ratio thresholds for subsequent calculations periods is one of the areas for discussion with bondholders," Fitch said.

S&P says Terex ratings unchanged

Standard & Poor's said Terex Corp.'s ratings, including its corporate credit at BB-, and its stable outlook remain unchanged following the announcement that it will acquire Demag Mobile Cranes GmbH & Co. KG for $150 million.

The acquisition will be funded with cash on hand.

S&P said it expects the company to operate total debt to EBITDA within the 3 times to 4x range.

This acquisition fits well into Terex's existing product offerings of rough terrain and truck cranes, S&P noted.

S&P puts Pacer on positive watch

Standard & Poor's put Pacer International Inc. on CreditWatch with positive implications. Ratings affected include Pacer's $150 million 11.75% senior subordinated notes due 2007 at B- and its $100 million revolving credit agreement and $135 million term loan at B+.

S&P said its action is in response to Pacer's filing for an initial public stock offering.

There is potential for a modest upgrade if the stock offering is successfully completed, S&P said.

Pacer has stated that it expects $135 million in net proceeds, assuming an initial public offering price of $16 a share, and that it will use proceeds to repay debt, S&P noted.

S&P raises Hollywood Casino outlook

Standard & Poor's raised its outlook on Hollywood Casino Corp. to positive from stable. Its senior secured and corporate credit ratings are B.

S&P said the outlook revision reflects the improved performance at the company's Aurora, Ill. and Shreveport, La. facilities, the steady operations in Tunica, Miss. and the rating agency's expectation that the positive momentum will continue in the near term.

Hollywood Casino has a narrow business focus, high debt levels and faces competitive market conditions, S&P said.

Offsetting positives are the continued solid performance at each of the company's properties, improving credit measures and the expectation that this trend will continue in the near term, S&P said.

S&P takes US Steel off watch

Standard & Poor's removed United States Steel Corp. from CreditWatch with negative implications and confirmed its ratings. Ratings affected include United States Steel LLC's $535 million 10.75% senior unsecured notes due 2008 and $49 million 10% senior quarterly income debt securities due 2031, both rated BB.

S&P said U.S. Steel was put on CreditWatch after the company's announcement on Jan. 17, 2002 that it entered into an option agreement to acquire NKK's 53% ownership in National Steel and that it would seek other opportunities to consolidate the U.S. steel industry.

S&P said its rating actions reflect "the meaningful turnaround expected in the company's earnings performance, as a result of improving steel industry conditions in the U.S. following the government's recent implementation of import tariffs under section 201."

In addition, S&P said management has shown a commitment to maintaining a moderate financial profile, evidenced by its recent $192 million sale of equity.

In addition, uncertainty regarding funding for U.S. Steel's plan to consolidate the U.S. steel industry has been removed, as USS is no longer expected to engage in a broad consolidation, S&P said.

U.S. Steel abandoned the consolidation plan because efforts to obtain relief from the industry's burdensome retiree medical and pension costs have been unsuccessful, the rating agency noted.

Moody's raises Premcor USA

Moody's Investors Service upgraded Premcor USA, Inc.'s notes to B1 from B3 and Premcor Refining Group's bank debt to Ba3 from Ba3. It also confirmed Port Arthur Finance Corp.'s Ba3 senior secured rating and Premcor Refining Group's senior unsecured notes at Ba3 and subordinated notes at B2. Premcor USA's senior subordinated notes, created by an exchange of its preferred stock, were rated B2.

Moody's said the upgrades anticipate Port Arthur Finance will have a successful consent solicitation on its $255 million of 12.5% notes to permit, among other amendments, the restructuring of the ownership of Port Arthur Finance and Port Arthur Coker to become a wholly-owned subsidiary of Premcor Refining.

The transactions prompting the current action follow on from the Premcor's recent IPO, raising $463 million.

S&P lowers Amtrol

Standard & Poor's downgraded Amtrol Inc. The outlook is negative. Ratings affected include Amtrol's $115 million 10.625% senior subordinated notes due 2006, cut to CCC from CCC+. The bank loan ratings were withdrawn after the debt was replaced with an unrated facility.

S&P said it lowered Amtrol because of continuing tight liquidity following the refinancing of bank debt with two new credit facilities.

Amtrol replaced credit facility with a $42.5 million first-priority term loan and revolving credit facility with Foothill Capital Corp. and a $25 million payment-in-kind senior second-priority secured credit facility with affiliates of its equity sponsor, The Cypress Group LLC, S&P noted.

Although the parental support and lower cash interest burden are positives, the company had only $ 7.7 million of undrawn availability as of March 31, S&P said.

Liquidity should gradually improve as the company enters into a seasonally stronger period, but is likely to remain strained, S&P added.

S&P cuts BGF

Standard & Poor's downgraded BGF Industries Inc. and put the company on CreditWatch with negative implications. Ratings affected include BGF's $50 million revolving credit facility, cut to CCC+ from B, and its $100 million 10.25% senior subordinated notes due 2009, cut to CCC- from CCC+.

S&P said it cut BGF because of extreme market weakness, delays in arranging a new credit facility, somewhat higher than expected debt levels, and potential covenant violations under the company's existing bank credit facility.

S&P said BGF has been severely affected by the dramatic downturn in the electronics industry, its largest end market.

Despite a modest recent pick-up in sales and EBITDA from very low levels, demand and earnings prospects remain uncertain, and EBITDA is not currently covering interest expense, S&P said.

Moody's puts Bradley Operating on upgrade review

Moody's Investors Service put the Ba2 senior debt ratings of Bradley Operating, LP, a subsidiary of Heritage Property Investment Trust, Inc., under review for possible upgrade.

Moody's said the review follows the recent completion of Heritage's $450 million initial public offering, which significantly improved the REIT's capital structure and coverage ratios.

The REIT's ability to sustain and to further enhance its balance sheet, while successfully implementing its business strategy would support ratings improvement, Moody's said.

Moody's rates KazTransOil notes Ba2

Moody's Investors Service assigned a Ba2 rating to the $150 million 8.5% senior notes due 2006 of Closed Joint Stock Company KazTransOil. The outlook is stable.

Moody's said the rating is not constrained by the sovereign ceiling of Kazakhstan.

Moody's said that KazTransOil's rating reflects the increasing competition that the state-owned oil pipeline faces from new third-party-owned pipelines being built in Kazakhstan in conjunction with the development of the country's oil reserves, in particular from the CPC pipeline which competes with KTO's most profitable western branch.

The ratings also incorporate the company's heavy medium-term investment requirements to build and improve the integration of its pipeline infrastructure, increase capacity in certain key pipelines and provide greater access to export routes, Moody's said.

Positives include KTO's special status as the national oil pipeline owner and operator in Kazakhstan, its 100% state ownership, and its strategic and fiscal significance to the country, Moody's sadi.

Moody's said its expectation of consistent government and regulatory support is factored into the rating as well as the company's established customer base, relative price competitiveness and recently announced changes in its ownership structure.

S&P upgrades Alfa Laval

Standard & Poor's upgraded Alfa Laval AB and kept the company on CreditWatch with positive implications.

Ratings affected include Alfa Laval Credit Finance AB's €161 million term loan A due 2007, €329.6 million term loan B due 2008 and €351 million bank loan due 2008, all raised to BB+ from BB, and Alfa Laval Special Finance AB's €220 million 12.125% notes due 2010, raised to BB- from B+.

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