S&P puts El Paso Energy Partners on watch

Standard & Poor's put El Paso Energy Partners LP on CreditWatch with negative implications. Ratings affected include El Paso Energy Partners' $150 million senior subordinated notes due 2012, $175 million 10.375% notes due 2009, $230 million 8.5% senior subordinated notes due 2011 and $250 million 8.5% senior subordinated notes due 2011 at BB- and $250 million term B loan and $600 million revolving credit facility at BB+.

S&P said the action is based on the recent downgrade of El Paso Energy's general partner, El Paso Corp.

El Paso's involvement as the general partner with a 42% stake in El Paso Energy Partners influences the partnership's credit profile in several ways and effectively tethers the ratings of the two entities, S&P said.

El Paso Energy Partners has played an important role in El Paso's plan to deleverage its balance sheet plan by enabling it to transfer qualifying midstream assets to El Paso Energy Partners. El Paso continues to operate El Paso Energy Partners' assets and provide administrative support.

The deterioration of El Paso's credit quality pressures El Paso Energy Partners' rating irrespective of the partnership's stand-alone credit quality, S&P said.

Moody's rates Brickman notes B2, credit facility Ba3

Moody's Investors Service assigned a B2 rating to The Brickman Group, Ltd.'s planned $150 million of seven-year senior subordinated notes and a Ba3 to its $80 million secured bank credit facility. The outlook is stable.

Moody's said the ratings reflect the heavy debt leverage and negative tangible net worth resulting from Brickman's proposed new leveraged recapitalization (its second), the likelihood that an additional recapitalization may lie ahead, and the financial and integration risks that may accompany a possible acquisition strategy.

At the same time, the ratings consider Brickman's leading position in the commercial landscape maintenance business, its recurring, somewhat recession resistant revenue stream, its positive free cash flow generating ability, its impressive growth rates, its strengthening financial profile since the time of its first leveraged recapitalization in 1998, and the attractive industry trends, Moody's added.

Pro forma for the proposed $150 million senior subordinated note offering and take down of a $50 million term loan, total debt plus preferred stock to EBITDA amounts to 5x, Moody's said. After subtracting out goodwill and other intangibles of $150 million, tangible net worth drops to a negative $154 million.

With this transaction, the Brickman family will achieve a controlling interest of 54%, and non-family management members will own an additional 10%. CIVC Partners (one of the 1998 investors) and associated investors will own the remaining 36%. It is the intention of the Brickman family and management to buy back the entire company at some point in the future, which will probably necessitate a third recapitalization, Moody's said.

S&P cuts Atlas Air

Standard & Poor's downgraded Atlas Air Worldwide Holdings Inc. and its subsidiary Atlas Air, Inc. and kept it on CreditWatch with negative implications. Ratings lowered include Atlas Air, Inc.'s $150 million 10.75% senior notes due 2005 and $150 million 9.375% senior notes due 2006, cut to CCC from CCC+, and most of the company's various passthrough certificates, which were lowered one notch.

S&P said the action follows Atlas Air's announcement that its failure to provide timely audited financial statements has become an event of default under its credit facilities and related intercompany aircraft leases, and that lenders may now accelerate repayment of approximately $246 million in outstanding indebtedness, should lenders representing at least 50.1% of the outstanding loans choose to do so.

S&P said it has continuing concerns about near-term liquidity and the company's ability to meet debt service requirements as they come due over the near term. The company is in discussions with its banks and is attempting to negotiate a waiver of the default.

Moody's cuts Collins & Aikman Products' liquidity rating

Moody's Investors Service downgraded Collins & Aikman Products Co.'s speculative-grade liquidity rating to SGL-3 from SGL-2 and confirmed its senior implied rating at Ba3.

Moody's said the action reflects its belief that the company's short-term cash flow generation capabilities and unused effective availability (after covenants) under its various debt facilities are lower than previously anticipated.

Moody's added that it confirmed the senior implied rating based on its expectation that the company's net new business generation and overall intermediate-term revenue and margin prospects remain substantially intact.

Moody's cuts Dine notes

Moody's Investors Service downgraded the $150 million ($73 million remaining) senior unsecured guaranteed notes, originally issued by Dine SA de CV and assumed by Desc SA de CV in May 2002. The outlook is stable.

Moody's said the action reflects structural changes associated with the May 15, 2002 merger of Dine into Desc together with the significant challenges currently faced by Desc within its autoparts and chemicals sectors, which represent the company's two largest operations.

The rating actions reflect that the Dine notes were assumed by its former guarantor Desc and must now be notched relative to all of Desc's existing debt facilities and its subsidiary-level payables and other obligations, Moody's said. Desc's other committed obligations exceed $1 billion in aggregate, all unsecured.

The ratings actions also reflect the fact that Desc is currently facing significant challenges within its autoparts and chemicals sectors, which contain the company's two largest operations. Desc has therefore made limited progress to date with regard to either debt reduction or the improvement of its debt protection measures, Moody's said.

More specifically Desc is currently challenged within its autoparts sector by DaimlerChrysler's (one of the company's main OEM clients) recent closure of a production facility in Mexico City, the rating agency said. This is expected to reduce Desc's sales by about $130 million on an annualized basis.

In addition, demand for Desc's products in the U.S. automobile market could decline further if the Big 3 do not maintain their aggressive promotions.

In the chemical sector, profitability has deteriorated as Desc has been unable to pass on the increases in raw material costs to the final customers, Moody's added.

Fitch cuts Trenwick

Fitch Ratings downgraded Trenwick Group, Ltd.'s senior debt to CC from CCC and its preferred capital securities to C from CC. The remain on Rating Watch Evolving.

Fitch said the downgrade follows Trenwick's announcement that it is suspending dividends or distributions on its preferred stock and trust preferred capital securities.

Trenwick had agreed to refrain from making such payments or distributions under a forbearance agreement it entered into with its letter of credit providers on Nov. 13, Fitch noted.

S&P cuts Cluett American, on watch

Standard & Poor's downgraded Cluett American Corp. and put it on CreditWatch with negative implications. Ratings lowered include Cluett's $125 million 10.125% notes due 2008, cut to CCC- from CCC+, and $43.2 million term A loan due 2004, $50 million revolving credit facility due 2004 and $50.6 million term B loan due 2005, cut to CCC+ from B.

S&P said the rating action reflects its concern with Cluett's liquidity and ability to reduce the outstanding debt on its senior secured facility by approximately $45 million by March 31 as required by a Nov. 13 amendment to the loan agreement.

S&P noted that currently Cluett does not generate any free cash flow.

The facility was amended because the company was not in compliance with its financial covenants at Sept. 29, a result of the difficult retail environment, which has pressured margins and profitability, S&P said. In addition to the required debt reduction, the financial covenants for the September and December 2002 quarters were also amended.

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