S&P raises Tower Automotive outlook to stable

Standard & Poor's affirmed the BB corporate credit rating on Tower Automotive Inc., including the senior unsecured debt at BB and subordinated debt at B+. The outlook was raised to stable from negative, following Tower's completion of the sale of $222 million of common equity.

Proceeds from the sale were used to reduce borrowings on the company's bank credit facilities, improving Tower's financial flexibility by increasing borrowing availability under the revolver and strengthening its credit statistics, which should permit the company to remain comfortably within its bank financial covenant requirements, S&P said.

The ratings reflect a leading niche position, albeit in a cyclical and highly competitive industry, offset by an aggressive financial profile.

There was significant deterioration in operating performance during the year. In 2001, the company reported a net loss of $267.5 million, including a restructuring and asset impairment charge of $383.7 million. Benefits from restructuring actions, reduced launch activity and stronger North American production schedules should result in improved performance during 2002.

Tower's recent equity offering improved the company's credit statistics, with total debt to EBITDA declining to 3.0 times from 3.8 times. Only modest further improvement is expected in credit protections measures this year and that will depend to some extent on the market acceptance of several key new platforms, S&P added.

S&P expects the company's funds from operations to debt, treating the trust preferred securities as equity, to average in the mid-20% area and debt to EBITDA to average about 3.0 times over the course of the business cycle, acceptable levels for the rating.

S&P lowers NTL

Standard & Poor's downgraded NTL Inc. and related companies.

Ratings affected include NTL Communications Corp.'s $1.05 billion 11.5% deferred coupon notes due 2006, $400 million 10% notes due 2007, $1.3 billion 9.75% deferred coupon notes due 2008, $450 million 12.375% senior deferred notes due 2008, $599.3 million 7% convertible subordinated notes due 2008, £330 million 9.75% senior deferred notes due 2009, €350 million 9.875% notes due 2009, €250 million 9.25% notes due 2006, €175 million 11.5% deferred coupon notes due 2009, €300 million 12.375% bonds due 2008 and $1 billion 6.75% notes due 2008, all cut to D from C; NTL Inc.'s $100 million 13% exchangeable preferred stock due 2009, cut to D from C; Cablecom (Ostschweiz) AG's CHF4.1 billion bank loan due 2010, cut to C from CC; Diamond Cable Communications plc's $285.101 million 13.25% senior discount notes due 2004, $530.855 million 11.75% senior discount notes due 2005 and $420.5 million 10.75% senior disc notes due 2007, all cut to D from C; NTL Business Ltd.'s £2.5 billion bank loan due 2005, cut to C from CC; and NTL Communications Ltd.'s £1.3 billion bank loan due 2006, cut to C from CC.

Moody's upgrades PTC

Moody's Investors Service upgraded Polska Telefonia Cyfrowa Sp zoo and its subsidiaries. The outlook is stable. Ratings affected include PTC's $253 million senior subordinated guaranteed discount notes due 2007, €200 million 10.875% senior subordinated guaranteed notes due 2008, $150 million 11.25% senior subordinated guaranteed notes due 2009 and €300 million 11.25% senior subordinated guaranteed notes due 2009, all upgraded from B2 to B1.

Moody's said it raised PTC because of the company's continued progress in deleveraging the business while consolidating its market leadership position in the Polish mobile telecommunications market.

In addition, Moody's said its upgrade factors in its expectation that the recent 12-month postponement of UMTS roll-out requirements announced by the Polish regulatory body will generate substantial short- to medium-term cash flow benefits for PTC compared to initial expectations.

S&P puts William Hill on positive watch

Standard & Poor's put William Hill Ltd. on CreditWatch with positive implications.

Ratings affected include William Hill Ltd.'s £380 million bank loan due 2004 rated BB- and William Hill Finance plc's £150 million 10.625% senior subordinated notes due 2008 rated B.

S&P lowers SC International

Standard & Poor's downgraded SC International Services, Inc., removed it from CreditWatch with negative implications and assigned a negative outlook. Ratings affected include SC International's $300 million 9.25% senior subordinated notes due 2007, cut to B+ from BB+.

S&P said its action reflects its uncertainty about the longer-term economic incentive for SC International's parent Deutsche Lufthansa AG to provide continued support.

"Challenging airline industry conditions and the related negative impact on SC International's recent operating results, as well as Lufthansa's ultimate intention to monetize its investment in the noncore subsidiary, remain primary rating concerns," S&P said.

SC International's recent financial difficulties resulted from the impact of the Sept. 11 attack, its aftermath on the airline industry, and the weak economy, S&P added.

Although the ratings previously incorporated implicit material support from Lufthansa, and Lufthansa has provided SC International with financial support to date, it is not certain what level of support could be expected from Lufthansa in the future, the rating agency said.

SC International's ratings reflect its leveraged financial profile, customer concentration risk and limited pricing flexibility given its customer base's competitive market conditions, S&P said. These factors are mitigated by the company's leading position in the airline catering industry, the long-term nature of its contracts with the airlines, and the attractive fundamentals in the home meal replacement industry.

S&P cuts Polymer Group

Standard & Poor's downgraded Polymer Group Inc.'s senior secured ratings to D from CC.

S&P said the action follows Polymer Group's filing a prepackaged Chapter 11.

Polymer Group's corporate credit rating was already at D after it missed an interest payment on its notes, S&P said.

S&P lowers ICO notes

Standard & Poor's downgraded ICO Inc.'s senior unsecured debt including cutting its $120 million 10.375% senior notes due 2007 to B- from B+. The rating agency also confirmed the company's corporate credit rating at B+ and removed it from CreditWatch with negative implications.

S&P said it took ICO off CreditWatch in recognition of the reduced likelihood of a significant strategic or financial restructuring. The rating agency originally put the company on watch after it said it had hired an investment banking firm to explore strategic alternatives to build shareholder value.

S&P added that it lowered the senior unsecured notes to reflect their structural subordination to the claims of creditors at operating subsidiaries.

Moody's puts Grupo Elektra on review

Moody's Investors Service put Grupo Elektra, SA on review for possible downgrade. Ratings affected include Grupo Elektra's $275 million guaranteed senior notes due 2008 rated B1.

Moody's said it started the review because of uncertainties surrounding the establishment of the bank and the financial performance and profile of the stand-alone retail operation. The issuer and guarantor of the rated debt will consist solely of Grupo Elektra's retail business units following the proposed establishment of an unrestricted banking subsidiary. The proposed bank is expected to eventually house all of its consumer financing business, which currently creates an ongoing working capital need but also produces income to service the rated debt. The bank is not expected to be established earlier than the fourth quarter of 2002.

The goal of establishing a bank subsidiary is to help ensure consistent financing for Elektra's customer receivables, which are an integral part of its retail strategy, Moody's noted.

However, there are still many unknowns about the bank, including its total capitalization, and the full business arrangements between the future bank and the retail operation. In addition, Elektra has not broken out detailed performance and balance sheet information for its retail segment, nor has it indicated the amount of additional personnel that might be needed as a result of further separating the retail and credit businesses, Moody's said

Moody's rates American Commercial senior notes Caa2, sr sub notes Caa3

Moody's Investors Service assigned a Caa2 rating to American Commercial Lines LLC's proposed $120 million 11¼% senior unsecured notes due January 1, 2008 and a Caa3 rating to the proposed $116.5 million 12% payment-in-kind senior subordinated notes due July 1, 2008. The notes will be issued in an exchange for a like amount of ACL's existing 10¼% senior unsecured notes due June 2008, currently rated Ca, as part of the acquisition and recapitalization of ACL by Danielson Holding Corp.

Pending completion of the restructuring, Moody's said it confirmed ACL's $413 million senior secured facilities at B3.

On completion of the acquisition and recapitalization, Moody's said it intends to upgrade ACL's senior implied rating to Caa1 and issuer rating to Caa2. The rating on the senior secured facilities will be unchanged at B3. The outlook will be changed to positive from negative.

The outlook change will reflect the improved financial environment with the reduction in cash interest expense and the covenant relief provided by the amended bank facility, Moody's said.

In addition, the improved outlook recognizes the meaningful financial commitment made by Samuel Zell and Danielson Holdings by purchasing over 50% of the existing $295 million senior note issue and cash outlay necessary to acquire the ACL membership interest, the rating agency added.

S&P lowers Unifi

Standard & Poor's downgraded Unifi Inc. including lowering its $250 million 6.5% notes due 2008 to BB from BB+. The outlook is stable.

S&P said it cut Unifi because of the continued difficult operating conditions and weakness in Unifi's end-use markets, compounded by changing industry fundamentals, which include increasing foreign competition in the commodity polyester business and a declining domestic customer base.

Softness in Unifi's core businesses, the end-use customers in the apparel, home furnishings, hosiery and automotive markets, which aggregate over 75% of revenues, has led to pricing pressure and steady volume declines over the past five years, S&P said.

Reduced utilization of assets has resulted in lower margins and significant weakening of the firm's financial measures, the rating agency added.

Additionally, the current arbitration regarding its manufacturing alliance with E.I.DuPont De Nemours and Co. is a further concern.

Moody's rates Kinetic Concepts' loan Ba3

Moody's Investors Service assigned a Ba3 rating to Kinetic Concepts Inc.'s new $30 million term loan E due 2005. All other ratings were confirmed including its $50 million revolver due 2003, $27.5 million term A due 2003, $90 million term B due 2004, $90 million term C due 2005 and $95 million term D due 2006, all at Ba3; $200 million 9.625% senior subordinated notes at B3; senior implied rating at B1; and senior unsecured issuer rating at B2. The outlook is stable.

Proceeds from the term E were used to repay outstanding debt under the revolver, increasing availability to about $40 million from about $10 million. At March 31, the company had $529 million of total debt, LQA leverage of 4.0x and LQA leverage coverage of 3.4x.

Ratings reflect high leverage, deficient cash flow generation, significant concentration of revenues in one product line and weaknesses in the surfaces and specialty beds businesses, Moody's said. In addition, the company's limited financial flexibility combined with debt amortization over the next few years could lead to liquidity issues.

Positive influences on the ratings include, continued growth of the V.A.C., the company's wound closure product line, position as the second largest provider of specialty beds, mattresses and overlays and worldwide distribution and service platform, Moody's said.

Fitch may review United Defense outlook

Fitch Ratings said it may review its outlook on United Defense Industries, Inc. if the Crusader program is canceled but that its BB senior secured debt rating would not be affected. Fitch currently has a positive outlook on the company.

"In addition, given the apparent support the program continues to have in Congress, Fitch believes it is premature to assume the Crusader program has ended, although the probability of termination or reduction has greatly increased," the rating agency said.

Fitch said it believes a compromise could be a high probability outcome in what is becoming primarily a political issue.

"One compromise might be the application of Crusader technology to a new program more in line with the Army's goal of a lighter, more mobile force. Such an outcome could mitigate the impact of the Crusader decision on UDI. The DOD has already spent approximately $2 billion in development costs on the Crusader," Fitch noted.

Although Crusader accounts for more than 20% of United Defense's revenues, its share of EBITDA is lower because it is a lower-margin program in the development stage, Fitch said.

In addition, Fitch said it believes United Defense would still have positive free cash flow post-Crusader, allowing continued debt reduction in the absence of acquisitions.

Finally, while the full cancellation of Crusader would shrink United Defense's income, it could also shrink the balance sheet, supporting credit quality, Fitch said.

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