Moody's cuts P-G Newco, S-C Newco

Moody's Investors Service downgraded P-G Newco LLC's and S-C Newco LLC's $147 million secured bank credit facility maturing September 2005 to Caa3 from Caa1 and withdrew the rating.

The downgrades reflected a combination of a missed debt payment and lack of clear expectations for a near-term recovery as well as the continued decline in the value of the underlying collateral, primarily Airbus A300-B4200 freighter aircraft, Moody's said.

The withdrawal of the rating is prompted by the prospect of insufficient ongoing information available to accurately ascertain investor risk, Moody's added.

The company has seen cash flow deteriorate due to the weak market for freighter aircraft and the lack of the development of an active secondary market in the A300-B4-200 aircraft as a freighter. This has led to more difficulty in placing the aircraft on lease, shorter leases than optimal and higher operating costs than anticipated, Moody's said. At the present time only 10 of the company's 22 aircraft are on lease.

The original business plan included a debt maturity profile that anticipated sales of aircraft to meet principal payments.

Moody's cuts AES Tiete, still on review

Moody's Investors Service downgraded AES Tietê Holdings, Ltd. to Caa1 from B2 and kept it on review for possible downgrade.

Moody's said the action reflects AES Tietê's inability to upstream dividends from underlying projects due to net operating losses, the possibility that Tietê Operating Co., despite its positive cash generation, will continue to post net losses due to inflation that will legally prevent it from paying dividends to the issuer, uncertainty that additional regulatory approvals will be granted to allow funds to be sent to the issuer, particularly considering that other AES subsidiaries have defaulted on obligations to BNDES, and expectations that the $22.4 million June 2003 interest and principal payment will be funded from the debt service reserve account so these funds will not be available to meet the December 2003 principal and interest payment.

The review for possible further downgrade reflects the expectation that default may occur in the near term if Tietê Operating is not able to send cash to the issuer, Moody's said.

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