Moody's cuts AT&T Canada to junk, still on review

Moody's Investors Service downgraded AT&T Canada to junk, affecting $2.96 billion of debt, including its senior unsecured notes, cut to Ba3 from Baa3. The ratings remain on review for possible further downgrade.

Moody's said it lowered AT&T Canada because of its weak financial status, lack of progress regarding changes to foreign ownership legislation and the potential for a violation of a bank debt covenant which would put "significant strain" on AT&T Canada's liquidity.

The rating agency also said it is "uncertain about the nature of any explicit direct support" which AT&T Corp. may provide to AT&T Canada, given the considerable cost to AT&T's debtholders and shareholders of doing so.

Without meaningful support from AT&T, AT&T Canada's rating "is subject to further significant downgrade in the near-term," Moody's said.

Moody's said AT&T Canada's bank debt might be placed into default shortly if a going concern footnote is included in its 2001 financial statements. The company has enough cash on hand to retire the bank debt but would then have, at best, one year of liquidity and no likely ability to access the capital markets for additional funding, the rating agency said.

S&P rates new Dana notes BB

Standard & Poor's assigned a BB rating to Dana Corp.'s proposed $250 million senior unsecured notes due 2010 and confirmed the company's existing ratings. The outlook is stable.

S&P said its assessment reflects Dana's leading market positions offset by exposure to cyclical and competitive industries and the challenges associated with the implementation of a major restructuring program.

Among the "significant challenges" faced by Dana in the last year, S&P pointed to sharp declines in heavy-duty truck production, decreasing production schedules in the passenger car/light-truck market, increasing pricing pressures and continuing softness in the aftermarket. These, the rating agency continued, have led to a significant deterioration in Dana's financial profile.

In 2001, Dana reported a net loss of $298 million after $390 million in restructuring charges compared to $334 million in net income in 2000 after $173 million in restructuring and integration charges, S&P said.

Dana has cut its dividend, put its Dana Credit unit up for sale, and accelerated restructuring actions, S&P added. The also intends to close or consolidate more than 30 facilities worldwide and reduce headcount by at least 15%.

"These actions should help the company gradually improve its financial profile and position itself to better deal with future periods of industry stress," S&P said. "However, they will likely also put additional pressure on cash flow and financial flexibility over the near term."

Moody's rates new Mail-Well notes B1, lowers some ratings

Moody's Investors Service assigned a B1 rating to Mail-Well I Corp.'s proposed offering of $300 million senior unsecured notes, confirmed its $150 million revolver, $104 million term A loan and $103 million term B loan at Ba3, downgraded its $300 million 8.75% senior subordinated notes due 2008 to B3 from B2 and confirmed Mail-Well, Inc.'s $139 million 5% convertible subordinated notes due 2002 at B3. The outlook is stable.

Moody's said the ratings reflect Mail-Well's continued reduction in profitability (as measured by EBITA return on assets), modest coverage of interest expense relative to the rating category and high financial leverage.

Moody's also downgraded Mail-Well's senior implied rating to B1 from Ba3, reflecting the company's likely run-rate operations before and after restructuring, and the long term recovery period necessary to post sustained improvements in financial condition. Pro-forma for the new senior note, liquidity is adequate, Moody's said, noting there is a modest cushion under amended covenants and some likelihood that further covenant relief may be required to maintain orderly access to funding in a down scenario.

The proposed issue is critical to Mail-Well's liquidity profile, Moody's said, and without it, liquidity would be weak and would pressure the ratings and could likely result in a downgrade.

The stable outlook is also prospective and further reflects our expectation of relatively steady-state performance throughout the remainder of these depressed domestic economic conditions. Stabilization in the ratings would be jeopardized by non-execution of the proposed financing; further delays in the completion of the previously stated divestiture program; and/or erosion in credit statistics.

Pro-forma for the $40 million sale of Curtis 1000 and the new senior notes, Moody's said at Dec. 31 Mail-Well's total debt of about $1 billion to EBITA of around $119 million is 8.4 times (5.7 times EBITDA of about $176 million). The cash position is estimated to be $130 million. On a going forward basis, Moody's said it anticipates pro-forma EBITDA less capital expenditures to cover pro-forma interest expense slightly below 2 times.

S&P rates new Mail-Well notes BB

Standard & Poor's assigned a BB rating to the $300 million of senior unsecured notes due 2012 to be issued by Mail-Well I Corp. and guaranteed by its holding company, Mail-Well Inc. The rating agency also confirmed Mail-Well Inc.'s ratings. The outlook is negative.

S&P said Mail-Well's ratings reflect the company's narrow business focus, competitive business conditions and weak credit measures. Positives include its leading market positions in the envelope and commercial print segments.

S&P noted Mail-Well has recently concentrated on improving operating efficiencies and enhancing margins through plant consolidations, headcount rationalization and working capital improvements.

But difficult business conditions have still negatively affected operating results throughout 2001, S&P said, adding that in particular commercial print was hurt by the decline in advertising spending and intense pricing pressures.

Moody's rates new Shop at Home notes B3

Moody's Investors Service assigned a B3 rating to the proposed $135 million senior secured notes due 2009 of Shop at Home, Inc. and said that once the offering is complete it will downgrade the company's ratings including its senior implied rating to B3 from B2 and its senior unsecured issuer rating to Caa2 from Caa1.

Moody's said the B3 rating on the new notes reflects the protection afforded to bondholders by the collateral, which consists of essentially all the broadcasting assets but also recognizes the establishment of liens on more liquid operating assets by banks.

Limiting Shop at Home's ratings are the higher level of debt supported by the same assets, the potential for insufficient interest coverage for this higher debt level unless the company is able to quickly turn operating performance around and the trend of declining performance metrics as Shop at Home's business has grown, Moody's said.

Moody's downgrades MPower

Moody's Investors Service downgraded MPower Holding Corp. and its subsidiaries. Ratings affected include Mpower Holding's 13% senior unsecured notes due 2010, cut to C from Ca, and Mpower Communications Corp.'s 13% senior secured notes due 2004, cut to Ca from Caa3. MPower's 7.25% convertible redeemable preferred stock was confirmed at C.

Moody's said it downgraded MPower because of the company's announcement that it intends to file a voluntary pre-negotiated Chapter 11 reorganization once it receives final approval from the holders of at least 2/3 of the outstanding principal amount of its senior notes due 2010.

Moody's downgrades Salta, still on review

Moody's Investors Service downgraded Salta Hydrocarbon Royalty Trust's $234 million of 11.55% targeted amortization notes due 2015 to Caa1 from Ba3 and kept them on review for possible further downgrade.

Moody's said it lowered Salta because of the rapid performance deterioration of the transaction as a result of the re-denomination of the U.S. dollar-denominated contracts among private parties at the exchange rate of 1:1.

"As a result, royalty collections have decreased significantly in U.S. dollar terms," Moody's said, adding that once royalties are re-denominated in pesos, the U.S. dollar-denominated notes become exposed to further devaluation of the peso.

Moody's Investors Service confirms Casella, negative outlook

Moody's Investors Service confirmed Casella Waste Systems, Inc., concluding a rating review begun on July 13, 2001. Ratings affected include Casella's $280 million guaranteed senior secured revolving facility due 2004 and $122 million guaranteed senior secured term loan B due 2006 at B1. The outlook is negative.

Moody's said its action reflects Casella's effective completion of its divestiture of non-core and underperforming assets, primarily from the KTI acquisition in December 1999. Casella has also shown improved earnings and cash flow at its core, northeastern collection and disposal business.

Furthermore, Casella has reduced debt faster than Moody's had anticipated using both sale proceeds and internally generated cash flow, the rating agency said.

However the outlook is negative, Moody's said, because of concern about the company's ability to increase its historically low return on assets to generate sufficient cash to permanently reduce acquisition-related debt.

Moody's downgrades Coyne

Moody's Investors Service downgraded Coyne International Enterprises Corp. The outlook is negative. Ratings affected include Coyne's $75 million 11.25% senior subordinated notes due 2008, lowered to Ca from Caa1.

Moody's said it lowered Coyne because of concerns about the company's liquidity position and the near-term sustainability of the company's capital structure.

"The ratings reflect Moody's belief that the company's enterprise value may be less than its liabilities," the rating agency said.

As of Oct. 31, 2001, the company had about $2.5 million available on its $30 million secured revolving credit facility and $120,000 of cash on hand, Moody's said. The company apparently complied with the minimum EBITDA and fixed charge coverage ratio as required in the bank agreement for the 12 months ending October 2001, but Moody's said it is worried that bank loan covenant compliance and liquidity will remain very tight going forward.

"Substantial leverage reduction, a stronger liquidity position and improved operations would be necessary for any rating improvement," Moody's added.

Fitch cuts Gap, rates new convertible BB-

Fitch Ratings downgraded Gap, Inc.'s $2 billion of senior unsecured notes to BB- from BB and assigned a BB- rating to the company's planned $1 billion convertible note issue. The outlook remains negative.

Fitch said it cut Gap's ratings because of the significant addition to the company's debt burden, which further weakens its credit profile, and because of somewhat weaker than anticipated year-end results.

Gap's credit profile has deteriorated considerably, due primarily to weak sales and lower operating cash flow, Fitch noted. For the fiscal year ended Feb. 2, 2002, leverage (total debt plus eight times rents to EBITDAR) weakened to approximately 5.2 times from 3.0 times in the same period last year and EBITDAR coverage of interest and rents decreased to 1.8 times from 3.0 times over the same period.

The pending $1 billion convertible will increase the company's total debt to approximately $3 billion, which will further weaken bondholder protection measures from year-end levels, Fitch said.

However, the offering along with $1 billion in cash on hand at year end and the anticipated $1.3 billion secured bank facility should provide the company with sufficient liquidity for 2002.

Fitch cuts Solutia to junk, on watch

Fitch Ratings downgraded Solutia Inc. to junk, cutting its senior secured debt to BB+ from BBB and its senior unsecured debt to BB from BBB-. Fitch also put the company on Rating Watch Negative.

Fitch said it lowered Solutia's ratings because of the heightened refinancing risk for the $150 million maturity in October 2002 and the $800 million credit facility up for renewal in August 2002.

In addition, Fitch said it is concerned about the ongoing polychlorinated biphenyl contamination litigation, mainly because it is creating an unfavorable environment to refinance the maturing debt.

Solutia has delayed the refinancing a number of times, each time facing an increasingly negative lending environment, Fitch said.

Fitch lowers Aguas Argentinas

Fitch Ratings downgraded the foreign and local currency ratings of Aguas Argentinas SA to DD from CC and CCC+ and lowered the company's IDB B loan participation certificates to CC from CCC+. The loan remains on Rating Watch Negative.

Fitch said its action follows Aguas Argentina's non-payment of $1.6 million of interest due last week to an international bank.

Although transfer restrictions were in place at the payment date, they have been lifted for various issuers this week, Fitch noted. In addition, the rating agency said Aguas Argentinas has sufficient cash balances.

S&P downgrades IFCO, on watch

Standard & Poor's downgraded IFCO Systems NV and put the company on CreditWatch with negative implications.

Ratings lowered include IFCO's €200 million 10.625% senior subordinated notes due 2010, cut to CC from CCC+, and PalEx Inc.'s $78 million acquisition facility due 2006 and $100 million revolving credit facility due 2006, both guaranteed by IFCO Systems and both lowered to CCC from B.

S&P takes Allied Holdings off watch

Standard & Poor's removed Allied Holdings Inc. from CreditWatch with negative implications and confirmed the company's ratings. The outlook is negative.

Ratings affected include Allied's $150 million 8.625% senior notes due 2007 rated CCC+.

S&P downgrades Bio-Rad

Standard & Poor's downgraded Bio-Rad Laboratories Inc., including lowering its $100 million senior secured term loan due 2004 to BB- from BB.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.