Moody's rates Seagate Technology's notes Ba2; loan Ba1

Moody's Investors Service assigned a rating of Ba2 to Seagate Technology HDD Holdings' proposed $300 million of senior notes and a Ba1 rating to its new $350 million guaranteed senior secured term loan due 2007 and $150 million guaranteed senior secured revolver due 2007.

The company's senior implied rating was raised to Ba1 from Ba2 and the senior unsecured issuer rating was raised to Ba2 from Ba3. Seagate Technology International had its ratings confirmed including its $210 million 12½% senior subordinated notes due 2007 at Ba3, $180 million guaranteed senior secured term loan A due 2005 at Ba1 (will be withdrawn upon repayment), $493 million guaranteed senior secured term loan B due 2006 at Ba1 (will be withdrawn upon repayment) and $200 million guaranteed senior secured revolver due 2005 at Ba1 (will be withdrawn upon closing).

The ratings reflect "Seagate Technology's preeminent position in the high margin enterprise drive segment of the business; the company's sustained profitability in the wake of deteriorating end market demand; and the contrasting marginal performance of Seagate's leading competitors, particularly perennial rival IBM, which has lost substantial enterprise market share," the Moody's release said.

The company's refinancing will reduce outstanding debt by 15%, while maintaining 0.9 times pro forma debt to LTM EBITDA.

Moody's lowers Advanstar loan to B2; notes to Caa1

Moody's Investors Service downgraded Advanstar Communications Inc.'s ratings and gave the ratings a negative outlook due to increasing risks in the trade show sector and the company's increasing leverage. Ratings affected include Advanstar's $450 million bank credit facilities lowered to B2 from B1, $160 million senior subordinated notes due 2011 lowered to Caa1 from B3, senior implied rating lowered to B2 from B1 and issuer rating lowered to B3 from B2.

"In Moody's view, Advanstar's growth prospects will be driven mostly by acquisitions - a challenge given the company's current highly leveraged capital structure," Moody's said. "While the trade show sector has been the agent of growth for the company, the potential for ongoing travel concerns, have made the sector a less attractive investment. Moreover, the lack of tangible assets is likely to provide little comfort in a distressed scenario."

Positive influences on the ratings include the company's dominant market position and relative stability and high profit margins of its MAGIC fashion shows. Advanstar's businesses, according to the rating agency, held up better than its peers. This may be a result of the company's cost cutting measures, such as layoffs and curtailment of its Internet strategy.

The negative outlook reflects the difficult operating environment, including the likelihood of continuing weakness in the advertising market and restrained business travel, Moody's said. Negative rating pressure is likely should the company pursue acquisitions without a meaningful equity component or if leverage were to measurably increase over the course of the year.

Moody's raises Lennar outlook

Moody's Investors Service affirmed all debt ratings of Lennar Corp. and changed to outlook to positive from stable due to the successful integration of U.S Home and two smaller acquisitions. Affirmed ratings include Ba1 on $271.5 million 7.625% senior notes due March 1, 2009, $301.3 million 9.95% senior notes due May 1, 2010, $256.9 million 3.875% zero-coupon convertible senior debentures due July 29, 2018, $715 million revolver due May 2, 2005, $300 million 364-day revolver and $395 million term loan B due May 2, 2007, Ba3 on $235.9 million 5.125% zero-coupon convertible senior subordinated notes due April 4, 2021 and Ba1 senior implied rating and issuer rating.

Moody's said the positive outlook reflects Lennar's long and consistent history of revenue and earnings growth, strong equity base, considerable geographical diversification and positive real cash flow generation for the past four years, "which is uncommon for a homebuilder."

Ratings also reflect the company's "appetite for acquisitions", an ongoing share repurchase program, a larger-than-industry-average land position, its off-balance sheet joint venture and partnership debt and the cyclical nature of the industry, Moody's said.

Moody's downgrades Cablecom (Ostschweiz)

Moody's Investors Service downgraded the €2.4 billion senior bank facility rating of Cablecom (Ostschweiz) AG, an NTL Inc. subsidiary, to Caa2 from B3. The outlook remains negative.

Moody's said its action reflects its heightened concerns about Cablecom's near-term liquidity position and longer-term ability to grow cash flows to level sufficient to adequately service the company's sizable debt burden.

In addition, year-end filings by parent NTL indicate that Cablecom is negotiating with bank lenders over waivers for the various covenant breaches on the senior bank facility, Moody's said.

In light of the company's high leverage profile of 20 times debt/EBITDA for the year ending Dec. 31, 2001, considerable on-going cash requirements and increased liquidity risk resulting from the technical default of the company's bank facilities, Moody's said it believes that it is increasingly likely that a restructuring of the company's bank debt may ultimately be required.

S&P downgrades Telewest

Standard & Poor's downgraded Telewest Communications plc and kept it on CreditWatch with negative implications.

Ratings affected include Telewest's various notes and convertibles, cut to CCC- from B, Telewest Communications Networks Ltd. bank loans, cut to B- from BB, and Telewest Finance (Jersey) Ltd.'s convertibles, cut to CCC- from B.

S&P keeps US Airways on watch

Standard & Poor's said US Airways Group Inc. and its US Airways Inc. subsidiary remain on CreditWatch with negative implications after the parent reported a "heavy" first quarter net loss of $298 million and said it will likely apply for a federal loan guarantee. Both are rated CCC+.

S&P said US Airways continues to trail the rest of the industry in an adverse revenue environment.

Cash fell to $561 million at March 31, 2002, from $1.08 billion at Dec. 31, 2001, a relatively low level but not one that poses an immediate threat to solvency, the rating agency said. US Airways has subsequently received a $169 million tax refund and projects positive operating cash flow in the second quarter.

"However, liquidity could become a more serious concern by late this year, absent progress on reducing the airline's cost structure and securing a federally guaranteed loan," S&P said.

S&P takes Argo-Tech off watch

Standard & Poor's removed Argo-Tech Corp. from CreditWatch with negative implications, confirmed its ratings and assigned a negative outlook. Ratings affected include Argo-Tech's $195 million 8.625% senior notes due 2007 at B- and its $130 million bank credit facility due 2004 at BB-.

"The affirmation is based on Standard & Poor's expectation that Argo-Tech will remain profitable during the current commercial aerospace downturn and that key credit protection measures will gradually improve to a level consistent with the ratings," said S&P analyst Roman Szuper in a release.

S&P noted that Argo-Tech derives 50%-60% of its revenues from a relatively stable and higher-margin aftermarket, which is beginning to benefit from a recovery in air traffic.

In the wake of the Sept. 11 attacks and a softer global economy, jetliner orders and deliveries have suffered most and are expected to be substantially lower in 2002 and 2003, S&P said. However, the rating agency pointed out, this segment represents only 15%-20% of Argo-Tech's revenues.

Although earnings have been adversely affected by difficult conditions in the airline and commercial aircraft sectors, Argo-Tech continues to generate positive free cash flow, has sufficient availability under a committed credit facility and is in compliance with bank covenants, S&P said.

The rating agency expects debt to EBITDA to improve to 4.0-5.0 times in the near- to intermediate-term, with EBITDA and EBIT interest coverages at 2.0-2.5 times and 1.5-2.0 times, respectively.

S&P affirms Starwood at BBB-

Standard & Poor's affirmed the BBB- corporate credit and notes rating of Starwood Hotels & Resorts Worldwide Inc. and took it off watch.

The watch resolution follows Starwood's successful sale of $1.5 billion in senior notes with proceeds used to repay all of its increasing-rate notes and part of its senior credit facility.

The outlook is negative.

Credit measures remain weak for the rating following the significant decline in operating performance in the second half of 2001, said S&P credit analyst Craig Parmelee.

The ratings could be lowered if a recovery in the lodging industry fails to take hold in 2002 and if Starwood does not apply free cash flow to debt reduction, improving credit measures.

S&P expects a gradual industry recovery in 2002 from the weaker 2001 trends and from the effects of the Sept. 11 terrorist attacks. Industry data through early April support this. S&P expects Starwood will improve its credit measures in 2002, primarily through using free cash flow to reduce debt.

Additional flexibility stems from the potential sale of noncore assets, such as the CIGA portfolio, which may be divested over time as market conditions allow. S&P expects proceeds to be applied to reducing leverage.

S&P keeps UAL on watch

Standard & Poor's said United Air Lines Inc. and its parent UAL Corp. remain on CreditWatch with negative implications after UAL reported a "substantial" first-quarter net loss of $487 million before $23 million net special charges. The corporate credit rating for both is B+.

S&P said the loss reflected the industrywide weak revenue conditions, particularly for business travel.

United's pretax margin before special items, negative 23%, was less unfavorable than the negative 34% recorded in the fourth quarter of 2001, but worse than those of all other large U.S. airlines, except US Airways Group Inc., S&P noted.

Still, UAL's revenue generation deficit relative to the rest of the industry has narrowed gradually since September 2001. The daily operating cash deficit narrowed to under $5 million, versus $10 million in the fourth quarter of 2001. Management forecasts another significant, albeit smaller, loss in the second quarter and for the full year 2002. Liquidity and financial flexibility remain good, with cash of $2.9 billion, aided by over $600 million of tax refunds, S&P added.

Fitch will raise Premcor outlook on IPO completion

Fitch Ratings said it will raise its outlook on Premcor Refining Group and Premcor USA to positive from stable when Premcor Inc. completes its upcoming IPO. Premcor announced the IPO will be completed in the next few weeks with proceeds being used to pay down existing debt.

Fitch also confirmed the existing ratings including Premcor Refining's $650 million revolving credit facility at BB, its senior floating-rate term loan and senior notes at BB- and its senior subordinated notes at B and Premcor USA's senior notes at B.

Fitch said the IPO effectively serves as a de-leveraging event to improve credit protection measures. On a pro forma basis, leverage is expected to be in the range of 3.0 to 3.5 times with interest coverage in excess of 3.0 times, Fitch said.

Premcor Refining is expected to continue to maintain large cash balances in order to fulfill working capital requirements as well as provide a measure of safety in down-cycle environments, the rating agency added.

However Fitch said it is concerned about management's stated intent to grow Premcor. In particular, refinery acquisitions in attractive locations could result in significant premiums paid.

S&P cuts Hudson Respiratory

Standard & Poor's downgraded Hudson Respiratory Care Inc.

Ratings affected include Hudson Respiratory's $115 million 9.125% senior subordinated notes due 2008, cut to D from CCC-, and its $50 million senior secured revolving credit facility due 2004 and $40 million senior secured term loan due 2004, both cut to D from CCC+.

Moody's rates Stoneridge notes B2, bank debt Ba3

Moody's Investors Service assigned a B2 rating to Stoneridge, Inc.'s $200 million of new guaranteed senior unsecured notes due 2012, a Ba3 rating to its $100 million new guaranteed senior secured revolving credit maturing 2007 and $100 million new guaranteed senior secured term loan maturing 2008 and confirmed its existing ratings.

Moody's said the ratings reflect Stoneridge's high financial leverage and moderate coverage levels; exposure to the cyclicality inherent in its end-markets; heavy price competition and embedded technological risk; fairly concentrated customer base; and relatively modest size, particularly relative to its peers.

Positives are the company's broad product offering, which includes some highly engineered and critical component parts; the sole-sourced nature of many of its contracts; the recently awarded new contracts that will add considerably to the core sales base over the next few years; management's ability to weather the recent industry downturn at above average levels, which affords some measure of comfort about relative predictability; and the dramatically improved balance sheet, liquidity profile and financial flexibility pro forma for the proposed transactions, Moody's said.

The rating agency added that the stable outlook reflects its view that the automotive industry may be showing early signs of stabilization and that Stoneridge will continue to perform at above-average levels in any event.

The anticipated positive trends would allow Stoneridge to prepay bank borrowings with excess free cash flow, Moody's said.

Moody's rates National Dairy loan Ba2

Moody's Investors Service assigned a Ba2 senior secured rating to National Dairy Holdings LP's new $425 million of bank facilities.

Moody's said its ratings are based on National Dairy's "solid position as the second largest dairy company in the US, its collection of regional brands, and the fact that approximately 86% equity interest is held by Baa1 rated Dairy Farmers of America."

Also incorporated in the rating are the low margin and highly competitive dairy industry, National Dairy's significant adjusted leverage when off-balance sheet leases are included and the potential for further acquisitions and equity repurchases, Moody's said.

While National Dairy has an experienced management team, Moody's noted the company has only existed for a short time and management will need to successfully carry out a regional strategy with the productive assets that were assembled to create the company.

The stable outlook indicates that Moody's expects National Dairy to manage its acquisitions and equity repurchases in a way that preserves debt protection measures at levels appropriate to the current ratings.

S&P keeps America West on watch

Standard & Poor's said America West Holdings Corp. and its America West Airlines Inc. subsidiary remain on CreditWatch with positive implications after announcing a first-quarter loss of $47.6 million, excluding special charges ($358.3 million including special charges). The corporate credit rating for both companies is CCC-.

While America West's unit revenues declined 8.8%, the figure was less than levels recorded by most other airlines, S&P said.

America West ended the quarter with much improved liquidity, with $421 million of cash, primarily the proceeds of a government-backed loan that closed in January, S&P added.

Moody's downgrades Key3Media

Moody's Investors Service downgraded Key3Media Group including its $120 million bank credit facilities to B3 from B1, $290 million senior subordinated notes due 2011 to Caa3 from B3, the senior implied rating to Caa1 from B1 and the issuer rating to Caa2 from B2. The outlook is negative.

The downgrade reflects the continuing softness in the technology sector, which Key3Media focuses almost exclusively on. "As a result of the declining prospects for Key3Media, the company appears over-leveraged with limited opportunity for near-to intermediate term improvement," Moody's said.

Positive factors affecting the ratings include the company's strength as leading provider of IT trade shows and the company's efforts to improve liquidity, Moody's said. During the fourth quarter of 2001 approximately $67 million was raised in preferred stock and the company's credit facility was amended to provide covenant relief and limitations on total debt.

"The negative rating outlook considers the uncertainty associated with the trade show industry and, in particular, its role for technology professionals," the release said. "The outlook also considers Key3Media's lack of tangible assets and the consequent impact on recovery values."

The company's debt to EBIDTA was 5.7 times and EBIDTA to interest expense was 1.4 times at Dec. 31, 2001.

S&P rates National Dairy loan BB+

Standard & Poor's assigned a BB+ rating to National Dairy Holdings LP's $125 million revolving credit facility due 2008, $125 million term loan A due 2008 and $175 million term loan B due 2009. The outlook is stable.

S&P upgrades Advantica

Standard & Poor's upgraded Advantica Restaurant Group Inc., raising its $592 million 11.25% senior notes due 2008 to CCC from D and its $200 million bank credit facility due 2003 to B- from CCC+. The corporate credit rating of B- was put on CreditWatch with developing implications,

S&P rates Block loan BB-

Standard & Poor's assigned a BB- rating to Block Communications Inc.'s $200 million senior secured bank loan.

Moody's rates Applica's loan Ba2

Moody's Investors Service assigned a Ba2 rating to Applica Inc.'s $205 million senior secured revolver due 2005. In additions, Moody's confirmed its $130 million 10% guaranteed senior subordinated notes due 2008 at B2, its senior implied rating at Ba3 and its senior unsecured issuer rating at B1. The ratings outlook is stable.

The revolver's rating reflects its substantial tangible asset support and its senior position in the capital structure. Borrowings are limited to 85% of eligible receivables, plus the lesser of 70% of eligible inventory or 85% of appraised liquidation value, Moody's said. At Dec. 31, 2001, revolver borrowings of approximately $90 million were covered over three times by inventory and receivables alone.

"The ratings confirmation reflects prudent management of the company through a very challenging operating environment, especially with regards to the reduction in working capital and debt," Moody's said. At Dec. 31, 2001, the company had lower inventory by over $55 million from the previous year and had reduced debt by over $65 million. In addition, the company finalized its revolving credit facility agreement at the end of Dec. 2001, providing an appropriate liquidity profile.

Moody's said the stable outlook reflects its expectation that Applica's credit statistics will modestly improve in the near- to medium- term as ongoing exposure to a difficult environment is offset by the benefits from its facility consolidation plan, new products and increased product placements.

S&P cuts Qwest to BBB-

Standard & Poor's lowered its corporate credit ratings on Qwest Communications International Inc. and its subsidiaries to BBB- from BBB following the company's revision to revenue and cash flow guidance downward for 2002.

Also, S&P placed the ratings on watch with negative implications. Total debt at year-end 2001 was $25 billion.

The performance revision is significantly below what S&P had expected and reflects more sustained pricing pressure, intense competition, and weak demand in many of Qwest's product and services. This includes the core local exchange business, where access lines losses have not abated.

In response, the company is reducing capital expenditure levels to roughly match the decline in operating cash flow, in order to be free cash flow neutral in 2002. In addition, Qwest accelerated the timetable for asset sales, the most prominent of which are directory and wireless businesses.

Obtaining definitive asset sale agreements during the next two quarters has now become the most critical item in S&P's analysis.

At this juncture, liquidity appears adequate to meet 2002 debt maturities. However, even with the recent covenant amendment, if operating results decline beyond what the company now anticipates, meeting bank covenants, particularly when the debt to EBITDA test tightens to 4 times for the fourth quarter, could become a concern.

Fitch cuts Qwest to BBB-

Fitch Ratings downgraded the senior unsecured debt ratings for Qwest Communications International Inc., and subsidiaries, to BBB- from BBB. Additionally, the senior unsecured debt rating for Qwest Corp. was downgraded to BBB from BBB+. The commercial paper ratings of Qwest Capital Funding and Qwest Corp. remain at F-3.

All the ratings remain on negative outlook.

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