S&P cuts Lucent

Standard & Poor's lowered Lucent Technologies Inc. senior unsecured debt to B- from B and the two convertible preferreds to CCC- from CCC. The ratings also were placed on negative watch.

The action followed Lucent's warning and yet another restructuring plan along with $3 billion in charges.

S&P is concerned that distressed industry conditions may challenge Lucent's ability to return to profitability and positive cash flows over the coming year, even after the latest downsizing.

Lucent had $8.2 billion of debt outstanding at June 30, of which $3.65 billion are the convertibles.

Although Lucent anticipates that it will have cash balances of $2 billion at the end of fiscal 2003, including anticipated operating cash flow losses and cash restructuring charges, continued cash consumption at this rate is unsupportable.

Lucent cancelled its undrawn $1.5 billion revolving credit agreement to avoid a default on the covenants and is negotiating a new, smaller credit facility. Those negotiations could be protracted, S&P said.

The company has also cancelled its $500 million accounts receivable sales program, which was not in use, and has repurchased $100 million in real estate, rather than be in default of the terms of the lease.

Fitch cuts Lucent

Fitch Ratings downgraded Lucent Technologies Inc.'s senior unsecured debt to CCC+ from B- and convertible preferreds to CC from CCC-. The outlook remains negative.

Fitch estimates Lucent's revenues for fiscal fourth quarter ending Sept. 30 will be about $2.3 billion, which is below the currently planned break-even levels. Total revenues for fiscal 2002 are estimated to be $12.3 billion, a 42% decline from fiscal 2001.

The negative outlook reflects uncertain capital expenditure patterns of Lucent's customer base and risk that further reductions will continue to pressure revenues and cashflow, Fitch said.

Operational issues and execution risks surrounding the restructuring strategy continue to include significant headcount reductions and organizational changes.

In addition, while the company has clearly reduced its vendor finance exposure and has improved the credit profile of the portfolio, Fitch believes it remains a risk. At June 30, drawn commitments for vendor financing were around $1.2 billion.

Moody's cuts AES

Moody's Investors Service downgraded The AES Corp.'s ratings, including the 4.5% convertible to B3 from Ba3 and convertible preferreds to Ca from Caa1.

In addition Moody's assigned a rating of B2 to AES' $1.6 billion of proposed senior secured bank credit facilities, and a rating of B2 to its proposed senior secured bonds of up to $500 million.

The outlook is negative.

Ratings reflect weak cash flow relative to a high debt burden, difficult economic and power market conditions in several countries, and diminishing financial flexibility, Moody's said.

The ratings also anticipate the creation of a new secured class of creditors at the holding company level as noted above.

S&P puts Shaw on watch

Standard & Poor's placed The Shaw Group Inc.'s ratings, including the 0% convertible senior unsecured notes due 2021 at BBB-, on CreditWatch with negative implications.

The watch is a result of the company's announcement that it is in discussions with PG&E National Energy Group regarding funding alternatives following the statement by NEG's parent that it does not intend to make further contributions toward the completion of two power plants for which Shaw is engineer and construction contractor.

Should an alternative source of funding not be available, Shaw said there will be a material adverse effect on 2003 earnings.

S&P puts SBA on watch

Standard & Poor's placed the ratings of SBA Communications Corp. (senior unsecured, B-) on CreditWatch with negative implications.

The watch reflects heightened concern that slowing cashflow could make it challenging to meet covenants on its bank facility in 2003 and improve weak liquidity, S&P said.

If the situation does not improve, SBA faces increased risk of not meeting its recently amended interest coverage, fixed charge coverage and debt service covenants in 2003.

Liquidity at the end of June was about $31 million in cash and $92 million in bank availability. Independent of covenant concerns, S&P believes this level of liquidity only provides limited cushion against execution risks.

S&P puts Crown Castle on watch

Standard & Poor's placed the ratings of Crown Castle International Corp. (senior unsecured B- and convertible preferreds CCC+) on CreditWatch with negative implications.

The watch reflects concern that risks to the wireless tower industry have increased so that Crown Castle may find it challenging to improve cash flow and significantly lower debt in the next several years.

S&P puts American Tower on watch

Standard & Poor's placed the ratings of American Tower Corp. (senior unsecured, B-) on CreditWatch with negative implications.

The watch reflects concern that risks to the wireless tower industry have increased so that Crown Castle may find it challenging to improve cash flow and significantly lower debt in the next several years.

S&P also has concerns that the prospect of slower cash growth could make it more challenging for American Tower to meet a bank covenant, especially in the second half of 2003, and bank debt amortization beyond 2003.

In the absence of an amendment to its bank credit agreement, the company does not have significant headroom under its cash flow to pro forma debt service test.

Moody's withdraws Railtrack

Moody's Investors Service affirmed and withdrew all of Railtrack plc's Baa1 long-term and P-2 short-term ratings, including the £400 million of 3.5% convertible bonds due 2009.

The action follows the prepayment of all outstanding long-term bonds rated by Moody's, the cancellation of Railtrack's medium-term note program, the repayment of all short-term commercial paper and the cancellation of the commercial paper program.

As an integral part of the acquisition of Railtrack by Network Rail, the latter raised finance from a number of commercial banks and used part of the proceeds to prepay the Railtrack bonds and meet the acquisition price.

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