Moody's puts Mastec on downgrade review

Moody's Investors Service put MasTec, Inc. on review for possible downgrade including its $200 million 7.75% senior subordinated notes due 2008 at Ba3.

Moody's said the review reflects the effect that the continuing decline in the telecommunications sector has had on MasTec's company's operating and financial risk profile. The review also incorporates Moody's outlook for capital spending among telecommunications companies during 2003 and beyond and its concerns about the company's diminishing liquidity.

On a trailing 12-month basis at the first quarter 2003, total debt leverage (debt/EBITDA) had increased to 4.1x versus approximately 2.0x from one year ago, Moody's noted. Meantime, profit margins have deteriorated reflecting a difficult pricing environment, underutilization of assets and the shift away from some higher risk telecommunications work.

MasTec reported available liquidity of approximately $43 million at the end of the first quarter 2003. This is down from $96 million for the prior-year period, despite the receipt of over $30 million in cash tax refunds and a dramatic reduction in capital expenditures in this period, Moody's said.

Moody's puts Noranda on review

Moody's Investors Service put Noranda Inc. on review for downgrade to junk affecting $1.3 billion of debt including its senior unsecured debentures and senior unsecured notes at Baa3.

Moody's said the review was prompted by weaker than anticipated operating earnings, continued high leverage ratios and depressed earnings and cash flow coverage ratios, which are unlikely to meaningfully improve given the poor earnings fundamentals and outlook for a significant portion of Noranda's business segments in 2003, apart from nickel, and Moody's concerns that the timing of a recovery in Noranda's financial measurements will be more protracted than expected.

S&P cuts HeidelbergCement to junk

Standard & Poor's downgraded HeidelbergCement AG to junk including lowering its €30 million notes due 2005, €700 million bank loan due 2004, €1 billion 6.375% bonds due 2007, €25 million floating-rate notes due 2004, €25.565 million floating-rate notes due 2004, €300 million 4.75% bonds due 2009 and €45 million floating-rate notes due 2006 to BB+ from BBB-. The corporate credit rating, cut to BB+ from BBB- has a negative outlook while the senior unsecured debt remains on CreditWatch negative.

S&P said the watch placement on the senior unsecured debt will be resolved once HeidelbergCement has completed upcoming refinancing.

S&P said the action is based on its reassessment of HeidelbergCement's credit profile in light of recent developments, including the group's aggressive financial policy and its tight financial flexibility; the effect of the German cement market's ongoing price war on the group's near-term cash generation; and a €250 million cartel fine recently imposed on the group by the German cartel office, against which the group has lodged an appeal.

S&P said it believes these factors, together with an overall cyclical decline in most of HeidelbergCement's markets, are likely to weigh on the group's financial profile in the medium term.

The negative outlook reflects the execution risks related to projected asset sales, and the group's heightened sensitivity to a prolonged cyclical downside, and its tight financial flexibility, S&P said.

S&P notes Regal ups special dividend

Standard & Poor's said Regal Entertainment Group's (BB-/stable) decision to increase its extraordinary dividend by $75 million to between $675 million and $700 million will not affect its ratings or outlook.

But, S&P said any negative surprises or additional moves that increase leverage or decrease discretionary cash flow are likely to lead to a revision of the outlook to negative or a ratings reassessment.

Regal will fund the additional dividend by boosting the new convertible offering to $200 million from $125 million. With the greenshoe, the issue may be further increased to $240 million, which would be retained to boost liquidity and be used for general corporate purposes.

Regal still plans on reducing its quarterly dividend by 20% as previously expected, which will offset some of the cash flow impact from the higher interest expenses, S&P said.

Pro forma lease-adjusted debt to EBITDA increases to about 4.5x, which is only marginally higher than previously expected. The company should still generate meaningful levels of discretionary cash flow and maintain substantial borrowing capacity under its $145 million revolving credit facility.

Even so, the transaction, and the shift in financial policy, will effectively cap Regal's corporate credit rating at BB- for some time. In addition, the company's capacity to add more debt at the current rating level is substantially reduced.

Moody's upgrades Kia

Moody's Investors Service upgraded Kia Motors Corp. including raising its senior debt to Ba2 from Ba3. The outlook is stable.

Moody's said the upgrade is based on Kia's continuing solid operating performance and improving debt coverage measures.

The rating action also reflects Kia's growing global presence - particularly in North America - its successful defense of its dominant market position in Korea and the positive earnings impact of its improving model mix.

Kia was acquired by Hyundai Motor Co. in 1999 and became a consolidated subsidiary. Since the acquisition, Kia has posted significant growth in sales, supported by strong demand in Korea and improvements in the quality and brand image for Kia cars, especially in the US. North American sales are further supported by highly attractive warranty programs in that region, Moody's added.

Kia will continue to face operating challenges which may affect its future operating performance, such as unpredictable foreign exchange rates and potential hikes in warranty costs, Moody's said. Furthermore, Moody's believes that Kia may need to consider lifting capital spending so as to raise production as demand is increasing rapidly. However, Moody's expects the company to maintain good operating performance and cash flow generation capabilities in the intermediate term.

Moody's upgrades Hyundai

Moody's Investors Service upgraded Hyundai Motor Co.'s debt to Ba1 from Ba2. The outlook is stable.

Moody's said the upgrade is based on Hyundai's continuing solid operating performance and improving debt coverage measures.

The rating action also reflects Hyundai's growing global presence - particularly in North America - its dominant market position in Korea, and the positive earnings impact of its improving model mix.

Over the past several years, Hyundai has posted significant growth in sales, supported by strong demand in Korea and improvements in the quality and brand image for Hyundai cars, especially in the US, and there is further support from the highly attractive warranty programs in North America, Moody's said.

While Hyundai will continue to face operating challenges which may affect its future operating performance, such as unpredictable foreign exchange rates and potential hikes in warranty costs, Moody's believes that Hyundai can maintain its strong operating performance and cash flow generation capabilities in the intermediate term.

Meanwhile, Moody's has concerns over Hyundai's two subsidiaries in the consumer finance business, Hyundai Card and Hyundai Capital. The level of non-performing assets at Korean consumer finance companies is rapidly increasing, and the government recently asked such companies to improve the capital base of Hyundai Card.

S&P rates Siberian Oil notes B+

Standard & Poor's assigned a B+ rating to the new $400 million 11.5% loan participation notes due 2007 issued by Salomon Brothers AG and guaranteed by OAO Siberian Oil Co.

The rating is on CreditWatch positive.

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