Moody's puts Phelps Dodge on review for downgrade

Moody's Investors Service placed Phelps Dodge's senior unsecured debt Baa3, convertible preferred stock, (P)Ba2 and Prime-3 short-term ratings on review for possible downgrade. The review results from concerns as to the ongoing impact of higher costs and weak copper market fundamentals on Phelps Dodges' performance. Although the company's "Quest for Zero" and other cost containment measurements are delivering cost improvement, Moody's said implied unit costs are expected to continue high as production curtailments take hold in 2002. An additional factor in the review is the continued high leverage of the company which increased to 51% at year end as measured by the debt to capitalization ratio.

While Phelps Dodge's cash position remained strong at $387 million, with a portion earmarked to meet the $150 million debenture maturing on April 1, continued high interest costs associated with the debt levels and earnings pressure are likely to result in weak coverage ratios. The company indicates that operating cash flow will be $100 million for the first quarter of 2002. Moody's review will focus on the company's cost position, anticipated improvement from programs in effect and the timing by which these improvements could be accomplished.

Moody's cuts Williams Communications ratings

Moody's Investors Service downgraded all ratings of Williams Communications Group Inc. including the preferred stock rating to Ca from Caa3, but noted that the Williams Communications Group Note Trust's senior secured notes are unaffected by the action. The downgrade reflects heightened concern regarding WCG's financial performance, Moody's said, which continues to fall substantially short of expectations and a view that the protracted softness facing the whole broadband fiber sector will persist in constraining WCG's revenue growth. The outlook is negative and ratings could be lowered further if WCG's management is unable to significantly improve the company's financial performance and liquidity position, Moody's said. Although management cites WCG's accelerating financial performance, Moody's considers that its recent results, revised guidance and work force reductions provide a signal that the company is experiencing many of the challenges faced by other broadband fiber operators.

Moody's rates new Solectron notes at Ba1

Moody's Investors Service assigned a Ba1 rating with a negative outlook to the planned issuance by Solectron Corp. of $500 million in senior unsecured seven year notes as well as credit facilities totaling $500 million, which will be secured by a pledge of stock of certain subsidiaries. The rating and outlook reflects a downgrade in December 2001 and the company's weak operating performance in terms of sales and margin deterioration as well as an ongoing erosion of returns on capital and assets in excess of what has been typical among its electronic manufacturing services peers.

Moody's cuts Covanta senior rating to Caa1

Moody's Investors Service downgraded Covanta Energy Corp.'s senior unsecured rating to Caa1 from B3 and subordinated rating to Caa2 from Caa1, saying the ratings remain under review for possible further downgrade pending the company's immediate actions to obtain sufficient liquidity to maintain ongoing operations and to announce and execute a credible plan to insure its long-term financial viability.

Moody's said it took the action as a result of the expiration Thursday of covenant waivers under Covanta's bank credit facility, putting the company in technical default under the agreement and raising the level of uncertainty regarding its operations going forward. Moody's understands that the company is working closely with its bank group to obtain an extension of these waivers and has indicated that the co-agents are recommending approval to the larger bank group. However, the inability of the company to obtain covenant waiver extensions before their expiration today demonstrates the increasing difficulties facing the company. If the banks do not agree to continue to waive these covenant defaults, it will eliminate a critical source of letter of credit capacity for the company that it will be unable to replace. In addition, Moody's is growing increasingly concerned with the company's tight liquidity and its lack of access to the capital markets.

Moody's cuts TXU holding company senior rating to Baa3

Moody's Investors Service lowered to Baa3 from Baa1 the senior unsecured rating assigned to debentures assumed by TXU US Holdings Co., which is the intermediate holding company for Oncor Electric Delivery Co. (A3 senior secured.) and TXU Energy Co. (Baa2 senior unsecured). TXU Corp. (Baa3 senior unsecured) formed TXU US Holdings Jan.1 when TXU Electric de-merged into Oncor and TXU Energy. Moody's rated Oncor's predecessor in September and TXU Energy in December , at which time the ratings for TXU Corp. were confirmed.

The Baa3 rating represents a two-notch downgrade for $19.8 million of unsecured debentures previously issued by TXU Electric and which were not tendered during its decapitalization. Due to priority of claims, Moody's also lowered the rating for $135.7 million of preferred securities held at TXU US Holding Co. by two notches. Moody's derives the Baa3 rating from risk weighting dividends upstreamed from Oncor and TXU Energy to derive a composite rating, and then notching down one due to structural subordination. The outlooks for TXU Corp. and all subsidiaries are stable.

S&P downgrades ITC DeltaCom two notches

Standard & Poor's downgraded ITC DeltaCom, Inc. two notches and kept the outlook at negative.

Ratings affected include ITC's $200 million 11% senior notes due 2007, $160 million 8.875% senior notes due 2008, $100 million 4.5% convertible subordinated notes due 2006 and its $125 million 9.75% senior notes due 2008, all lowered to CCC- from CCC+, and Interstate FiberNet Inc.'s $160 million revolving credit facility, lowered to CCC+ from B.

Moody's put New World Infrastructure on review for downgrade

Moody's Investors Service put New World Infrastructure Ltd. on review for possible downgrade, affecting its $174 million 1% convertible bonds due 2003 rated Ba1.

Moody's said its action follows New World's announcement it is considering whether to acquire the fixed line telecommunications business of its parent, New World Development Co. Ltd.

The rating agency said its review will look at "the overall strategic considerations that are driving the acquisition, the form of capital raising that NWI will undertake if the deal proceeds and the cashflow implications to NWI."

Moody's said the company is considering issuing convertible notes to pay for the acquisition.

S&P downgrades Foster Wheeler, still on negative watch

Standard & Poor's downgraded Foster Wheeler Ltd. and kept it on CreditWatch with negative implications. Ratings affected include Foster Wheeler's $200 million 6.75% notes due 2005 and $270 million revolving credit facility due 2003, both lowered to B+ from BB-, and its $200 million convertible subordinated notes due 2007, lowered to B- from B.

S&P said it expects credit protection measures and financial flexibility will not strengthen to a level consistent with the previous ratings in the near to intermediate term.

At the former level, S&P had expected EBITDA to interest coverage in the 3 times to 4 times range and total debt (including operating leases, the receivable securitization but excluding nonrecourse project debt) to EBITDA around 3.5 times.

The rating agency said "it will be a formidable challenge for the company to effect meaningful and lasting change within the context of a highly cyclical industry."

S&P rates new Six Flags notes B

Standard & Poor's assigned a B rating to Six Flags Inc.'s new $480 million notes due 2010. The outlook is stable.

S&P said its assessment reflects Six Flags' increasing geographic and cash flow diversity, relatively stable operating performance, and the rating agency's expectation that interest coverage will improve modestly despite management's active acquisition orientation.

"Management has successfully pursued a strategy of acquiring underperforming parks and improving their profitability through aggressive capital spending on new rides and attractions, as well as enhanced marketing," S&P commented.

The Six Flags theme park chain has seen substantial EBITDA growth through new marketing strategies and cost reductions.

S&P said it changed Six Flags' outlook to stable on expectations that operating performance will remain relatively stable in 2002 as consumers look for close-to-home entertainment alternatives.

© 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.