S&P cuts WorldCom to D on bankruptcy

Standard & Poor's lowered WorldCom, MCI Communications Corp. and affiliates' senior unsecured debt and preferred ratings to D from C following the company's bankruptcy filing.

Clinton, Miss.-based WorldCom had about $30 billion of total debt outstanding as of March 31.

WorldCom's long-term and short-term corporate credit ratings had been lowered to D last week following missed interest payments on two rated note issues.

Fitch cuts WorldCom to D on bankruptcy

Fitch Ratings downgraded the senior unsecured debt and preferred ratings for WorldCom Inc. to D from C, following the company's bankruptcy filing.

The downgrade also applies to Intermedia Communications senior unsecured debt.

S&P notes Solectron tender

Standard & Poor's said Solectron Corp.'s (BB/negative) ratings will not be affected by the completed tender offer for $1.5 billion of its 0% convertibles due 2020.

The tender offer will be funded by $900 million in cash and reduces total debt by about $919 million, or almost 20%.

Ratings incorporate concerns associated with the leveraged financial profile, S&P said, which remains high for the rating, with total debt, pro forma for the tender offer, to EBITDA for the 12 months ended May 31 of more than 6 times.

This is only somewhat offset by solid cash flow generation of more than $2.5 billion over the 12 months ended May 31 and a cash and short-term investments balance exceeding $2 billion after the tender offer.

S&P notes CMS asset sale

Standard & Poor's said it perceives no immediate effect on CMS Energy Corp.'s credit quality from the sale of CMS Oil and Gas Co. for about $232 million. CMS Energy has a BB corporate credit rating with a negative outlook.

The sale, which comes at a price that is slightly less than original expectations, represents almost one-half of the $500 million of asset sales CMS Energy expects to close by year-end 2002, S&P said.

Proceeds will enable the company to reduce borrowings under its bank facilities, which currently are fully drawn, the rating agency added.

Fitch cuts Williams to junk

Fitch Ratings downgraded The Williams Companies Inc.'s senior unsecured debt rating has to BB+ from BBB and its short-term rating to B from F2.

Also, the senior unsecured debt rating for Williams' three pipeline units, Northwest Pipeline Corp., Texas Gas Transmission Corp. and Transcontinental Gas Pipe Line Corp., were lowered to BBB- from BBB+.

All ratings were placed on negative watch.

The downgrades follows the announcement by Williams on Monday that it has entered into negotiations to arrange a new secured bank financing to replace its existing unsecured credit facilities which consist of a $2.2 billion 364-day unsecured revolving credit facility expiring on July 23, 2002, and a $700 million three-year line due July 2005.

Based on prior discussions with Williams management, Fitch expected the company to renew the maturing revolver on an unsecured basis at the $1 billion to $1.5 billion range.

The pledged collateral, which WMB has initially indicated will consist of interests in its domestic oil and gas reserves, will potentially secure more than $1 billion of borrowing capacity that will become structurally senior to Williams' outstanding senior unsecured debt obligations.

Moreover, the inability of Williams to access the bank market on an unsecured basis is indicative of a level of financial flexibility that is not consistent with an investment grade credit profile.

In addition to a previously revealed balance sheet enhancement program which included up to $3 billion of asset sales and the potential issuance of $1 billion to $1.5 billion of common equity, Williams also announced Monday a significant cut to its third quarter 2002 dividend in order to further preserve its cash position.

However, Fitch believes that the probability of Williams completing the aforementioned equity issuance in the near-term has declined significantly due to the ongoing deterioration in its equity valuation. Therefore, efforts to strengthen its balance sheet will likely become more dependent on asset sales.

While the pending sale of refinery assets and Williams Gas Pipeline Central transmission system will boost its liquidity position and should allow for meaningful deleveraging by year-end 2002, the potential sale of these physical assets removes a more stable cash flow source from its credit profile.

Part of the review will focus on Williams' revised energy marketing and trading strategy, particularly the impact of reduced origination activity on unhedged exposure under existing long-term power tolling arrangements.

© 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.