Moody's cuts Solutia

Moody's Investors Service downgraded Solutia Inc. and kept it on review for possible further downgrade, affecting $1.2 billion of debt. Ratings lowered include Solutia's senior unsecured notes and debentures, cut to B3 from Ba3, the senior secured notes, cut to B2 from Ba2, and secured credit facility, cut to B1 from Ba1

Moody's said the downgrade reflects Solutia's deteriorating liquidity position as the maturity date of its existing $800 million credit facility approaches. The downgrades do not reflect concerns over the future financial performance of the company's businesses, Moody's added.

The credit facility matures on August 13 but the refinancing must be in place by August 9 in order to avoid the loss of funds received from the $223 million secured note offering, Moody's said.

Solutia received less than $200 million from this offering, which was less than the company had anticipated.

Moody's said it is uncertain as to why the credit facility has not been refinanced; the continuing delay raises concern over the company's ability to refinance the facility within the next four weeks and the potential for disruption in Solutia's operating performance, if this issue is unresolved.

If the credit facility is refinanced, Moody's said it believes that the company's near-term financial performance should improve versus 2001 and that second quarter results will reflect increased demand in most businesses and especially in the company's Integrated Nylon segment.

Moody's said it anticipates that the company's full year financial performance should result in cash flow from operations as a percent of total debt in the range of 12-14%, and free cash flow of roughly $50 million. Moody's also believes that there will be a modest improvement in 2003 as the US economy slowly recovers. In addition, if the US dollar remains at or below current levels, Solutia should experience a moderate increase in earnings and cash flow versus Moody's current projections.

S&P cuts Alcatel to junk

Standard & Poor's downgraded Alcatel to junk. The outlook is negative.

Ratings lowered include Alcatel's bonds, medium-term notes and notes, all cut to BB+ from BBB.

Fitch rates ProSiebenSat.1 bonds BB+

Fitch Ratings assigned a BB+ senior unsecured bond rating to ProSiebenSat.1 Media AG's proposed new issue of €200 million senior notes due 2009 and downgraded the company's existing €400 million bonds due March 2006 to BB from BBB-. The outlook is stable.

Fitch said the action concludes a review begun in February, triggered by the increased event risk surrounding the proposed merger of ProSieben with KirchMedia KgaA announced in September 2001.

The rating action takes account of the economic and industry specific difficulties impacting ProSieben's operating environment, which has seen a decline in ProSieben's TV advertising revenues since early 2001, Fitch said. The impact on ProSieben's financial performance has been considerable in light of its reliance upon TV advertising revenues, which in the fiscal year ending 2001 accounted for 97% of total revenues, and more generally the deterioration in the German economic outlook.

Owing to the high degree of operational gearing that is characteristic of the TV broadcasting industry, the 6.4% decline in TV adspend was primarily responsible for the 33% decline in ProSieben's EBITDA to €239.4 fiscal in fiscal 2001, Fitch said.

Net debt rose to €897 million reflecting negative free cash flow resulting from a combination of lower revenues, cash investments in Euvia Media AG, and seasonally high working capital, Fitch added. The rating agency calculated that net debt to EBITDA increased to 3.75x from 1.5x and net interest coverage (EBITDA to net interest expense) fell from 9.3x to 4.7x - outside the company's target ratios.

Moody's upgrades Per-Se

Moody's Investors Service upgraded Per-Se Technologies, Inc., formerly known as Medaphis Corp., and revised the outlook to stable from negative. Ratings raised include Per-Se's $175 million 9½% guaranteed senior notes due 2005.

Moody's said the action is in response to the stabilization of Per-Se Technologies' physician services business, the company's return to operating profitability in fiscal 2001 and, through continual growth in operating income, the attainment of 1.3 times free cash flow (EBITDA plus rents, minus capital expenditures) coverage of fixed charges over the 12 months ended March 31, 2002.

EBITA alone, after adjusting for the amortization of capitalized software, plus rentals, would have provided 1.2 times coverage over the same interval, Moody's said.

Further ratings improvement at this time is tempered by the company's weak balance sheet, taking into account debt and capital lease obligations of $181 million against a negative consolidated tangible net worth of $86 million after adjusting for goodwill; and continued substantial debt leverage of 5.5 times EBITDA plus rentals, reflecting the capitalization of operating leases for the company's corporate headquarters and regional processing centers, Moody's said.

Additionally, the company faces intense competition in its applications software and electronic commerce divisions, which are comparatively small, the rating agency added. With the imperative of cost containment embedded in the company's turnaround strategy, the company may not be able to deploy the technical, marketing and post-installation maintenance resources that are required to augment its market share in the applications software and e-Health solutions, as electronic commerce is known in the medical field, businesses.

Moody's rates Mobile Storage's loan Ba3; notes B2

Moody's Investors Service rates Mobile Storage Group Inc.'s $150 million five-year revolver at Ba3 and $160 million seven-year senior notes at B2. Proceeds from the new debt will be used to refinance debt incurred during the company's purchase in a June 200 leveraged buyout.

Furthermore, the company's senior implied rating was downgraded to B1 from Ba3 and unsecured issuer rating to B3 from B1. The rating outlook is stable.

The senior implied rating was adjusted because the company has higher leverage and lower tangible equity than was expected previously since the initial public offering was not completed, Moody's said.

Negative factors influencing the ratings include the company's leveraged financial condition, cyclical nature of the industry, small revenue base, small size of the company compared to potential competitors, expected rapid acquisition pace and necessity to adjust growth to available excess operating cash, Moody's said.

Positive factors influencing the ratings include historical strong cash flow generation characteristics and the expectation that margins will not decline as the company rolls up smaller competitors, Moody's said.

Pro-forma for completion of the proposed financing transaction, lease adjusted debt equaled an estimated 5.7 times EBITDAR and cash flow, as measured by EBITDA, covered interest expense and capital expenditures about 1.3 times for the 12 months ending March 2002.

S&P cuts ICN outlook

Standard & Poor's lowered its outlook on ICN Pharmaceuticals Inc. to negative from stable and confirmed its senior secured bank loan at BB+ and subordinated debt at B+.

S&P said the action follows ICN's announcement of a significant decrease in earnings due to lower sales of its pharmaceutical products in the North American and Russian markets.

The company believes that sales will continue to be pressured well into 2003, S&P noted.

Furthermore, ICN may soon no longer benefit from the ribavirin royalties, as ICN is in the midst of a restructuring plan, S&P said. The restructuring provides for the completion of ICN's spin-off of its ownership share in subsidiary Ribapharm Inc. to shareholders in a tax-free distribution in the near future. Ribapharm holds the rights to the ribavirin royalty as well as to the U.S. R&D operations.

The loss of the internal R&D infrastructure will also likely mean that ICN will need to acquire additional products in order to fully leverage its large international sales force, S&P added.

Moody's raises Owens-Illinois outlook

Moody's Investors Service raised its outlook on Owens-Illinois Inc. to stable from negative, affecting $5 billion of debt. Moody's also confirmed the company's ratings including its senior unsecured debt at B3 and Owens-Brockway Glass Container Inc. and other subsidiaries' $100 million term loan maturing March 31, 2004 and $3 billion revolving senior secured credit facility maturing March

31, 2004 at B1 and $1 billion senior secured notes due 2009 at B2.

Moody's said the outlook revision is based on the anticipated stabilization of the company's operating performance and on the expectation that the company's liquidity should remain satisfactory over the medium term.

Moody's expects Owens-Illinois' liquidity should be adequate over the medium term and that management will maintain a financial policy geared towards an improvement of credit metrics through debt reduction.

The expected stabilization in operating performance in 2002 is a result of the company's strong position in the glass sector, its ability to pass on increases in energy, raw material and other costs over time and the absence of significant contracts coming up for renewal over the medium term, Moody's said.

Additionally, Owens-Illinois should be able to maintain increased pricing in 2002. Owens-Illinois' operating margins are among the highest in the packaging sector, thanks to the company's technological edge, its strong market shares in certain glass markets and the good dynamics sustaining glass as a packaging material, Moody's noted. In North America, glass is increasing its penetration in the largest end-market, beer.

Still, the company remains highly leveraged, and its free cash flow remains very weak relative to debt, Moody's said. 2001 free cash flow before asbestos payments and net of acquisitions and divestitures was only at $397 million relative to a year-end total debt level of $5.4 billion.

S&P rates Mobile Storage loan BB-, notes B

Standard & Poor's assigned a BB- rating to Mobile Storage Group Inc.'s proposed $150 million secured revolving credit facility maturing 2007 and a B rating to its planned $160 million senior unsecured notes due 2009. S&P also assigned a B+ corporate credit rating to parent company Mobile Services Group Inc. The outlook is stable.

S&P said the ratings replace those issued previously, including a BB corporate credit rating, in anticipation on an intended IPO. The IPO, whose proceeds were to be used to reduce debt, was postponed over the near to intermediate term.

S&P said Mobile Services' ratings reflect its modest scale of operations, small equity base, and relatively weak credit measures.

However, a respectable market share and efficient operations are positive features, S&P said.

Mobile Services has grown rapidly over the past several years, primarily through acquisitions financed with debt, which has resulted in relatively weak credit ratios, S&P said.

Privately held Mobile Services had intended to complete an initial public offering, utilizing proceeds to reduce debt. However, due to weak market conditions, the IPO was postponed for the near term. Instead, the company will replace its existing bank facility with a new one and issue public debt. As a result, the company's credit profile is expected to remain constrained over the near to intermediate term, S&P said.

Moody's cuts Rogers Wireless, reviews Rogers Communications

Moody's Investors Service downgraded Rogers Wireless Inc., kept it on review for possible further downgrade and put Rogers Communications Inc. on review for possible downgrade, affecting a total of $2.1 billion of debt. Ratings covered by the action include Rogers Wireless' senior secured notes, cut to Ba3 from Baa3, senior subordinated notes, cut to B2 from Ba1 and Rogers Communications' senior unsecured notes, rated Ba1.

Moody's said it lowered Rogers Wireless Inc. because of its concerns that the company may lack meaningful positive free cash flow for the foreseeable future, especially in relation to its increasing debt level within an industry environment characterized by decelerating subscriber growth.

Rogers Communications was put on review given Moody's concern with continuing negative free cash flow on both a consolidated and unconsolidated basis and the possibility that Rogers Communications will need to invest more cash into Rogers Wireless.

Until this year Rogers Wireless had been unable to increase operating cash flow for the previous five years, Moody's noted. It has historically lagged industry growth which itself has been slowing recently, and Moody's said it is concerned about the ability of the company to quickly move beyond its current stage of cash consumption to a level of positive free cash flow which would bear a reasonable relationship to its level of debt.

S&P cuts American Equity

Standard & Poor's downgraded American Equity Investment Life Holding Co. to junk. The outlook is negative.

Ratings affected include American Equity's $150 million notes due 2012, cut to BB+ from BBB-.

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