S&P cuts Hughes, PanAmSat to junk, Echostar on positive watch

Standard & Poor's downgraded Hughes Electronics Corp. and PanAmSat Corp. to junk but put EchoStar Broadband Corp. on positive watch.

Affected ratings include EchoStar's $1 billion of senior notes due 2007, rated B, put on CreditWatch with positive implications, up from CreditWatch with developing implications; Hughes' corporate credit rating, cut to BB+ on CreditWatch with negative implications from BBB- on CreditWatch with negative implications, Hughes' short-term rating, cut to B from A-3; PanAmSat's bank facility, cut to BB- from BBB- and remaining on CreditWatch with negative implications, PanAmSat's notes, cut to BB- from BBB- and also remaining on CreditWatch with negative implications.

S&P rates International Specialty new notes B+

Standard & Poor's assigned a B+ rating to International Specialty Holdings Inc.'s recent offering of senior secured notes due 2009.

Moody's rates OM Group new notes at B3

Moody's Investors Service assigned a B3 rating to OM Group, Inc.'s new offering of senior subordinated notes and confirmed the company's existing ratings including its Ba3 rated bank debt. The outlook is negative.

The rating agency said its B3 assessment reflects the notes' contractual subordination to a "significant amount" of senior debt, and structural subordination to material obligations of the subsidiaries that do not guarantee.

S&P rates new Wheeling Island Gaming notes B+

Standard & Poor's assigned a B+ rating to Wheeling Island Gaming Inc.'s proposed $125 million senior unsecured notes due 2009.

At the same time, S&P assigned its B+ corporate credit rating to the company, and stated that the outlook is stable.

"Ratings reflect Wheeling's narrow business focus, relatively small cash flow base, competitive market conditions, high debt levels, and construction risks associated with the upcoming expansion," S&P stated.

S&P noted that the company has proposed an approximately $60 million expansion, which will include a 150-room hotel, 550 slot machines, a 600-seat entertainment complex, and new dining venues, and commented that "construction/development risks exist, since final architectural designs have not been finalized."

Stating that the company's outlook is stable, S&P commented that the ratings stability reflects the expectation that the Wheeling, W.Va.-based company will maintain its niche market position and that the overall financial profile provides some cushion within the rating for a potentially increased competitive environment.

Moody's cuts Sealy outlook to negative

Moody's Investors Service lowered its outlook on Sealy Mattress Co. to negative from stable and confirmed the company's ratings including its $250 million 9 7/8% senior subordinated notes due 2007 and its $128 million senior subordinated discount notes due 2007, both at B2, and its $100 million senior secured revolving credit facility maturing 2002 and its $350.5 million senior secured term loans maturing 2002 through 2006, both at Ba2.

Moody's said the revision is in response to Sealy's "diminished credit statistics and its exposure to a challenging economic environment that Moody's expects will persist for the near-to-intermediate term."

The rating agency noted Sealy's recently wrote of $26.3 million for minority equity investments in affiliated companies.

Diminished consumer confidence is likely to force consumers to delay high-ticket purchases, or choose lower-priced, lower-margin products, Moody's added.

Moody's downgrades AES Drax

Moody's Investors Service downgraded AES Drax Holdings Ltd.'s £200 million and $302.4 million of senior secured bonds and InPower Ltd.'s £905 million of senior secured bank debt by one notch to Ba1 from Baa3. It also cut AES Drax Energy Ltd.'s £135 million and $200 million notes by two 2 notches to B1 from Ba2. The outlook on all ratings remains negative.

Moody's said the downgrades reflect four issues: long-term expectations on market prices for electricity in the UK; Drax's high dependence on the TXU Europe hedge contract, which favors Drax as it was agreed at a time when market prices were considerably higher than today; the expectation that counterparties will generally be tightening credit requirements and procedures, together with the particular aspects of Drax's trading agreements; and various uncertainties regarding Drax's insurance program.

While none of the issues by itself would likely have led to a downgrade, especially for the senior secured debt, in combination the overall risk profile is not consistent with investment grade status, Moody's said.

S&P rates new Sovereign capital securities B

Standard & Poor's assigned a B rating to the preferred capital securities to be issued by Sovereign Bancorp's Sovereign Capital Trust III.

S&P rates new A&P notes BB

Standard & Poor's assigned a BB rating to the planned issuance of senior notes by The Great Atlantic & Pacific Tea Co. Inc.

S&P keeps Senior Housing Properties Trust on negative watch

Standard & Poor's kept Senior Housing Properties Trust on CreditWatch with negative implications where it was placed on Aug. 11, 2001.

"The CreditWatch placement was driven by the company's proposed, highly leveraged acquisition of assets owned by Crestline Capital Corp., a publicly traded real estate company, and the uncertainty related to the ultimate form of financing for the transaction," S&P stated.

Senior Housing has since raised $172 million (net) in common equity, which will lower the degree of leverage resulting from the transaction. As a result of the new equity, the company is also no longer as reliant upon additional external financing to complete the transaction, S&P said, adding that it expects to remove Senior Housing's ratings from CreditWatch and return the outlook to stable, following the successful completion of the Crestline shareholder vote on Dec. 13 and the recently announced resolution of the Five Star Quality Care Inc. spin-off, which appear imminent.

Moody's rates new Collins & Aikman notes B1, raises outlook to stable

Moody's Investors Service assigned a B1 rating to the new senior unsecured notes of Collins & Aikman Products Co. and a Ba3 rating to its new senior secured bank facility. The rating agency confirmed the company's existing ratings - including its B2 senior notes, Ba3 senior secured credit facilities - and raised the outlook to stable from negative. In total $2 billion of debt is affected.

Moody's said the ratings reflect C&A's high pro forma near-term leverage despite its accretive acquisitions of the Becker Group, the Joan Automotive Group, and the pending acquisition from Textron.

However after the Textron acquisition, C&A will be the world's largest and most competitively advantaged manufacturer of automotive interior trim components, Moody's said.

It noted management estimates it will be number one or number two in 14 out of 15 automotive interior trim categories and Textron's fully assembled cockpit module capabilities are addressing an expanding market and are expected to drive Collins & Aikman's growth over the next five years, Moody's said.

Moody's downgrades Revlon senior unsecured notes

Moody's Investors Service downgraded Revlon Consumer Products Corp.'s senior unsecured notes to Caa3 from Caa2 and confirmed the company's other ratings after its recent issuance of $363 million of notes and $250 million of new bank financing. The outlook remains negative. Confirmed ratings include the bank debt at B3, the senior secured notes at Caa1 and the senior subordinated notes at Ca.

Moody's said it cut the senior unsecured notes because of the higher level of outstanding funded debt under the revised transaction. The note issuance was increased to $363 million from $250 million while the bank facility was only reduced to $250 million from $325 million.

S&P rates new Ainsworth Lumber $95 million notes B-

Standard & Poor's raised its corporate credit and senior secured debt ratings on Ainsworth Lumber Co. Ltd. to B- from CCC+, according to a Friday ratings release. At the same time, S&P assigned its B- rating to Ainsworth's proposed $95 million senior secured notes due 2007, and noted that the outlook is stable.

"The upgrade is contingent on the completion of the proposed financing," S&P stipulated. "Should the proposed financing not occur or should it be materially different, the rating will revert to CCC+."

S&P observed that the proposed notes will be secured by the company's interest in its new oriented strandboard (OSB, a plywood substitute) facility.

Noting the company's "improved business risk profile," and its recovery from recent liquidity problems, S&P stated that Ainsworth's heavy capex program and "extremely weak pricing in its core business" caused it to miss its Jan. 15, 2001 interest payment on its rated $186.5 million notes, although the default was remedied within the 30-day grace period permitted by the note indenture.

"Generally weak prospects for OSB prices, stemming from weak economic conditions and industry-wide capacity additions, will likely constrain the company's credit parameters over the near term," S&P stated.

Ainsworth's financial profile remains very aggressive, as pro forma debt to capitalization will be around 80% after the issuance of the $95 million senior secured notes in December 2001, according to S&P. "Nevertheless, the issue provides the company with much needed liquidity and improves financial flexibility in the short term."

S&P also noted that "very strict covenants on Ainsworth's $95 million senior secured notes ensure that a large portion of free cash flow will be used to redeem outstanding debt."

Moody's cuts Simmons outlook to stable

Moody's Investors Service lowered its outlook on Simmons Co. to stable from positive and confirmed the ratings, affecting $400 million of debt. Ratings covered include Simmons' $150 million of 10.25% senior subordinated notes due 2009 at B3, its $60 million senior secured revolving credit facility maturing in 2004 at Ba3, its $70 million term loan A maturing in 2004 at Ba3, its $70 million term loan B maturing in 2005 at Ba3 and its $50 million term loan C maturing in 2006 at Ba3.

Moody's said it lowered Simmons' outlook because the company has "reduced upgrade potential in the near term, given its significantly lowered sales levels and the likelihood of upcoming sales and margin pressures from a soft economic environment."

Although year-over-year credit statistics have improved, Moody's said Simmons will be challenged to continue this trend by both external economic influences and supply chain changes, particularly the loss of volume from retailers that have filed for bankruptcy.

Sales in the third quarter were 22% lower due largely to bankruptcies, Moody's said but Simmons managed to offset the loss of revenue with aggressive cost cutting. But the rating agency added that further reductions will be difficult to achieve.

Moody's lowers outlook on Commercial Federal to stable

Moody's Investors Service lowered its outlook on Commercial Federal Corp. to stable from positive. Moody's gives the Nebraska thrift a long-term deposit rating of Ba1.

The rating agency said the thrift's sizable commercial real estate exposure, its high current level of non-performing assets and its continued low core profitability led to the outlook revision despite the success of a new management team in improving the interest rate risk profile and focusing retail branches on metropolitan areas.

Moody's added: "Future rating direction will be determined by management's success in executing its strategy of back office administration centralization, changing the branch processing culture into a sales culture, and the continued strengthening of Commercial Federal's core deposit position, all of which should manifest themselves in improved financial fundamentals."

S&P lowers Linc.net, put on negative watch

Standard & Poor's downgraded Linc.net Inc. and put the company's ratings on CreditWatch with negative implications, affecting $239 million of debt including the senior secured bank loan lowered to B from B+.

S&P said its action reflects Linc.net's "limited financial flexibility, weak operating performance, and expectations that the telecommunications infrastructure service market will remain depressed for the next several quarters."

Although the company's equity sponsors put up an additional $10 million in the third quarter andit added an additional $8.5 million revolving credit facility, delays in collecting receivables have left the company with $8 million in cash and availability under its secured bank credit facilities, S&P said.

"Liquidity will be strained further in the very near-term" as the company will likely break recently amended bank covenants, S&P said, adding that the company also has $13 million of debt amortization in the next 12 months.

S&P raises ClimaChem, outlook negative

Standard & Poor's upgraded ClimaChem Inc., including raising its senior unsecured debt to C from D. The outlook is negative.

S&P said the upgrade follows payment of interest that was due Dec. 1, 2001 on the company's $105 million of 10.75% senior notes within the 30-day grace period.

S&P added: "Profitability and cash flows remain under extreme pressure, reflecting continued weakness in the agricultural and blasting-grade ammonium nitrate business."

S&P puts Tri-Union on negative watch

Standard & Poor's put Tri-Union Development Corp.'s ratings on CreditWatch with negative implications. Affected ratings include the B- senior secured debt.

S&P said its action follows the Tri-Union's failure to meet expected financial and operational targets at the end of the third quarter.

S&P said it is now concerned that "without operational improvement or the adoption of measures to enhance liquidity, the company will not have sufficient financial resources to meet $28 million of interest and debt payments in June 2002."

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