S&P cuts The Gap to junk

Standard & Poor's downgraded The Gap Inc. to junk from investment grade. The outlook is stable. Ratings affected include Gap's $1.3 billion revolving credit facility due 2002, $500 million 6.9% notes due 2007, $150 million revolving credit facility due 2005, $500 million 5.625% notes due 2003, $200 million 8.15% senior unsecured notes due 2005, $500 million 8.8% senior unsecured notes due 2008 and Gap International BV's €250 million 5% guaranteed notes due 2004, all cut to BB+ from BBB+. Its commercial paper is cut to B from A-2.

S&P said it lowered The Gap's ratings because of "a protracted record of disappointing sales and earnings."

It added: "Management faces significant challenges in turning around the performance of each of its brands, as the weak economy has exacerbated an already poor retail environment. Because of this, no significant improvement in credit measures is likely to occur in the near term."

Causing the weak operating results are a loss of focus on the company's core customer, merchandising and execution mistakes, an aggressive store expansion program, increased competition and new entrants effectively copying The Gap's historically successful business model,S&P said.

Moody's cuts Gap to junk

Moody's Investors Service downgraded Gap Inc. to high junk from investment grade. The outlook for the senior unsecured rating is negative reflecting the likelihood it will be downgraded one notch when the new senior secured bank facility closes. Ratings lowered include Gap's senior unsecured notes, Gap International BV's eurobonds and Gap (Japan) KK's notes, all lowered to Ba2 from Baa3, and Gap's commercial paper, lowered to Not Prime from Prime-3.

Moody's said its action completes a review begun Dec. 11 and reflects the deterioration in Gap's comparable store sales and profitability as well as uncertainty about when management's new merchandising strategy will gain traction.

Moody's also expects it will be difficult for Gap to achieve significant improvement in its operating performance in 2002 given the soft economy, fierce competition and sated consumer appetite for apparel.

All three concepts - Gap, Banana Republic and Old Navy - continue to experience negative comparable store sales and lower profitability following a period of rapid store expansion and changes in the competitive landscape, Moody's noted.

Moody's confirms Young Broadcasting, keeps negative outlook

Moody's Investors Service confirmed its ratings on Young Broadcasting, Inc. and maintained its negative outlook on the company. Ratings affected include Young's $295 million senior secured bank credit facilities rated Ba3, $250 million of senior unsecured notes rated B2 and $825 million of senior subordinated notes rated B3.

Moody's said its action follows Young's announcement it will sell its KCAL television station to Viacom for $650 million. Net after tax proceeds are expected to be $570 to $575 million and Young will use part of that money to repay its $145 million in drawn credit facilities under its term loan.

"While Moody's recognizes the reduction in the company's debt position net of the asset sale proceeds, a substantial amount of uncertainty continues to surround the company, and the current ratings and outlook are warranted in the absence of a shift by management to a full asset rationalization mode, which we do not believe to be the case," Moody's said.

Confirmation of the ratings and the negative outlook continue to reflect the difficulty that Young's KRON station is expected to experience as an independent San Francisco television station; the uncertainty surrounding the use of the remaining proceeds from the asset sale, especially as it relates to the company's potential and propensity to acquire television assets that are more challenged; and the removal of KCAL, arguably Young's most valuable station, from the asset pool that had previously afforded a comfortable level of implied asset protection and support for noteholders, Moody's said.

Fitch takes Northwest Airlines off watch

Fitch Ratings removed Northwest Airlines, Inc. from Rating Watch Negative and confirmed its current ratings of B+ for Northwest's senior unsecured debt securities. The Rating Outlook is Negative.

Fitch said it took Northwest off watch in response to signs of stabilization in the airline's cash flow position that have begun to appear over the last several weeks.

"Following the unprecedented collapse in air travel demand that resulted from the events of September 11, Northwest's revenue per available seat mile (RASM) performance has improved steadily," Fitch noted.

RASM showed a year-over-year decline of 16% in the fourth quarter while each month since September has seen a sequential improvement, Fitch said. Northwest continues to enjoy a premium over the U.S. industry as a whole, due in large part to its strong competitive position at the Minneapolis-St. Paul and Detroit hubs.

Moody's downgrades American Tower

Moody's Investors Service downgraded American Tower Corp. and its subsidiaries, concluding the review begun Jan. 25, 2002. The outlook is stable. Ratings affected include American Tower Corp.'s $1 billion 9.375% senior notes due 2009, $213 million 6.25% convertible notes due 2009, $203 million 2.25% convertible notes due 2009 and $450 million 5.0% convertible notes due 2010, all downgraded to Caa1 from B3; and co-borrowers American Tower LP and American Towers, Inc.'s $650 million secured revolving credit facility, $850 million secured term loan A and $500 million secured term loan B, all downgraded to B2 from B1.

Moody's said its action was in response to slower cash flows from American Tower's core leasing operations and still growing bank debt levels despite the decreasing amount of expected tower acquisitions and new builds.

Moody's said it does not foresee any near-term liquidity or bank covenant issues but noted American Tower will be relying on access to its $650 million revolver until it begins to support itself from internally generated funds, which the company expects to occur in the latter half of 2003.

In the past, Moody's said it has expressed concern with weak operating results from the company's services and Verestar divisions that have slowed EBITDA growth and the anticipated delevering. Results from the services and Verestar operations are unlikely to rebound as much as previously expected, Moody's said, adding that due to fewer towers being built and acquired, EBITDA from the core leasing business is also not growing as quickly as anticipated.

Moodys' downgrades Song Networks

Moody's Investors Service downgraded Song Networks Holding AB to Caa3 from Caa1. The outlook is negative. Ratings downgraded include Song's $150 million 13% senior notes due 2009, €100 million 13% senior notes due 2009, €150 million 11.875% senior notes due 2009 and €175 million 12.375% senior notes due 2008.

Moody's said its action was prompted "by heightened concerns relating to Song's weakening financial flexibility and rapidly deteriorating liquidity cushion, as well as continued underperformance compared to Moody's expectations."

In particular, Moody's noted Song's fourth quarter results showed a quarter-on-quarter decrease in revenues, continued significant margin pressure, as well as a significant funding gap over the next 12-18 months, in spite of a SEK 300.0 million bank facility entered into in the third quarter.

In the next 18 months, Song still needs SEK 500-600 million even though its network is complete and management has taken action to re-focus the business on core competencies, reduce SG&A expenses, and conserve capital expenditures, Moody's said.

S&P raises AMF Bowling to B

Standard & Poor's upgraded AMF Bowling Worldwide Inc.'s corporate credit rating to B from D and assigned a B rating to its proposed new bank facility, made up of a $75 million revolving credit facility due 2007 and a $275 million term loan bank loan due 2008. The outlook is stable.

S&P said its upgrade follows AMF Bowling's emergence from bankruptcy.

The new ratings incorporate the expectation that management will moderate its financial policies, and that the company will generate sufficient cash flow to manage its capital structure and gradually improve financial flexibility over the near term, S&P said.

The rating agency noted AMF has a strong position in bowling center and equipment, a degree of business diversity and a significantly reduced debt burden and amortization requirements following the recapitalization.

S&P cuts Spalding to D

Standard & Poor's downgraded Spalding Holdings Corp. to D from CC. Ratings affected include Spalding's $200 million 10.375% senior subordinated notes due 2006, cut to D from C, and its $250 million revolving credit facility bank loan due 2003, $175 million term loan A bank loan due 2003, $87.5 million term loan B bank loan due 2004, $87.5 million term loan C bank loan due 2005 and $50 million term loan D bank loan due 2006, all lowered to D from CC.

S&P said the action follows the missed interest payment due Oct. 1 on its $200 million senior subordinated notes. Spalding in late January agreed with noteholders to exchange the subordinated notes for $100 million in PIK senior notes and about 89% of the shares of common stock of the company.

Moody's confirms Merisant

Moody's Investors Service confirmed its ratings on Merisant, including its $40 million revolving credit facility due 2006, $103.6 million term loan A due 2006 and $269.5 million term loan B due 2007, all at Ba3. The outlook is stable.

Moody's said Merisant is increasing the term loan B by $70 million to $269.5 million to refinance its $65 million 13% subordinated notes at a call price of 104%.

Moody's said its assessment of Merisant takes into account its concentration on one product, aspartame, its brand concentration on two names, Equal and Canderel which account for 80% of revenues, the maturity of its primary European and North American markets, and a leveraged balance sheet with large intangibles (65% of 2001 assets).

Aspartame and Merisant's brands are subject to competition from new sweetener products and brands, such as Splenda, which was introduced in 2000 by Johnson & Johnson, a company with substantial resources, Moody's noted.

"In addition, aspartame, which has been in use since 1979 and has been thoroughly tested by the FDA and other regulatory bodies, has nevertheless been subject to adverse publicity in the past regarding its side effects, and Merisant will remain vulnerable to changes in consumers' views of sweetener products," the rating agency added.

Moody's rates new Corus issue B1

Moody's Investors Service assigned a B1 rating to Corus Entertainment Inc.'s planned offering of $200 million senior subordinated notes due 2012. The outlook is stable.

Moody's said its ratings reflect Corus' leading position in the Canadian marketplace as an operator of radio stations and a developer and aggregator of content which is distributed both globally and domestically over its own cable television networks.

Also incorporated in the assessment is the assumed large underlying asset value which provides indirect implicit support of the company's debt obligations in consideration of its many leading brands and programming library in particular, the rating agency added.

In addition, management has made commitments to operate the company in a fiscally prudent manner over the ensuing rating horizon, with margin improvements and cash flow growth anticipated for several business lines, curtailment of developmental spending to strictly conservative levels, utilization of equity and/or asset monetizations as necessary, all leading to near-term debt reduction, Moody's said.

However Moody's also said Corus has high leverage and moderate coverage of the consolidated entity pro forma for the proposed transaction.

The rating agency also has concerns about recent underperformance and negative trends at certain of the company's operating subsidiaries, which may prove somewhat challenging to reverse in such short order as anticipated by management.

Moody's also expects Corus to continue to be opportunistically acquisitive and pointed out that the new notes are structurally subordinate to all subsidiary obligations, including a large amount of unrated bank debt.

Moody's raises International Game outlook

Moody's Investors Service raised its outlook on International Game Technology to stable from negative and confirmed the company's ratings, including its senior unsecured debt at Ba1.

Moody's said it changed International Game's outlook in response to the gaming industry's rebound from the initial negative impact of the events of Sept. 11.

"Moody's believes that the concerns related to the possibility of a reduction in demand for the company's products, as well as lower play levels, have been alleviated," the rating agency said.

Moody's confirms IWO, cuts US Unwired outlook

Moody's Investors Service confirmed IWO Holdings, Inc. with a stable outlook, including its $160 million of 14% senior notes due 2011 at Caa1 and senior implied rating at B2.

Moody's said its action is based on comfort with the structure of the proposed acquisition of IWO by US Unwired Inc. (senior implied B1), as well as the business trends and outlook for the IWO credit on a standalone basis.

Moody's noted IWO's bank debt and senior notes will remain outstanding and will not receive any support from US Unwired.

Moody's also confirmed US Unwired but changed the outlook to negative from stable. Affected ratings include US Unwired's $140 million secured credit facility rated Ba3 and its $400 million 13.375% senior subordinated discount notes due 2009 rated B3.

Moody's said it changed the outlook in response to US Unwired's pending acquisition of two other Sprint PCS affiliates, IWO Holdings and Georgia PCS.

US Unwired was upgraded by Moody's in November 2001 in response to the attainment of positive EBITDA, low utilization of secured credit facilities and a strong liquidity position. The stable ratings outlook was based upon the prudent utilization of that liquidity position.

Since November, the growth outlook for Sprint PCS and its affiliates has weakened as those company's adjust their strategies to address the subprime credit segment of the consumer market, Moody's said. "As churn elevates due to the size of the subprime credit subscribers and cash flow growth slows, that liquidity position will be eroded. On top of this the company is making two acquisition of other Sprint PCS affiliates, IWO and Georgia PCS."

S&P rates new Corus notes B+

Standard & Poor's assigned a B+ rating to Corus Entertainment Inc.'s planned offering of $200 million senior subordinated notes due 2012 and a BB rating to its C$305 million senior secured term loan due 2007 and its C$450 million senior secured revolving credit due 2006. The outlook is stable.

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