S&P puts Adelphia on negative watch

Standard & Poor's put Adelphia Communications Corp. on CreditWatch with negative implications.

Ratings affected include Adelphia's notes rated B+, its preferred stock rated B- and its convertible subordinated notes rated B and its unit's bank debt rated BB.

Moody's rates new CBRL convertible at Baa3

Moody's assigned a Baa3 to CBRL Group's $150 million senior convertible notes due 2032, and confirmed the company's existing Baa3 senior unsecured ratings and stable outlook reflecting the turnaround at the Cracker Barrel Old Country Store concept and improved performance at the Logan's Roadhouse concept that has resulted in improved margins.

Proceeds from the new debt offering will be used to repay outstandings under the company's existing revolving credit agreement and a simultaneous share repurchase. Debt is expected to increase by about $60 million as a result of this transaction, so adjusted debt to EBITDAR on a proforma basis could increase to about 2.0 times from 1.7 times using 2001 debt and earnings levels.

The ratings reflect an established restaurant franchise, adequate debt protection measures, geographic diversity, as well as strong underlying asset value since the majority of its restaurants are owned. The rating outlook reflects the strength of same store sale results that are expected to continue with increased traffic on the interstate highways. Moody's expects the company to manage its future share repurchases from cash flow.

Fitch affirms Citizens Communications convertibles at BBB-

Fitch Ratings affirmed the BBB senior unsecured ratings of Citizens Communications and its 85%-owned subsidiary Electric Lightwave, and the convertible EPPICS of Citizens Utilities Trust at BBB-. The outlook is stable.

The ratings assume Citizens will continue to improve its credit profile by using its large cash balance to repay maturing debt over the next several years. The company's liquidity position is strong as it had over $900 million of cash at year-end 2001, proforma the closing of the water property sale.

Liquidity is enhanced by the generation of free cash flow and an undrawn $800 million 5-year revolving bank line. Fitch recognizes the company's low business risk profile, as it should continue to benefit from its rural service territory with no intense competition.

Pro forma asset divestitures known to date, at yearend 2002, Fitch expects the leverage ratio to be about 4.1 times on a net debt basis. In 2003, credit protection measures should continue to improve as it receives the proceeds from the remaining public service properties.

Fitch anticipates increases in EBITDA margins due to the continued penetration of secondary services. The ILEC segment's financial performance in 2001 was commensurate with Fitch expectations, as it generated a 50% EBITDA margin.

Electric Lightwave's $400 million credit facility is fully drawn and matures in November. Citizens has guaranteed the debt and continues to support Electric Lightwave with another $450 million credit facility maturing in 2005 that had $194.5 million outstanding at yearend 2001. Fitch noted that Electric Lightwave is currently EBITDA positive.

S&P affirms Automatic Data at AAA

Standard & Poor's affirmed its ratings for Automatic Data Processing Inc., including senior debt and the 0% convertible notes due 2012 at AAA, and ssigned an A-1+ rating to its commercial paper.

The ratings reflect the company's superior operating and financial profiles. With revenues for fiscal 2001, ended June, exceeding $7 billion, Automatic Data has consistently strong earnings and cash flow generation and a leadership position in all of the business segments in which it competes.

Automatic Data has significant recurring revenue streams and a sizable installed customer base and has maintained a long-standing track record of steady revenue and earnings growth.

Automatic Data's balance sheet is supportive, with ample cash affording high liquidity, while debt to total capital, below 15%, is very conservative. Cash and marketable securities balances of about $2.6 billion at Dec. 31, 2001, along with strong free cash flow, provide Automatic Data with sufficient resources to fund medium-to-large acquisitions and routine share repurchases.

Moody's amends Railtrack review to direction uncertain

Moody's amended its review on the Baa1-rated bonds and bank loans of Railtrack PLC from possible downgrade to direction uncertain, following Network Rail's bid for Railtrack PLC that includes the proposed prepayment of outstanding bonds.

While Moody's sees the bid as a potential improvement to the bondholders' position as it may reduce the uncertainty associated with the restructuring of Railtrack, the rating agency warned that there remain a number of challenges to be overcome and other uncertainties to be clarified before the proposed acquisition of Railtrack can be concluded, including the level of government support and financial structure of the acquiring company.

If the Network Rail bid be successful, which currently appears the most likely outcome, all of Railtrack's bondholders will be asked to accept cash prepayment at par or the trading level prior to administration, adjusted for current spread levels.

The proposed take-out of the existing Railtrack bonds, which has yet to be approved, is broadly in line with earlier government assurances that non-defaulting bondholders and other financial creditors would be kept whole during the process of and exit from Railway ddministration, and which is encompassed in the current Baa1 rating.

Bondholders could, however, decline to accept the offer and become creditors of the new entity of which the credit quality has yet to be determined and within which the bonds' ranking is unknown at this stage.

Alternatively they could simply refuse to accept the offer and go into default.

Moody's expects that bondholders will accept the cash prepayment.

Fitch rates Brinker convertibles at BBB+

Fitch Ratings assigned a BBB+ rating to Brinker International Inc.'s $311 million of senior notes. The outlook is stable.

The rating reflects Brinker's consistent blended same store sales growth, the diversity of its restaurant concepts, solid operating performance and reasonable credit protection measures. These factors are balanced against the cyclical and competitive nature of the restaurant industry as well as the challenges inherent in expanding smaller concepts.

Brinker has generated steady growth, with blended same store sales increasing 4.4% in fiscal 2001 and 6.3% in fiscal 2000. Brinker's operating performance has been relatively stable over the past few years. Revenues increased 32% from fiscal 1999 to fiscal 2001, while EBITDA increased 40% to $332 million.

EBITDA margin remained steady at 13.2% in 2001. However, Brinker's debt levels have increased as it spent around $153 million in 2001 to buy back franchisees. In addition, in February 2002, Brinker retired its $90 million of synthetic leases in order to make its capital structure more transparent.

Higher debt levels have negatively impacted credit protection measures, with lease-adjusted debt/EBITDAR increasing to 2.5 times in 2001 from 2.1 times the year before. Leverage is expected to decline going forward as the company plans to manage its share repurchases, capital expenditures and acquisition activity at a level that will permit debt to be paid down from cash flow.

Moody's ups Reebok outlook to stable

Moody's changed Reebok International Ltd.'s rating outlook to stable from negative, based on customer acceptance of new product offerings, more effective marketing initiatives and improvement in sales and profit margins.

Reebok's ratings were confirmed, including the 4.25% convertible bond due 2021 at Baa3, reflecting Moody's expectation that Reebok's better debt protection measures will be sustained. The ratings also incorporate Reebok's strong market share in U.S. athletic footwear, prospects for further growth and a conservative capital structure.

Despite the slower growth of the domestic economy, Reebok's operating performance has continued to improve. Net income for 2001 increased to $102.7 million from $80.9 million in 2000. Sales rose by 7% in 2001 on a constant dollar basis as the company's new products and more effective marketing gained traction with consumers.

Financial management remains conservative. Reebok is liquid, with cash of $413.3 million exceeding outstanding debt of $363.1 million. The company's operations usually generate sufficient cash to fund capital expenditures and other major cash uses, allowing debt balances to be reduced or stay stable.

S&P affirms Fleming, removes from watch

Standard & Poor's affirmed Fleming Cos. Inc. ratings, including senior debt at BB and the 5.25% convertible notes due 2009 at B+, based on progress in Kmart Corp.'s bankruptcy.

Contributing factors were the expectation that Kmart's store closing program will only modestly effect Fleming, designation of Fleming as a critical vendor in the bankruptcy case and giving it priority in payment over other vendors, the expectation that Fleming will continue its supply contract with Kmart and S&P's belief that Kmart will emerge from bankruptcy.

Kmart is targeting emergence from bankruptcy for the summer of 2003.

The ratings on Fleming are supported by its position as one of the two largest food wholesalers in the U.S., improving operating trends, and solid financial improvement over the past two years. This improvement provides some cushion to enable Fleming to get through this period of adjustment.

Lower than expected volume resulting from the Kmart bankruptcy filing is being partially offset by gains in distribution from new and existing customers. Growth in non-Kmart customers was 4% in fiscal 2001 and is expected to be 5% in fiscal 2002.

Moreover, Fleming has made good improvements in its core distribution and retail business. The company's growth plans include acquisitions of both retail stores and distribution businesses. These are expected to be carried out within the context of a moderate financial policy, as management has stated its intent to deleverage the company.

EBITDA covered interest expense by 2.8 times in 2001, up from 2.6 times in 2000. Moderate growth in cash flow in 2002 and 2003 should allow coverage to improve. The company's $600 million revolving credit facility provides good flexibility for ongoing operations.

Although Fleming's traditional wholesale customer base eroded over the past few years, the company's shift to non-traditional channels bodes well for this segment. The company has also gained some business from self-distributing supermarket chains that find Fleming's value proposition economically advantageous in certain regions.

Continued modest improvement in cash flow protection is incorporated into the rating on Fleming. Further negative developments from the Kmart alliance, including additional store closings or an inability to compete successfully in the discount industry, could negatively affect Fleming's business and financial position.

S&P downgrades Standard Motor

Standard & Poor's downgraded Standard Motor Products Inc. and removed it from CreditWatch with negative implications. The outlook is stable.

Ratings affected include Standard Motor's $90 million 6.75% convertible subordinated notes due 2009, cut to B from B+. S&P withdrew its rating on the company's $110 million unsecured line of credit due 2002, previously rated BB.

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