Moody's cuts Conseco's existing debt

Moody's Investors Service downgraded Conseco, Inc. and some affiliates including cutting its old senior debt by two notches to Caa1 from B2. A total of $5.6 billion of debt is affected. Also lowered were Conseco's senior subordinated debt, to Caa2 from Caa1, its preferred stock, to Caa3 from Caa2,

Moody's said that it had indicated on March 18 that the old senior debt would likely be downgraded one notch in response to the company's planned exchange offer.

"However, since then, Conseco's slower than anticipated progress in generating cash from reinsurance and other transactions and its continued weak net income performance from its finance and insurance subsidiaries leads Moody's to believe that the possible risks of bankrupcty for Conseco are more problematic," the rating agency said.

The lower ratings on the old senior unsecured notes also reflect their structural subordination to the new notes.

Moody's said the exchange provides Conseco with modest added financial flexibility. But Moody's also noted the uncertainty of the company's cash sources is heightened by the fragile economic environment.

Moody's confirms Building Materials

Moody's Investors Service confirmed the ratings of Building Materials Corp. of America and removed it from watch. The outlook is now stable. Ratings confirmed include Building Materials' $35 million 10.5% senior notes due 2003, $150 million 7.75%senior notes due 2005, $100 million 8.625%senior notes due 2006, $100 million 8% senior notes due 2007 and $155 million 8% senior notes due 2008, all at B2.

However Building Materials' senior unsecured issuer rating of B2 was lowered to Caa1, reflecting the fact that both the senior notes and the company's bank credit facility (which Moody's does not rate) are now secured.

Moody's said its actions reflect steady and significant improvement in Building Materials' operating results, liquidity and credit protection measures since December 2000, at which time its ratings were downgraded and kept on review for further downgrade.

In addition, the ratings incorporate the company's strong brand franchise, its growing, industry-leading market position, and its strong free cash flow generating ability.

But Moody's said the ratings also take into account the continuing uncertainties about Building Materials' ultimate ownership, as its parent company, G-1 Holdings Inc., works its way through Chapter 11 bankruptcy proceedings. The ratings also encompass Building Materials' own legal uncertainties, as it and its parent contest the attempts by asbestos litigants to impose successor liability on Building Materials for asbestos claims against the parent.

Building Materials also has negative book and tangible net worth and the senior notes are effectively subordinate to the bank credit facility.

S&P takes Bluegreen off watch

Standard & Poor's removed Bluegreen Corp. from CreditWatch with negative implications and confirmed its ratings including its $46 million 8.25% convertible subordinated debentures due 2012 at CCC+ and its $110 million 10.5% senior secured notes due 2008 at B. The outlook is stable.

At the end of the third quarter in December 2001, Bluegreen had $38 million in cash on its balance sheet of which $14 million represented unrestricted cash, S&P said. The company had high leverage levels, with debt to past 12-month EBITDA in the mid-7.0 times area and interest coverage just under 2.0x.

In April 2002, Bluegreen announced an agreement with ING Capital LLC to expand the size of a receivable purchase facility to $125 million and extend the maturity date to 2003. The company has adequate availability through the combination of its current credit facilities, warehouse facilities, construction and development facilities and its receivable purchase facilities. The rating also reflects expectations that the company will be able to obtain additional facilities as needed, S&P said.

Bluegreen has a high debt level, relies on capital market appetite for receivable sales, is exposed to timeshare and residential real estate development risk and faces a high level of competition in the timeshare industry, S&P said.

Partially offsetting the negatives are the company's focus on drive-to vacation destinations and its experienced management team, S&P said.

Moody's rates Indofood notes B3

Moody's Investors Service assigned a B3 rating to Indofood International Finance Ltd.'s proposed $200 million senior guaranteed notes due 2007. The outlook is positive.

Moody's said the rating recognizes that PT Indofood Sukses Makmur Tbk and its four flour subsidiaries, which accounted for approximately 70% of operating profits in fiscal 2001, will guarantee the notes.

The positive outlook reflects the positive outlook on Indonesia's sovereign rating.

The ratings reflect the risk associated with the large scale political, economic, and social uncertainties in Indonesia. Indofood operates in a country with a low sovereign rating (B3) and its future is heavily reliant on continuing growth in the Indonesian economy, Moody's said.

It is also exposed to the risk of adverse currency movements as 88% of its revenues are denominated in Rupiah while over 60% of costs are in U.S. dollars.

"It is a challenge for the company to fully pass on increased costs, resulting from Rupiah devaluation, domestic inflation pressure and increased competition, as reflected in its declining profit margin trend in recent years," Moody's commented.

S&P rates Indofood notes B

Standard & Poor's assigned a B rating to Indofood International Finance Ltd.'s proposed $200 million notes due 2007, guaranteed by PT Indofood Sukses Makmur Tbk.

Moody's cuts Avecia

Moody's Investors Service downgraded Avecia Group plc and changed the outlook to stable. Ratings affected include Avecia's $540 million senior notes, cut to B3 from B2, bank debt, cut to Ba3 from Ba2 and $45m PIK preference shares cut to Caa1 from B3.

Moody's said action reflects continuous weak demand in the electronics industry; limited prospects for any material improvement in debt protection measures given the group's significant capital investments and its priority on growth; and the heightened business risk following the disposal of the Stahl division and the recently announced large capital investments in biotechnology.

Avecia's recent operating performance and profitability has been hit by weak demand in agrochemicals and intermediate products, in the fine chemicals division as well as continuous inventory de-stocking at equipment manufacturers, in electronic materials which altogether lead to an operating loss in the first quarter of 2002, Moody's said. However, the second half of the year is anticipated to improve, especially in the biotechnology segment, with customer orders usually taking place during this period. The rating agency also notes that these two businesses (electronics materials and fine chemicals) are very cyclical and that the market outlook remains uncertain.

However, Moody's said it still views Avecia's business portfolio, degree of geographic and business diversity and focus on higher growth and margin businesses as positive.

Moody's also expects a reduced likelihood of further fully debt financed acquisitions and large capital investments going forward given the significance of the group's recent stated CAPEX plans, illustrated by its £70 million investment program to build Biologics medicines facilities at Billingham in the UK.

Although aimed at generating growth for the group, Moody's said it believes that this investment will increase the group's business risk profile through the "speculative" characteristics of the project and the medium-term nature of its cash flow generation.

Moody's rates IESI's loan B1; notes B3

Moody's Investors Service rates IESI Corp.'s $222.5 million senior secured loan due Aug. 31, 2004 at B1, $150 million senior subordinated notes due 2012 at B3, senior implied at B1 and issuer rating at B2. The outlook is negative.

Ratings reflect weak cash flow generation, pro forma LTM EBITA to interest coverage of 1.4 times in first quarter 2002, EBIT return of average assets of 5%, risk of increased leverage due to the acquisition strategy and size of the company compared to its competitors, Moody's said.

Ratings also reflect $200 million in capital from equity sponsors, recent quarterly improvement in cash generation, stable earnings related to certain municipal and franchise arrangements and lower costs associated with a young hauling fleet.

The negative outlook reflects uncertainty regarding future profitability.

In fiscal 2001, the company had positive net income of $2.25 million, the EBIT margin improved 120 basis points to 8.7% and cash from operations was 15.5% of revenues and was a negative $2 million after capital expenditures. First quarter 2002 gross profit margins improved to 36.5% from 35.6% for a comparable period a year ago and EBIT margin improved to 10.9% from 6.8% a year ago. EBIT return on average total assets for the twelve months ending December 31, 2001 is approximately 4.7%.

S&P cuts United Refining outlook

Standard & Poor's lowered its outlook on United Refining Co. to negative from stable and confirmed its ratings including its senior unsecured debt at B-.

S&P said it lowered United Refining's outlook because of the company's weakening financial profile, which has been exacerbated by an extremely poor refining margin environment.

Without a recovery in sector margins, United Refining's liquidity (cash flow generation and ability to borrow under its revolver) could become strained, S&P said.

United Refining's cash flow generation usually improves during the summer asphalt season as it liquidates inventory; in the near term, a potential ratings downgrade could be highly influenced by United Refining's performance during this peak business period, S&P noted.

For the longer term, a downgrade could be prompted by the high spending requirements associated with new clean fuels standards, S&P added.

S&P takes YPF off watch

Standard & Poor's removed YPF SA from CreditWatch with negative implications and confirmed its ratings.

Affected debt includes YPF's $350 million 8% medium-term notes due 2004, $300 million 7.75% notes due 2007, $350 million 7.25% notes due 2003, $100 million 10% medium-term notes due 2028 and $225 million 9.125% medium-term notes due 2009, all at B+.

S&P raises Jo-Ann Stores outlook

Standard & Poor's raised its outlook on Jo-Ann Stores Inc. to stable from negative and confirmed the company's ratings including its senior secured bank loan at B+ and its subordinated debt at B-.

S&P said the action is in response to Jo-Ann Stores' stabilized operations resulting from improved inventory management.

Prolonged inventory management difficulties related to the implementation of the SAP retail information system had negatively affected performance as it led to out-of-stocks, higher inventory levels, and a higher shrink expense rate, S&P said.

The company has also benefited from its turnaround plan, which included closing underperforming stores and the liquidation of 10,000 items from its merchandise assortment, and a trend toward home-based activities, the rating agency said.

Same-store sales increased 13.5% in the first quarter of 2002 following a 5.9% rise in all of 2001, while operating margins expanded to 13.3% from 12.7%, S&P noted. Credit protection measures also improved, with EBITDA coverage of interest for the 12 months ended May 4, 2002, at 2.7 times, up from 2.5x in the comparable period of 2001. Leverage declined with total debt to EBITDA at 3.2x, compared with 4.4x, as the company lowered debt by reducing inventory levels.

Moody's upgrades Foot Locker

Moody's Investors Service upgraded Foot Locker, Inc. affecting $380 million of debt. Ratings raised include Foot Locker's senior unsecured notes and medium-term notes, raised to Ba3 from B1, and its $150 million convertible subordinate notes due 2008, raised to B1 from B2. Moody's also raised the outlook to positive from stable.

Moody's said it raised Foot Locker because of the company's significantly improved financial profile due to accumulation of cash and a reduction of leverage; improvements in its continuing operations, a management team that is focused on cash generation and managing growth through internally generated cash flow; successful execution of its European strategy and its growth in the U.S. market.

Foot Locker's clear leadership in the athletic apparel and footwear market have helped it build a strong global franchise and favorable vendor relationships, Moody's noted.

However the ratings also reflect the risks involved with the increasingly fashion sensitive athletic apparel and footwear market, the risk of potential changes to the company's financial and growth strategies in the near to medium term, relatively high lease adjusted leverage and modest fixed charge coverage for its rating category, Moody's added.

The positive outlook incorporates Moody's expectation that Foot Locker will continue to see improvements in operations by leveraging its fixed expenses and using its leading market share to negotiate favorable pricing with vendors, and that Foot Locker will continue to effectively manage cash in order to fund growth internally, while improving its leverage and liquidity position.

S&P puts Amscan on developing watch

Standard & Poor's put Amscan Holdings Inc. on CreditWatch with developing implications. The ratings remain at their current levels including Amscan's $110 million 9.875% senior subordinated notes due 2007 at B-.

S&P said it put Amscan on watch after the company said it is reviewing options for a recapitalization.

Developing implications mean that the ratings could be raised, lowered, or affirmed, S&P said.

The company is considering several alternatives including a new bank facility, an initial public offering or a private sale of equity or debt securities, the rating agency noted.

At the same time, Amscan is exploring strategic alternatives to enhance stockholder value, including asset purchases, sales, and other acquisition or disposition transactions, S&P added.

S&P raises Constellation Brands outlook

Standard & Poor's raised its outlook on Constellation Brands Inc. to stable from negative and confirmed its ratings including its senior unsecured debt at BB and its subordinated debt at B+.

S&P said the outlook change is in response to improvement in Constellation's credit measures, bringing them more in line with the rating category.

S&P said acquisitions raised Constellation's debt substantially to over $1.4 billion at fiscal-year end Feb. 28, 2002 and leverage remains high yet adequate for the rating category.

Credit measures strengthened in fiscal 2002 as the company's operating performance improved, S&P said. Adjusted for operating leases, Constellation Brands' debt to EBITDA ratio was about 3.4 times at fiscal year ended February 2002, down from about 4.1x the prior year. Adjusted EBITDA coverage for fiscal year 2002 was about 3.6x, compared with EBITDA coverage of about 3.0x at the end of fiscal year

2001.

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