Moody's assigns B3 rating to VimpelCom convertible

Moody's Investors Service assigned a B1 senior implied rating and a B3 unsecured issuer rating to Open Joint Stock Co., or Vimpel-Communications, and a B3 rating to VimpelCom BV's $75 million 5.5% convertible notes due 2005 that were issued in July 2000, as well as a B3 rating to notes that are proposed to be issued by, but without recourse to J.P. Morgan AG, for the sole purpose of financing a loan to Vimpel-Communications. VimpelCom BV is a subsidiary of Vimpel-Communications. The ratings outlook is stable.

The ratings reflect a strengthening position as a leading mobile operator in Russia and strongly improving cash flow generation from core operations. Moody's, however, expects that consolidated debt levels will increase above the moderate levels at year-end 2001 and that Vimpel-Communications will increase its risk profile by developing mobile opportunities in the Russian regions.

On a proforma basis as of December 31, 2001, the overall credit profile of Vimpel-Communications remains moderately strong to accommodate the proposed $200 million increase in gross debt levels to $478 million with proforma debt to LQA EBITDA not exceeding 2.8-times. The company improved LQA EBITDA to $175 million on a revenue base of about $536 million.

The company reported gross debt of $277.7 million at year-end 2001, with supporting cash balances and cash equivalents of about $145 million. In the next 24 months, Moody's expects that shortfalls in free cash flow will be supported with additional bank and vendor finance.

The B3 rating on the proposed senior unsecured loan participation notes takes into consideration their effective subordination behind secured debt in the capital structure.

S&P keeps Starwood on negative watch

Standard & Poor's said its ratings for Starwood Hotels & Resorts Worldwide Inc. remain on watch with negative implications following the company's announcement of a $1 billion senior note offering, which is earmarked to repay Starwood's increasing rate notes and also a portion of itssenior credit facility.

S&P assigned a BBB- rating to the proposed $1 billion senior notes.

S&P expects to affirm the existing ratings once management makes material progress on a plan to address the significant amount of debt scheduled to mature by the end of February 2003. The note offering in addition to management's near term intention to refinance its senior credit facilities are sufficient to address the concerns, said S&P credit analyst Craig Parmelee.

Fitch rates new Starwood notes at BB+

Fitch Ratings assigned a BB+ rating to Starwood Hotels & Resorts Worldwide Inc.'s proposed $1 billion in senior notes. The outlook is negative. Fitch also affirmed the $507 million in series A & series B convertible notes due 2021.

The ratings reflects strong brand names, ownership of key assets in markets with high barriers to entry, and global diversity of cash flows, largely derived in Europe and Latin America. Offsetting factors include the some $1.3 billion in bank debt proforma for the issuance and $250 million in notes maturing in 2003. The new debt issuance addresses in part these pending maturities and bank refinancing is expected to occur over the upcoming months.

Following planned capital expenditures of $300 million (which was reduced from $477 million in 2001), HOT expects discretionary cash flow to approximate $500 million during 2002.

Application of excess cash to debt reduction, a continued improvement in the operating environment and the successful refinancing of bank credit agreement could lead to a stable outlook in the near term, Fitch said.

S&P sees no impact on Weatherford restructuring

Standard & Poor's said oilfield services provider Weatherford International Inc.'s (BBB+/Stable/--) corporate restructuring plan to change its incorporation to Bermuda from Delaware will not affect the ratings or outlook.

Under the planned restructuring, Weatherford International Ltd., a newly formed Bermuda-based company, will become the parent holding company of Weatherford International Inc.

The restructuring is expected to allow Weatherford to compete more effectively worldwide by improving its global tax position and thereby increase cash flow. Weatherford's management is expected to maintain a moderate financial policy.

S&P expects Weatherford to operate with strong EBITDA to interest coverage of about 7.5 times and to reduce discretionary debt, deleveraging to a more prudent mid-40% area from about 48% total debt including convertible subordinated debentures to total book capital at year-end 2001.

S&P cuts Adelphia to B

Standard & Poor's lowered its corporate credit rating on cable television operator Adelphia Communications Corp. to B from BB- due to concerns regarding the impact of co-borrowings by Adelphia subsidiaries and certain companies owned by the Rigas Family managed entities.

The rating remains on watch, however, and the implications were revised to developing from negative.

Adelphia has disclosed that the managed entities had outstanding borrowings of almost $2.3 billion at Dec. 31. While guaranteed by Adelphia, this debt is not consolidated on Adelphia's balance sheet.

The downgrade is based on an assessment that the off-balance-sheet debt has materially weakened the overall financial profile, said S&P credit analyst Richard Siderman.

S&P views Adelphia's financial flexibility as severely impaired by the event, at least for the near term, noting an SEC informal inquiry into the co-borrowing agreements and a number of lawsuits related to the matter.

Adelphia has not yet publicly disclosed the current amount of the off-balance-sheet debt.

If the $2.3 billion balance at year-end 2001 increases materially during 2002, S&P has concerns that a parent debt covenant limiting debt to no more than 8.75 times annualized pro forma EBITDA could be increasingly difficult to meet. Adelphia management has indicated it expects to be in compliance with the covenant for first quarter.

If the ratings are raised, the corporate credit rating is unlikely to be higher than B+ for a number of reasons, S&P said.

Fitch affirms Qwest at BBB

Fitch Ratings affirmed the BBB senior unsecured debt rating for Qwest Communications International Inc., Qwest Capital Funding Inc. and LCI International. Also, the BBB+ senior unsecured debt rating for Qwest Corp. was affirmed. The ratings remain on negative outlook.

The affirmation follows Fitch's recent meeting with Qwest senior management and considers the SEC's action to intensify its inquiry into the company's accounting policies.

The negative outlook reflects a tenuous liquidity position, expected flat operating performance, uncertain resolution of the SEC inquiry and the timing and scope of the company's plan to delever its balance sheet.

Factors that could contribute to a stabilization of the credit rating include material progress in achieving EBITDA, free cash flow and capex targets, a favorable resolution to the SEC inquiry, further stabilization of the liquidity position through the finalization of its accounts receivable program and retirement of current maturities, and progress with the deleveraging plan.

S&P downgrades ShoLodge

Standard & Poor's downgraded ShoLodge Inc. The outlook is negative.

Ratings affected include ShoLodge's $57.5 million convertible subordinated debentures due 2004, $30 million 9.75% senior subordinated notes due 2006 and $25 million 9.55% senior subordinated notes due 2007, all cut to CC from CCC-.

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