S&P cuts Conseco to D

Standard & Poor's downgraded Conseco, Inc.'s ratings to D. Affected securities include Conseco's $200 million 10.5% senior notes due 2004, $250 million 6.8% notes due 2005, $450 million 8.5% senior notes due 2002, $550 million 9% senior notes due 2006, $400 million 10.75% senior notes due 2008, $0.991 million 8.5% notes due 2003 guaranteed by CIHC, Inc., $150.783 million 6.8% notes due 2007 guaranteed by CIHC, Inc., $399.2 million 9% notes due 2008 guaranteed by CIHC, Inc., $362.433 million 10.75% notes due 2009 guaranteed by CIHC, Inc., Conseco Financing Trust I's $275 million Trust Originated Preferred Securities (TOPrS), Conseco Financing Trust II's $325 million 8.7% Capital Trust Preferred Stock (TruPS), Conseco Financing Trust III's $300 million 8.796% capital securities, Conseco Financing Trust IV's $500 million Feline Prides, Conseco Financing Trust V's $500 million 8.7% Trust Originated Preferred Securities (TOPrS), Conseco Financing Trust VI's $200 million trust originated preferred securities (TOPrS) and Conseco Financing Trust VII's $300 million Trust Originated Preferred Securities (TOPrS), all cut to D from CC.

S&P said the action follows the resignation of chief executive officer Gary Wendt.

S&P said it believes Wendt's resignation is a prelude to an ultimate bankruptcy filing.

S&P cuts Amerco, still on watch, rates notes BB+

Standard & Poor's downgraded Amerco to junk and kept the company on CreditWatch with negative implications. Ratings affected include Amerco's $175 million 7.85% senior notes due 2003, $200 million 8.8% senior notes due 2005 and $100 million 7.135% bond-backd asset trust certificates series 1997-C due 2002, all cut to BB+ from BBB. S&P also assigned a BB+ rating to Amerco's proposed $275 million senior notes due 2009.

S&P said it lowered Amerco because of the company's weakened financial flexibility and liquidity over the last year.

In June, the company entered into a $205 million bank facility, replacing the existing $400 million facility, S&P noted. The company also suspended its commercial paper program and had to contribute $76 million of equity to its insurance operations to meet regulatory requirements. The company has a $100 million debt maturity on Oct. 15, 2002, which proceeds of the proposed offering are intended to repay.

The ongoing Credit Watch reflects uncertainty regarding the proposed debt issuance, S&P said. If the company is unsuccessful in placing the notes the ratings would likely be lowered significantly.

Amerco's insurance operations are relatively small within the industry and both have been negatively affected by unprofitable lines of business as well as write-downs of investments, which have resulted in reduced profitability and cash flow for Amerco, S&P said.

In addition, Amerco has had to consolidate the results of SAC Holdings Corp. and its consolidated subsidiaries (the owner of self-storage properties managed by Amerco) with Amerco.

As a result, Amerco's credit ratios have weakened and are not expected to improve significantly due to increased capital spending needed to replace its aging fleet, S&P added.

Moody's keeps Sierra Pacific on review

Moody's Investors Service said Sierra Pacific Resources and its utility subsidiaries Nevada Power

Co. and Sierra Pacific Power Co. remain on review for possible downgrade including Sierra Pacific Resource's senior unsecured debt at B2 and the senior secured debt of both subsidiaries at Ba2.

But Moody's noted that the company has "weathered some very difficult times" in the months since the adverse decisions of the Public Utility Commission of Nevada in the deferred energy rate cases concluded in the spring of this year.

Since then, the utilities were able to fully draw on their respective bank credit facilities, after providing general and refunding mortgage bond security to the banks, to repay all maturing commercial paper balances in full, Moody's noted.

In addition, the utilities' current suppliers are still forbearing on demands for collateral and Duke Energy Trading and Marketing has filled much of the utilities' supply voids, Moody's said. Furthermore, Nevada Power's current suppliers either formally or in a de facto way accepted delayed payments throughout the summer months.

Moody's added that both Nevada Power and Sierra Pacific Power were able to meet summer peak customer demands for power while building up cash.

Having weathered the critical summer period, the utilities are now actively pursuing all available options to add to liquidity, improve access to the capital markets, meet maturing long-term debt obligations, and address the Nov. 28, 2002 expiration of the utilities' secured bank credit facilities, Moody's said.

S&P cuts MeriStar

Standard & Poor's downgraded MeriStar Hospitality Corp. and revised the outlook to negative. Ratings lowered include MeriStar Hospitality Corp.'s $205 million 8.75% senior subordinated notes due 2007 and $150 million 4.75% convertible subordinated notes due 2004, both cut to CCC+ from B-, and MeriStar Hospitality Operating Partnership, LP's $300 million term loan A, $200 million term loan B, $150 million revolving credit facility due 2003, $300 million 9% tranche 1 senior unsecured notes due 2008 and $400 million 9.125% tranche 2 senior unsecured notes due 2011, all cut to B from B+.

S&P said the action is in response to MeriStar's recently announced lowered earnings guidance, which underscores S&P's expectation for a modest lodging industry recovery, MeriStar's weak credit measures for the rating and more limited liquidity position than many in its peer group.

MeriStar recently announced its revised third-quarter 2002 EBITDA guidance of $38.5 million-$39.5 million, S&P noted. This is 12%-17% lower than management's prior guidance, and represents a 14% decline from the third quarter 2001. Revenue-per-available room (RevPAR) for the third quarter is expected to decline around 5% year-over-year.

The company's guidance points to increased margin pressure, probably as a result of increased price competition and a larger proportion of discount leisure travelers in its customer mix, S&P added. Margins will likely remain under pressure until demand from transient business travelers recovers.

MeriStar's credit measures are weak for its rating. Based on management's revised guidance, MeriStar will end the third quarter with debt to EBITDA in the high 7 times area and EBITDA coverage of interest in the high 1x range, S&P said. Based on its expectation of a more moderate average industry lodging RevPAR recovery for 2003 in the low single digits, S&P expects MeriStar's leverage will likely remain in the mid to high 6x range over the next two years.

S&P revises FelCor outlook to negative

Standard & Poor's revised its outlook on FelCor Lodging Trust Inc. to negative from stable and confirmed its ratings. Debt affected by the action includes FelCor's senior secured debt at BB-, senior unsecured debt at BB- and preferred stock at B-.

S&P said it revised FelCor's outlook because of the company's weaker-than-expected performance given a more moderate lodging industry recovery than previously expected.

While this affects the entire sector, FelCor's debt leverage was previously weak for the rating and the time period under which credit measures are expected to recover has now been lengthened, S&P noted.

While the lodging industry is gradually recovering, the pace of recovery has been slower than expected, primarily as a result of a significant decline in business travel, S&P said adding that it now expects that revenue per available room (RevPAR) in the industry will decline 2%-3% in 2002, compared to a previous expectation of flat to slightly negative. RevPAR in 2003 is expected to grow in the low single digits.

For the first half of 2002, FelCor's RevPAR declined 14.6% year-over-year. Management recently announced lowered earnings guidance of $77 million-$80 million in EBITDA for the third quarter of 2002 and $320 million-$326 million for the full year 2002, S&P noted. This reflects a 13% decline in EBITDA from the 2001 level.

S&P added that it expects FelCor's debt leverage, as measured by total debt to EBITDA (including 50% of debt from its unconsolidated subsidiaries), to be reported in the low 6 times range for the end 2002. Thereafter, operating performance is expected to improve as the economy recovers, and debt leverage is expected to decline to the high 5x by the end of 2003.

Moody's confirms Bway, outlook developing

Moody's Investors Service confirmed Bway Corp.'s ratings and changed the outlook to developing from negative. Debt covered by the action includes Bway's $100 million 10.25% senior subordinated notes due 2007 at B3.

Moody's said its action follows the announcement that Bway has agreed to be acquired by an affiliate of private equity firm Kelso & Co., LP for $330 million. Kelso will assume or refinance Bway's outstanding debt.

The developing rating outlook for Bway's ratings incorporates several uncertainties with respect to the company's ultimate capital structure and credit metrics, Moody's said.

Moody's rates Del Monte loan Ba3

Moody's Investors Service assigned a Ba3 rating to Del Monte Corp.'s planned new credit facility including its $350 mm senior secured revolving credit facility maturing 2008, $250 million senior secured term loan A maturing 2008 and $800 million senior secured term loan B maturing 2010. Subject to Del Monte closing its acquisition of Heinz businesses on current terms and conditions, Moody's will upgrade Del Monte's $300 million 9.25% senior subordinated notes to B2 from B3. The outlook is stable.

Moody's said that assuming the transaction closes as envisaged the ratings upgrade is supported by Del Monte's increased overall scale (sales would more than double to a sizable $3.1 billion) and greater center-of-store coverage; the expanded product and category diversification from the addition of the four new businesses; the addition of established well known national brands (including StarKist, 9-Lives, and Kibble n' Bits); and profitability enhancement provided by the new business' more ample operating margins than Del Monte.

Del Monte's pro forma revenue mix will be 30% pet products, 18% tuna, 17% fruit, 14% vegetables, 11% tomatoes, and 10% soup/infant feeding.

The merger results in a $1.2 billion increase in debt to Del Monte (including financing of transaction costs), but pro forma fiscal 2002 combined EBITDA of about $500 million leaves leverage modestly reduced (to about 3.6x EBITDA from 4.0x for Del Monte on a stand-alone basis for fiscal 2002), assuming EBITDA levels at the new businesses are maintained, Moody's said.

The common dry goods nature of the businesses, overlap in customers and suppliers, and expected retention of Heinz staff by Del Monte should facilitate the integration process, Moody's added.

The merged entity benefits from relatively stable consumption trends and durable sales for its products and a management team that has been effective in implementing operating, acquisition and financial strategies at Del Monte, Moody's said.

S&P cuts Alcatel

Standard & Poor's downgraded Alcatel and removed it from CreditWatch with negative implications. The outlook is negative.

Ratings affected include Alcatel's notes, bonds and bank loan, all cut to B+ from BB+.

Moody's raises Stena outlook

Moody's Investors Service raised its outlook on Stena AB to stable from negative and confirmed its senior notes at Ba3 and Stena International BV's senior secured bank loan at Ba1, affecting $350 million of debt.

Moody's said the action reflects the outlook for an improving performance of Stena's ferry operations and the expectation of a sustained reduction of debt following the sale of its 40% ownership in P&O Stena Line to the Peninsular Oriental Steam Navigation Company for SEK2.6 billion.

But Moody's noted the current weakness of Stena's relatively small tanker operations and the potential negative impact of a prolonged economic downturn on the company's performance.

Fitch raises Pioneer Natural Resources outlook

Fitch Ratings raised its outlook on Pioneer Natural Resources to positive from stable affecting its senior notes rated BB.

Fitch said the revision follows Pioneer's successful first production at its Aconcagua and Kings Peak gas fields through the Canyon Express gas gathering system in the Gulf of Mexico.

The Canyon Express project is the first of four projects which are expected to startup for Pioneer within the next 12 months and should substantially increase the company's production volumes, Fitch said. The Canyon Express project is expected to ramp up as additional wells are brought on in Pioneer's Aconcagua, Kings Peak, and Camden Hills gas fields.

Once this is achieved, Pioneer's daily production rate will be approximately 17% higher than its second quarter 2002 rate of approximately 110,000 barrels of oil equivalent per day, Fitch said.

Fitch said that when production from all four projects are online Pioneer expects its 2003 production will increase 45%-60% over expected 2002 levels of approximately 114,000 barrels of oil equivalent per day.

As a result, credit metrics are expected to improve significantly as each of the projects move toward full production, Fitch said. For 2003, Fitch anticipates that coverages, as measured by EBITDAX/interest, should be greater than 5.0 times and debt/EBITDAX should below 2.5x. Hedges have been placed on about half of Pioneer's 2003 production which should mitigate any downside risk if oil and gas prices drop below 'mid-cycle' type levels.

Moody's cuts Borden Chemical senior notes

Moody's Investors Service downgraded Borden Chemical, Inc.'s senior notes and confirmed its senior implied rating. The outlook remains negative. Ratings lowered include Borden Chemical's $117 million debentures due 2021, $250 million notes due 2023, $78 million sinking fund debenture due 2016, $49 million sinking fund debenture due 2019 and $8 million industrial revenue bonds due 2012, all to B2 from B1. The senior implied remains at B1.

Moody's said the action is in response to Borden Chemical's new $175 million secured revolving credit facility, which replaces its $250 million unsecured credit facility that matured in July 2002.

The ratings of the senior notes are lowered to B2 from B1 to take into account their effective subordination to the new secured facility to the extent of the value of the collateral securing the credit facility, Moody's said.

S&P says Foamex unchanged

Standard & Poor's said its ratings and outlook on Foamex LP remain unchanged including its corporate credit at B+ and stable outlook.

S&P made the comment after Foamex said it has terminated its agreement to sell its carpet cushion business to Leggett & Platt Inc.

Despite the loss of potential net proceeds in the $45 million to $50 million range, Foamex, through existing cash balances and availability under its bank facility, maintains sufficient liquidity for the rating, S&P said.

However, the expected cash proceeds were to be applied primarily to achieve anticipated debt reduction, which may now be further delayed, particularly in view of rising feedstock costs and continued weakness in the economy, S&P said.

S&P upgrades Transwestern

Standard & Poor's upgraded Transwestern Pipeline Co.'s corporate credit rating to BB from CC and changed the CreditWatch to positive from developing, affecting $550 million of debt. Transwestern is a subsidiary of Enron Corp.

S&P said the higher rating reflects increased confidence that Transwestern will not be drawn into Enron's bankruptcy proceedings.

Ratings are still not based solely on the stand-alone credit quality of Transwestern because of the uncertainty surrounding the company's future, S&P added. Enron has started a process that could lead to either the sale of Transwestern or to a reorganized holding company that concentrates on operating energy infrastructure assets in the natural gas and electricity industries.

The positive CreditWatch reflects the stand-alone credit profile of Transwestern and the possibility that the company will emerge from under Enron's influence after the issues in the parent company's bankruptcy proceedings are resolved, S&P said.

S&P confirms Westport Resources

Standard & Poor's confirmed its ratings on Westport Resources Corp. and maintained the outlook at stable. Ratings affected include its senior unsecured debt at BB+ and subordinate debt at BB-.

S&P said the announcement follows Westport's announced acquisition of oil and natural gas properties from Smith Production Inc. for $120 million in cash.

The purchase price of about $120 million will be funded through a draw of $100 million on Westport Resources' credit facility and from the application of cash balances, S&P noted.

While the transaction is not positive for the company's credit quality as it increases Westport Resources' indebtedness, S&P said it is not changing its ratings or outlook on the company, as such a transaction was expected.

To maintain the current rating, S&P said it expects that Westport Resources will reduce its leverage in the next upcycle. Despite the draw on the company's bank credit facility, liquidity remains healthy, with an estimated $25 million in cash and $250 million of available bank credit.

Cash flow protection measures are expected to remain strong, S&P said. EBITDAX coverage of interest expense should average between 6x to 7x for the next three years at assumed commodity prices of $21 per barrel of oil and $2.75 per million BTU of natural gas. Funds from operations as a percentage of debt is expected to remain in the low-to-mid 40's over the intermediate term.

Moody's assigns United Rentals SGL-3 liquidity rating

Moody's Investors Service assigned an SGL-3 liquidity rating to United Rentals (North America), Inc.

Moody's said the liquidity rating reflects the modest cushion under United Rentals' bank covenants and the annual renewal requirement of its $250 million accounts receivable securitization facility.

The assessment also reflects Moody's expectation that operational cash flow, combined with the approximately $400 million availability under its committed revolving credit facility, should be sufficient to fund the company's financial commitments and capital spending needs over the next 12 months.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.