Moody's upgrades Railtrack exchangeables to Baa1

Moody's upgraded to Baa1 Railtrack plc's £400 million 3.5% exchangeable bonds due 2009 while affirming the Baa1 long-term and P2 short-term ratings of other Railtrack obligations. All long-term ratings remain on review for downgrade.

Last week, Moody's said, holders of the exchangeable bonds voted to change the majority required to pass subsequent resolutions, prior to the standstill termination date, from 75% to a clear majority, reversing a Jan. 15 vote. Following that action, the bond trustee executed a standstill agreement on terms acceptable to the U.K. Secretary of State for Transport, based on the previous vote by holders to waive all events of default and potential events of default.

All of Railtrack finance creditors have now agreed to enter into standstill agreements, so providing Railtrack with the stability it needs during the period of Railway Administration, which began Oct. 7.

S&P revises Railtrack watch to developing

Following the approval of the standstill arrangements by holders of U.K.-based rail operator, Railtrack plc's (BB+/Watch Dev/B) £400 million exchangeable bonds, Standard & Poor's revised its watch implications on the bond's senior unsecured BB+ rating to developing from negative. At the same time, all other ratings on Railtrack remain on watch with developing implications.

Following this vote, all of Railtrack's bondholders are now participating in the standstill arrangement, said S&P infrastructure finance credit analyst Jonathan Manley. This will ultimately facilitate the eventual transfer of existing debt into the new railway infrastructure company, Manley said. S&P said it will continue to monitor the position of all Railtrack bondholders over the next few weeks as the various proposals to bring forward a new structure for the management of the U.K.'s railway infrastructure develop.

S&P rates new Ameren convertibles A

Standard & Poor's assigned an A rating to Ameren Corp.'s planned offering of adjustable conversion-rate equity security units. The outlook on the company remains negative.

S&P said the ACES are unsecured and rank equally with Ameren's other unsecured senior obligations.

Because of the two-year mismatch between the mandatory issuance of equity after three years and the maturity of the senior notes at five years, S&P said it does not assume the debt will be canceled by the equity proceeds. Accordingly, the rating agency adjusted the future consolidated capital structure to reflect the higher level of debt represented by the notes.

S&P also said that Ameren's credit quality reflects an average business profile and eroding consolidated financial measures that about a year ago were robust for current ratings. Potentially significant rate reductions at Union Electric Co., lower forward energy prices, additional financing requirements for the installation of a block of combustion turbines, and higher operating expenses will continue to pressure cash flow, earnings protection measures and capital structure balance, S&P added.

S&P downgrades Talk America, still on watch

Standard & Poor's downgraded Talk America Holdings Inc. and kept the company on CreditWatch with negative implications. Ratings affected include Talk America's $250 million 4.5% convertible subordinated notes due Sept. 15, 2002 and its $200 million 5% convertible subordinated notes due 2004, both cut to C from CC.

S&P said it cut Talk America after the company said it may not generate enough cash from operations or be able to raise additional capital to meet the redemption of about $62 million in outstanding 4.5% convertible subordinated notes in September 2002.

With about $22 million in cash at year-end 2001 and company-projected EBITDA of between $22 million and $35 million for 2002, Talk America will indeed have difficulty meeting the obligation when it comes due," S&P said.

S&P puts ONI on positive watch, confirms Ciena

Standard & Poor's put ONI Systems Inc. on CreditWatch with positive implications after Ciena Corp. announced it will acquire ONI for about $900 million in stock. Ratings affected include ONI's $250 million 5% convertible subordinated notes due 2005, rated CCC.

S&P also confirmed Ciena's B+ corporate credit and senior note ratings. Ciena will assume ONI's outstanding convertibles.

On completion of the merger, ONI's subordinated debt will be raised to the same level as Ciena's subordinated debt, S&P said.

It added that Ciena's ratings continue to reflect the company's narrow business position, substantial technology risks and narrow customer base, offset by its still-good financial flexibility.

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