Moody's removes Pacific Gas and Electric from review for downgrade

Moody's Investors Service confirmed the ratings of Pacific Gas and Electric Co. and took them off review for possible downgrade. The outlook is positive.

Moody's said it took the action after reviewing the company's reorganization plan under Chapter 11 filed with the bankruptcy court on Sept. 20.

Moody's said "fixed income investors of Pacific Gas and Electric Company are likely to recoup a high recovery rate on their investment in securities issued by the utility once it emerges from bankruptcy. This view is based upon the high asset value at Pacific Gas and Electric Company relative to the amount of debt and claims outstanding coupled with the underlying need for services provided by the utility. While the current plan, which contemplates 100% recovery of principal and interest for all classes of debt, may change or be altered, Moody's believes that any change or alternate plan would, in all likelihood, result in a high recovery rate of principal and interest."

Among the ratings included in the action are the company's first mortgage bonds and secured pollution control bonds rated B3; senior unsecured notes, unsecured debentures, and unsecured, unenhanced pollution control bonds rated Caa2; preferred stock of PG&E Capital I rated Caa3 and preferred stock rateed Ca.

Moody's puts Southern Calif. Edison on review for upgrade

Moody's Investors Service said it put the ratings of Southern California Edison Company on review for possible upgrade. The action follows Judge Ronald Lew's approval of a Settlement Agreement between SoCalEd and the California Public Utility Commission.

The agreement allows SoCalEd to use the expected surplus cash after meeting its recoverable costs to repay the costs of buying electricity largely incurred during the second half of 2000, Moody's noted.

The rating agency added: "The accumulation of cash along with an anticipated bridge financing at SCE should provide sufficient cash resources to repay all past due bills, including defaulted debt, and provide a predictable stream of cash to repay the anticipated bridge financing and debt previously issued to finance procurement related activities."

Among the SoCalEd ratings affected are first mortgage bonds and secured pollution control bonds rated B3; senior unsecured notes, unsecured debentures, and unsecured pollution control bonds rated Caa2; guaranteed notes of SCE Capital rated Caa2; junior subordinated debt of SCE rated Caa3; and preferred stock rated Ca.

Moody's puts TeleCorp Wireless, Tritel PCS on review for upgrade

Moody's Investors Service put TeleCorp Wireless and Tritel PCS on review for possible upgrade in response to news that AT&T Wireless plans to buy the 77% of TeleCorp PCS it doesn't already own. TeleCorp PCS is the parent of both TeleCorp Wireless and Tritel PCS. The rating action affects $2.9 billion of debt and credit facilities.

The rating agency said Baa2 rated AT&T Wireless will not guarantee the debt of the two issuers. It added that in conducting its review it will "consider the degree of implicit credit support from AT&T Wireless in the absence of an explicit guarantee."

Among the affected ratings are TeleCorp Wireless' $525 million secured credit facilities rated B2; and its $575 million (face) 11.625% subordinated discount notes due 2009 and $450 million 10.625% subordinated notes due 2010 both rated B3; Tritel PCS' $550 million secured credit facilities rated B2; and its $372 million (face) 12.75% subordinated discount notes due 2009 and $450 million 10.375% subordinated discount notes due 2011 rated B3.

Fitch puts TeleCorp, Tritel positive watch

Fitch put the ratings of TeleCorp Wireless and Tritel PCS on Rating Watch Positive following announcement of the proposed acquisition of their parent company TeleCorp PCS, Inc. by AT&T Wireless Services, Inc. (AWS)

The rating agency said the acquisition "significantly enhances" AT&T Wireless' national footprint by adding 16 top 100 markets. It anticipates operational synergies will lead to EBITDA margin enhancements through "bringing roaming traffic on-network, volume equipment procurements for handsets and network, an expanded use of AWS' Digital One Rate pricing plan and national advertising campaigns." Rollout or new technology will also be speeded.

Fitch added: "AWS has significant financial flexibility within its current rating category. The company has produced very strong credit protection measures for its current rating and has a large cash balance resulting from its spin-off from AT&T. The transaction as envisioned will significantly reduce AWS' current financial flexibility. This evaluation includes the prospect that the company will complete the Nextwave spectrum purchase through its Alaskan Native Wireless partnership for $2.3 billion, which is net of its previous $300 million payment. It is also expected that AWS will need to fund a cash shortfall in 2002 due to high capital expenditures reflecting its 3G evolution path and its fixed wireless business. Nevertheless, leverage should remain consistent with the current rating category."

Ratings affected include TeleCorp Wireless' $560 million senior secured credit facility rated B+ and its $575 million 11 5/8% senior subordinated discount notes due April 15, 2009 and $450 million 10 5/8% senior subordinated notes due 2011 rated B-; and Tritel's $560 million senior credit facility rated B+ and its $372 million 12 ¾% senior subordinated discount notes due 2009 and $450 million 10 3/8% senior subordinated notes due 2011 rated B-.

Moody's puts Ackerley on review for upgrade

Moody's Investors Service put the ratings of The Ackerley Group on review for possible upgrade, affecting approximately $300 million of debt.

The review is in response to news that Baa3 rated Clear Channel Communications, Inc. will acquire Ackerley for $497 million in stock plus the assumption of Ackerley's $294 million of outstanding debt.

Moody's said it expects Clear Channel to refinance Ackerley's bank debt and leave the bonds outstanding. It added: "Given Clear Channel's notably higher ratings and long history operating broadcasting assets, Ackerley's senior subordinated notes are likely to be materially upgraded."

Ratings affected include Ackerley's $120 million senior secured bank credit facilities rated Ba3 and its $200 million senior subordinated notes due 2009 rated B3.

S&P puts Ackerley on positive watch

Standard & Poor's put Ackerley Group Inc.'s ratings on CreditWatch with positive implications following the announcement that BBB- ratedClear Channel Communications Inc. will acquire the company in an all-stock deal. S&P rates Ackerley's subordinated debt at CCC+.

When the acquisition closes, S&P will raise Ackerley's subordinated debt to BB+.

Moody's downgrades Budget Group

Moody's Investors Service downgraded Budget Group, Inc. including cutting its $550 million senior secured revolving credit facility to Caa2 from Caa1 and its $400 million senior unsecured notes to Ca from Caa3. The outlook was revised to stable from negative.

Moody's said it took the action because of "the sharp decline in rental car revenue as a result of the September 11 attack on the World Trade Center and expectation that recovery to more normal levels will be gradual at best."

The rating agency anticipates airline travel - the major factor in setting car rental activity - will stabilize over the near term in the range of 75% to 80% of the previous year.

Moody's continued: "While Budget benefits from its significant presence in the off-airport local car rental and the consumer and light commercial truck rental segments (representing about 20% and 30%, respectively, of annual revenue), the projected incremental business decline from the attack will further pressure the company's operating results which already were feeling the impact of the economic slowdown."

S&P puts Affiliated Computer Services on positive watch

Standard & Poor's put Affiliated Computer Services Inc.'s ratings on CreditWatch with positive implications. S&P said the action is a response to news that Affiliated Computer Services will finance the August 2001 acquisition of Lockheed Martin IMS Corp. primarily with equity, as opposed to a previously contemplated $500 million equity offering coupled with a $300 million bond offering.

S&P noted that the $715 million net proceeds from the equity issuance will be used to repay the $550 million bridge loan incurred with the acquisition, with the remainder used to repay a portion of its ACS' bank debt.

The rating agency added: "The acquisition is expected to add to earnings, and it bolsters ACS's position in the rapidly growing state and local government business process outsourcing (BPO) industry."

Among the ratings affected are Affiliated Computer Services Inc.' senior unsecured bank loan rating of BBB- and its subordinated notes rated BB+.

Moody's downgrades Asat senior notes to B1

Moody's Investors Service downgraded ASAT (Finance) LLC's ratings including cutting its $97.7 million of 12½% senior notes to B1 from Ba3, and changed the outlook to negative from stable.

The rating agency said its downgrade "takes into account the heightened risk to ASAT from the protracted downturn in telecommunications capital spending, which, due to the company's high exposure to communications integrated circuit providers, could forestall a recovery in the company's operating performance and impair the company's liquidity. The ratings could be lowered further if balance sheet cash deteriorates significantly, which remains a possibility as long as the company fails to attain a neutral level of free cash flow."

It noted: "Liquidity is limited to the $68 million cash and cash equivalents available at FY2002Q1 end. Structural considerations tied to the outstanding senior notes would constrain the company from arranging for a revolving credit facility after having terminated its original revolver upon the close of its initial public offering in early FY2001."

However Moody's also said the company's cash position could be stabilizing thanks to actions taken "aggressively" to reduce costs.

Moody's downgrades Atlantic Telecom to Ca, negative outlook

Moody's Investors Service downgraded Atlantic Telecom Group plc to Ca from Caa3 with a negative outlook, affecting €320 million of debt.

Moody's said it took the action after Atlantic Telecom announced it has appointed administrators after failing to agree satisfactory terms for a refinancing and restructuring.

The rating agency commented: "Given current market conditions in the European telecommunications sector, the one notch downgrade reflects the uncertainty whether the business can be sold in part or whole by the administrators. There is a high likelihood that Atlantic will suffer substantial discounts to the book value if the company is ultimately liquidated, further weakening recovery prospects for bondholders. Albeit the bondholders continue to benefit from remaining escrowed funds and unrestricted cash, and that Atlantic's bondholders do not rank behind sizeable secured indebtedness, Moody's views the recovery prospects for bondholders to be weak."

Debt affected is Atlantic Telecom's €200.0 million 13.0% unsecured senior notes (with warrants) due 2010 and its £75.0 million 13.25% unsecured senior notes (with warrants) due 2010.

Moody's puts Tekni-Plex on review for downgrade

Moody's Investors Service put the ratings of Tekni-Plex, Inc. on review for downgrade, affecting $715 million of debt securities.

Moody's said the review reflects its concerns over "Tekni-Plex's weak operating performance relative to our original expectations, its tight liquidity which is exacerbated by higher than anticipated inventory levels, and its modest credit statistics notably weak coverage of interest expense and low retained cash as a percentage of total debt. In our opinion, financial leverage is high particularly relative to current enterprise value reflecting the company's reduced cash flow."

The rating agency said its review will focus on Tekni-Plex plans for financing its $80 million acquisition of the garden hose business of Mark IV Industries, Inc. together with an analysis of the acquired company's financials and the impact of the acquisition on Tekni-Plex's weak balance sheet.

Ratings affected include the $440 million secured credit facility rated B1 and the $275 million 12.75% senior subordinated notes due 2010 rated B3.

S&P revises The Pantry Inc. outlook to negative from stable

Standard & Poor's revised its outlook on The Pantry, Inc., to negative from stable, and affirmed the company's BB- corporate credit and senior secured bank loan ratings, as well as its B subordinated debt rating.

"Significant wholesale gasoline price increases in fiscals 2000 and 2001 negatively affected The Pantry's operations," the rating agency stated, adding that S&P believes gasoline price volatility may continue due to the aftermath of the Sept. 11 terrorist acts and the weakening U.S. economy.

Because of the weakening lease-adjusted EBITDA coverage of interest is expected to decline to the low-2 times area in 2001 from the mid-2x area in 2000 and 1999, S&P stated, adding that the company's total debt to EBITDA is in the mid-4x area. Financial flexibility, S&P went on, is provided by a $45 million revolver.

The Pantry, Inc., based in Sanford, N.C., operates more than 1,300 convenience stores in the Southeast.

Moody's downgrades DTE Burns Harbor

Moody's lowered its rating for DTE Burns Harbor, LLC to Ba3 from Ba2 to reflect the rating agency's downgrade of Bethlehem Steel Corp. DTE Burns Harbor's outlook remains negative.

DTE Burns Harbor is an indirect wholly-owned subsidiary of DTE Energy Company (DTE), the holding company of Detroit Edison Company, Inc. In 1998 DTE Burns Harbor issued $163 million of senior secured bonds due 2003 to finance its purchase of the No. 1 coke battery at Bethlehem Steel's

Burns Harbor Steel Plant, located in Burns Harbor, Indiana. DTE Burns Harbor sells coke to Bethlehem Steel under an indexed "take and pay" contract.

Moody's downgrade of Bethlehem Steel's senior implied rating to Caa1 from B3 with a negative outlook was prompted by Moody's expectation that the slowing U.S. economy and continuing weakness in industrial production has significantly impacted Bethlehem's profitability and liquidity.

Moody's caps DTE Burns Harbor's rating by the weighted average rating of its revenue providers, Bethlehem Steel and DTE, the report said, adding that approximately 35% of DTE Burns Harbor's projected annual cash flows derive from the sale of coke to Bethlehem.

DTE Burns Harbor is based in Ann Arbor, Mich. DTE is based in Detroit, Mich.

Moody's cuts Guess? sub notes to B2

Moody's Investors Service downgraded Guess? Inc.'s debt ratings, including cutting its senior subordinated notes due 2003 to B2 from Ba3. The outlook is negative.

Moody's commented: "The new ratings reflect heightened uncertainty about the near to medium term operating outlook of Guess' core wholesale and retail businesses, whose prognosis had been weak even before consumer sentiment declined in the aftermath of September 11th. Moody's believes that Guess is likely to report an operating loss prior to inclusion of royalty income for the full year 2001.

"The ratings also incorporate the volatility of Guess' revenues and operating profitability, typical of a highly fashion-oriented manufacturer and retailer; and high lease payments relative to retail sales, which increases the sensitivity of profit margins to changes in store productivity."

On the positive side, it added that the ratings are helped by "historically consistent trends and diversified sources of royalty income, which appear likely to remain sufficient to comfortably cover the company's debt service costs; current levels of availability under its $125 million revolving credit facility, and largely discretionary levels of capital expenditures in the near future; and the company's efforts to reduce working capital and fixed costs, which Moody's believes will continue to benefit Guess' financial condition through future periods."

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