Fitch cuts BCE Teleglobe

Fitch Ratings downgraded BCE Teleglobe's $1.3 billion of senior unsecured notes to CCC- from B+ and put it on Rating Watch Negative.

Fitch said its analysis shows the likelihood of a debt restructuring is high and the probability its credit facility being extended past July 2002 is low.

BCE Inc., Teleglobe's parent, will be reviewing strategic alternatives for Teleglobe, including reassessing the continuance of funding Teleglobe under its current plan, as well as the possibility of restructuring or renegotiating Teleglobe's debt, Fitch noted. Concurrently, Teleglobe management intends to thoroughly review its operations and current business plan.

Fitch believes the consideration of a debt restructuring is a change in stance on the part of BCE and is a strong indication that BCE will not be supporting Teleglobe's senior unsecured noteholders. The now removed Rating Watch Evolving had considered that if BCE were to support the bank facility, an upgrade would be possible.

The rating is based on public information.

Moody's rates Standard Pacific notes Ba3

Moody's Investors Service assigned a Ba3 rating to Standard Pacific Corp.'s new $150 million senior subordinated notes due 2012 and confirmed the company's existing ratings including its $450 million revolving credit facility due 2004, $100 million 8.5% senior notes due 2007, $100 million 8% senior notes due 2008, $150 million 8.5% senior notes due 2009 and $125 million 9.5% senior notes due 2010 at Ba2. The outlook remains stable.

Moody's said the ratings reflect the strength of Standard Pacific's major markets in California, steady improvement in margins and strong returns, moderate homebuilder debt leverage, continued efforts to diversify geographically and a conservative land policy.

Negatives are the risks of having a regional concentration in California, integration risks from acquisitions, the stock buyback program and the cyclical nature of the homebuilding industry.

Moody's notes that Standard Pacific derived 51% of its home closings in California in 2001, down from 79% in 1996, but its profits from the Golden State constituted a significantly greater proportion of its homebuilding total.

"Fortunately for the company, California as a whole has been extremely strong for a number of years, and even the Bay Area, which suffered a sharp contraction last year, has come roaring back," Moody's commented.

Moody's lowers Dollar General to Ba2

Moody's Investors Service lowered Dollar General Corp.'s long-term rating to Ba2 because of concerns that its operating infrastructure can't keep up with rapid growth. The company's senior unsecured guaranteed notes were downgraded to Ba2 from Ba1 and a senior implied rating and issuer rating of Ba2 was established.

A negative outlook has been assigned to the company because bank financing needed for upcoming maturities and payments has not been completed, there is uncertainty due to a Securities and Exchange Commission investigation of accounting irregularities and there is growth strategy risk, according to Moody's.

Dollar General needs to refinance its bank loan in order to repay the $383 million of maturing debt associated with its synthetic lease structure and make a payment of $162 million, less $30 million which is covered by insurance, to plaintiffs as a settlement of the shareholder lawsuits, Moody's said. Discussions with banks have been initiated, however, there is no guarantee that a credit facility will be obtained.

Moody's raises Home Interiors' notes to Caa2; bank debt B3

Moody's Investors Service upgraded with a positive outlook Home Interior & Gifts Inc.'s debt ratings due to improvements in the company's financials. The $150 million 10.25% senior subordinated notes due 2008 were raised to Caa2 from Ca, the $30 million secured revolver and $162 million terms were raised to B3 from Caa1, the senior implied rating was raised to B3 from Caa1 and the senior unsecured issuer rating was raised to Caa1 from Caa2.

The upgrade, according to Moody's, reflects improvements in operating results and debt reduction and ratings could go even higher if the company continues on this path. The ratings reflect the company's "high leverage, modest cash flow generation, insufficient asset coverage of debt, and volatility in operating performance," Moody's said.

As a result of improvements to operating profitability and its balance sheet, Home Interior's full-year cash from operations was sufficient to cover interest expense, capex and debt amortization, the rating agency said. EBITDA to fixed costs plus debt service was 1.5 times, and coverage of capex and fixed costs was 1.2 times. Inventory turns slowed to about six times during 2001, but the decline was offset by higher gross margins as a result of an increase in sales of company-produced merchandise.

Fitch rates Hasbro's credit facility BB+

Fitch Ratings assigned a rating of BB+ to Hasbro's $380 million secured bank credit facility and affirmed the company's BB senior unsecured debt rating. The outlook remains negative.

The amended and restated revolver was entered into on March 19, 2002 to replace the previous $650 million loan. The new loan is secured by receivables, inventories and intellectual property, according to Fitch.

"The ratings reflect the company's strong market presence and its diverse portfolio of brands balanced against the cyclical and shifting nature of the toy industry," the Fitch release said. "The ratings also consider the challenges the company continues to face in refocusing its strategy on its core brands and its weak financial profile. The Negative Outlook reflects uncertainty as to the company's ability to successfully execute its strategy and its ability to achieve revenue targets for its core brands as well as Star Wars in 2002."

As of Dec. 31, 2001, Hasbro had a total of $1.2 billion debt outstanding.

S&P cuts Magellan Health outlook

Standard & Poor's lowered its outlook on Magellan Health Services Inc. to negative, attributing the change to results in the six months to Dec. 31, 2001 that were considerably weaker than the past several years. S&P also confirmed its B+ counterparty credit rating on Magellan.

"Magellan's near-term prospects for a return to the robust operating results it had experienced in the past are poor," S&P said.

Business conditions have recently squeezed margins, particularly in employee assistance programs, S&P noted. In addition, the significant loss of covered individuals at Magellan's largest customer, Aetna Inc., will affect revenue in the quarter ended March 31, 2002.

Magellan's leverage continues to improve slowly but in December management needed to obtain an amendment from its bank group to a covenant in its credit agreement that called for a decline in a key leverage ratio, the rating agency said.

S&P added that it believes that unless the current run rate of operating results improves Magellan might have to seek another amendment of this covenant.

Moody's keeps ProSiebenSat unchanged

Moody's Investors Service said it left unchanged ProSiebenSat.1's Ba3 rating with a negative outlook on €400 million of debt following the announcement that KirchMedia GmbH & Co. KGaA which owns 52.52% of ProSiebenSat.1's capital stock has filed for insolvency.

Moody's said it maintained ProSiebenSat.1's rating based on the likelihood that the group will be able to continue operating independently in the German free-to-air TV market on a going concern basis.

If this appears less likely, the rating could be reviewed with potentially substantial adverse consequences, the rating agency added.

Moody's said it considers ProSiebenSat.1's creditworthiness to be underpinned both by its own stand-alone credit fundamentals as well as the effective ring fencing of its position and assets under the requirements of German corporate law.

S&P puts PDVSA Finance on review for cut to junk

Standard & Poor's put the senior unsecured notes issued by PDVSA Finance Ltd., a wholly owned subsidiary of Petroleos de Venezuela SA (PDVSA), on CreditWatch with negative implications. The $3.6 billion and €200 million notes are currently rated BBB-.

S&P put PDVSA Finance on CreditWatch because of the increased probability of a downgrade if the current dispute between workers at PDVSA and the Venezuelan government leads to a substantial decline in output.

Any downgrade will depend on S&P's assessment of any impairment of the short- and long-term production capacity of PDVSA, which is threatened by the unexpectedly severe reaction of PDVSA management to the government's politically motivated changes in senior management and the board of directors.

S&P requires that investment-grade future flow transactions maintain liquidity reserves equal to at least three month's debt service and to have strong cash flow coverage of debt service help to reduce the risk of either payment default or covenant breaches that could result from events such as a prolonged strike by PDVSA workers.

S&P downgrades Spherion

Standard & Poor's downgraded Spherion Corp. The outlook is stable

Ratings affected include Spherion's $150 million 4.5% convertible subordinated notes due 2005, cut to B+ from BB+ and its $325 million revolving credit facility due 2004 and $75 million 364-day facility, both cut to BB from BBB-.

S&P downgrades Elgar

Standard & Poor's downgraded Elgar Holdings Inc. and kept it on CreditWatch with negative implications. Ratings affected include Elgar's $15 million revolving credit facility due 2003, cut to CCC- from B-, and its $90 million 9.5% senior notes due 2008, cut to CC from CCC+.

S&P said it lowered Elgar's ratings because of its severe liquidity problems.

Elgar is operating under a waiver of its credit facility, which calls for the full amount of loans outstanding - $13.8 million plus accrued interest - to be repaid by June 28, 2002, S&P noted.

Elgar, which designs and manufactures power conditioning equipment used by the semiconductor and automated test equipment markets, is suffering from the protracted downturn in these industries that is likely to pressure sales and profitability over the near to intermediate term.

As a result of lagging industry demand and weaker sales, operating margins decreased to about 9% in 2001 from 16% in 2000, S&P said.

Elgar Holdings is highly leveraged, with a total debt of $104 million compared with EBITDA of just $5.4 million for 2001. Cash flow coverage of interest was 0.6 times for 2001. Elgar has to obtain other sources of funding to meet its debt service and working capital requirements, S&P added.

S&P cuts Call-Net

Standard & Poor's downgraded Call-Net Enterprises Inc. including cutting its notes to D from CC after it completed its C$2.0 billion recapitalization plan.

Although there was no default under the bond indentures, S&P said it also defines default to be instances where bondholders receive significantly less than par.

In the exchange bondholders received less than face value on about US$1.7 billion of long-term debt outstanding.

S&P said it will shortly assign a new corporate credit rating to the company and a debt rating to its new 10.625% US$377.0 million senior secured notes due Dec. 31, 2008, both of which are expected to be rated in the single-B category.

Moody's downgrades Grupo Minero Mexico

Moody's Investors Service downgraded the Secured Export Notes issued by Grupo Mexico Export Master Trust No.1 to Caa3 from Caa1 and the ratings of Grupo Minero Mexico Guaranteed Senior Notes Series A and B to Ca from Caa2, affecting $963 million of securities.

Moody's said it cut the notes because of Grupo Minero Mexico's continued difficulties reaching a restructuring agreement with its creditors and the ongoing and severe deterioration of the company's liquidity position.

Affecting GMM's liquidity are the trapping of export collections by the SEN holders after the waiver previously given expired on March 28, 2002 and weak copper prices that, although having recovered somewhat from the low levels of November 2001, are still putting pressure on the company's earnings, cash flow and receivable generation.

In addition, the strike by workers at GMM's four mining operations in Mexico, which has been settled at three of the mines but remains ongoing at the La Caridad mining, smelting and refining facility is expected to impact production, which will likely have a follow-on impact on liquidity, Moody's said.

Moody's rates new Alltrista notes B3

Moody's Investors Service a B3 rating to Alltrista Corp.'s new issue of $150 million senior subordinated notes due 2012.

Moody's said the ratings are restrained by the susceptibility of the newly acquired business' main product line to possible changes in consumer preferences in regard to its value and convenience proposition. This product line is also susceptible to general margin compression and working capital support dynamics as it completes its migration from its past infomercial sales methods to more traditional sales and distribution channels, the rating agency added.

Further, while this product's profit profile is enhanced by the low-cost, high-quality manufacturing characteristics it now enjoys from being made in three separate locations in Mainland China, this strength also exposes it to logistical, political, and trade related risks.

However Alltrista's legacy businesses have stable cash flows of $25-30 million annually, augmented by the strong growth cash flows of the newly acquired Tilia business of $30-40 million per annum, with recent historical double digit growth rates.

Tilia not only contributes to aggregate sales and cash flow growth, but to marketing synergies and possible brand revitalization opportunities as well, Moody's said.

The company will have pro forma funded debt of $215 million, and book equity of $35 million, on $312 million in assets. Pro forma 2001 revenues of $425 million and EBITDA of $68 million (EBITA $56 million) suggest initial cash flow leverage and interest coverage of 3.0x and 4.1x respectively (3.7x and 3.4x respectively on an EBITA basis), Moody's said.

Moody's rates new Compass Minerals notes B3

Moody's Investors Service assigned a B3 rating to Compass Minerals Group, Inc.'s add-on senior subordinated notes and confirmed its existing ratings including its $135 million senior secured guaranteed revolving credit facility maturing 2009 and $150 million senior secured guaranteed term loan maturing 2008 at B1 and its $250 million senior subordinated guaranteed notes due 2011 at B3. The outlook is stable.

Moody's said the ratings continue to reflect Compass' high leverage, and the overall effect of weather conditions on demand for road salt deicing as mild winters result in earnings fluctuations. Road salt deicing comprises approximately 40% of net sales after shipping and handling, and about 60% of operating income.

The ratings also reflect the potential impact of overall economic and competitive conditions on the prices of salt for deicing, and on prices for salt products for general trade, Moody's said.

Compass also faces the possibility of increased regulation of road salt in Canada particularly in view of a report released in December 2001 by the Canadian government which concluded that road salts should be considered toxic pursuant to the Canadian Environmental Protection Act.

Positives include the company's leading market positions - approximately 30% of total North American salt production, 55% of U.K. salt production and about 56% of North American sulfate of potash production - and Compass' low cost operating positions in its markets due to the size and quality of its salt and SOP reserves, and facilities that are located near rail or water transport, and significant barriers to entry, Moody's said.

Moody's rates new Starwood notes at Ba1

Moody's assigned a Ba1 rating to Starwood's new senior notes due 2007 and 2012 and confirmed other ratings including its bank credit facilities, increasing rate notes and convertible zero coupon senior notes at Ba1, maintaining a negative outlook.

The ratings reflect increased risk of earnings volatility due to the weak economy and continued softness in the travel industry, as well as the likelihood that it will take time for the company's earnings to rebound, Moody's said. The rating confirmation also reflects Starwood's brand equity, scale and geographically diversified hotel portfolio.

Proceeds of the new notes will be used to repay the senior secured notes facility and a portion of the senior credit facility, so the issue should not impact credit statistics. All new debt will be pari passu with existing debt.

Moody's noted that Starwood's debt protection measures have improved substantially since its acquisition of Sheraton and Westin. Prior to the Sept. 11 attacks, Starwood's credit statistics had deteriorated slightly from prior year levels due to the negative RevPar (revenue per available room) trends.

The events of Sept. 11 had an immediate and significant negative effect on earnings, given the precipitous decline in travel and the inherent negative operating leverage of the company as an owner operator of hotels. However, RevPar trends at Starwood hotels have rebounded to some degree and continue to show improvement.

Absent asset sales, Moody's does not expect that the company can improve its credit statistics quickly given its reliance on owned hotels, as well as its concentration in the upscale segment.

Fitch cuts Flag

Fitch Ratings downgraded the senior unsecured debt rating of Flag Telecom Holdings Ltd. to D from B+ after it announced a proposed debt restructuring. Flag Ltd.'s BB+ rating was also cut to D.

S&P raises LifePoint outlook

Standard & Poor's revised its outlook on LifePoint Hospitals Inc. to positive and confirmed its ratings including the corporate credit at BB-.

S&P said that continued strong cash flow coupled with adherence to a modest, well-disciplined acquisition policy without material use of debt, could lead to an upgrade for LifePoint.

The rating agency added that its assessment of LifePoint reflects the company's strong positions in its small-market locations, offset by its dependence for most of its cash flow on about one-quarter of its hospitals.

Aggressive physician recruitment and service additions and enhancements are the company's key growth strategies to address the significant migration of local population to surrounding areas for certain services. However, the company's revenue concentration in two states leaves it vulnerable to legislative and economic changes within these markets, S&P added.

LifePoint Hospitals has been active in its efforts to improve its credit protection measures; proceeds of an equity offering in 2001 were used to repay debt, S&P noted.

Strong free cash flow after meeting all capital needs and funding all acquisition activity has allowed LifePoint to accumulate significant cash. The use of this cash to repay high interest rate debt may further enhance cash flow and will reduce further its current lease-adjusted debt to capitalization ratio of 35% as of Dec. 31, 2001, S&P said.

S&P withdraws Micro Warehouse ratings

Standard & Poor's said it withdrew its rating on Micro Warehouse Inc. due to insufficient information from the company to maintain the rating.

The previous ratings had been downgraded and left on CreditWatch on Dec. 21, 2001 due to deteriorating operating performance, weakening credit protection measures and limited financial flexibility, S&P said.

S&P rates new Swift Energy notes B

Standard & Poor's assigned a B rating to Swift Energy Co.'s $150 million of senior unsecured notes due 2012.

S&P cuts Blom Bank

Standard & Poor's downgraded Blom Bank sal's $75 million of 9% notes due 2005 to CCC from CCC+.

S&P cuts Banque de la Mediterranee

Standard & Poor's downgraded Banque de la Mediterranee sal's $500 million CD program, $125 million 8.75% notes due 2002 and $75 million 8.625% notes due 2003 to B- from B.

S&P cuts Banque Audi

Standard & Poor's downgraded Banque Audi sal's $75 million step-up notes due 2007 to CCC from CCC+.

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