S&P cuts Level 3

Standard & Poor's downgraded Level 3 Communications Inc. and removed it from CreditWatch with negative implications. The outlook is negative. Ratings lowered include Level 3's $2 billion 9.125% senior notes due 2008, $834 million 10.5% senior discount notes due 2008, $823 million 6% convertible subordinated notes due 2009, $800 million 11% senior notes due 2008, $250 million 11.25% senior notes due 2010, $675 million 10.75% senior discount notes due 2010, €500 million 10.75% senior notes due 2008, €300 million 11.25% senior notes due 2010 and $863 million 6% convertible subordinated notes due 2010, all cut to CC from CCC-.

S&P said it lowered Level 3 because it does not believe the company will be able to generate substantial cash flows to materially reduce its leverage due to poor fundamentals of the data transport industry.

The industry is expected to remain weak for many years due to excess capacity, slow demand for long-haul data services, and potentially increased competition from service providers that may emerge from bankruptcy, S&P said.

Given Level 3's substantial leverage, weak interest coverage, and limited liquidity, the company is not well positioned to deal with such weak industry fundamentals, the rating agency added.

S&P noted Level 3 was originally put on CreditWatch with negative implications in January 2002 due to concerns it 3 would violate its minimum telecom revenue bank covenant. The company has been able to meet this covenant through additional revenues gained from two software companies that were acquired in the first half of 2002.

Based in part on the company's guidance of $400 million in consolidated adjusted EBITDA for 2002, debt to EBITDA leverage is projected to be about 16 times at year-end 2002, with EBITDA interest coverage of less than 0.8x for the year, S&P said. Liquidity of about $1.5 billion in cash and $650 million in availability under a revolving bank facility on July 31, 2002, provides only a limited safety margin after adjusting for future capital expenditures, working capital requirements, and more than $500 million in annual interest expense. With Level 3 now positioning itself as an industry consolidator, additional acquisitions have the potential to further strain liquidity.

Recent actions to focus on financially solid customers, reduce overhead, cut capital expenditures and sell assets along with the repurchase of $1.7 billion in senior and convertible subordinated notes for $731 million in October 2001 and the recent investment of $500 million by "a group of well-known investors" are steps are in the right direction, S&P said. But it added that it remains concerned that they are "not sufficient to eliminate the possibility of a distressed debt exchange or bankruptcy filing."

S&P cuts Evercom to D

Standard & Poor's downgraded Evercom, Inc. including lowering its $115 million 11% senior notes due 2007 to D from CC.

S&P said the action follows Evercom's announcement it did not pay $6.3 million in interest on its senior unsecured notes that was due on July 1.

Fitch upgrades Telkomsel

Fitch Ratings upgraded PT Telekomunikasi Selular (Telkomsel)'s foreign currency rating to B from B-. Also upgrade to B from B- are by Telekomunikasi Selular Finance Ltd.'s $150 million notes.

Fitch said the action follows its recent upgrade of the Republic of Indonesia to B from B-.

Telkomsel's rating is capped by the rating of the Republic.

Fitch cuts AES Tiete

Fitch Ratings downgraded AES Tiete Certificates Grantor Trust's certificates to BB- from BB+.

Fitch said the action follows its downgrade of the local and foreign currency ratings of Eletropaulo Metropolitana Eletricidade de Sao Paulo SA to B-. All ratings were also put on Rating Watch Negative.

Fitch said the rating of the certificates is based on the credit quality of Tiete's offtakers, including Eletropaulo. Because Eletropaulo represents only 30% of Tiete's revenues the ratings are not lowered to Eletropaulo's level.

S&P cuts Telewest

Standard & Poor's downgraded Telewest Communications plc and kept it on CreditWatch with negative implications.

Ratings lowered include Telewest Communications Networks Ltd.'s £250 million senior secured bank loan due 2008 and £2 billion senior secured bank loan due 2007, both cut to CCC- from B, Telewest Communications plc's various notes and debentures, cut to C from CCC-, and Telewest Finance (Jersey) Ltd.'s $500 million 6% convertible bonds due 2005, cut to C from CCC-.

Fitch cuts Allied Waste outlook

Fitch Ratings changed its outlook on Allied Waste Industries, Inc. to negative from stable and confirmed its ratings. Debt affected includes Allied Waste North America's $1.3 billion senior secured credit facility and $2.9 billion tranche A,B,C loan facilities at BB, $3.1 billion senior secured notes at BB- and $2.0 billion senior subordinated notes at B and Browning Ferris Industries' $741 million senior secured notes, debentures and MTNs at BB-.

Fitch said the outlook change reflects the adverse effect that the weak economy has had on Allied Waste's ability to increase prices in certain business segments, pressuring margins and free cash flow generation.

Competitive pricing in the industrial and construction roll off segments has led to negative year over year pricing for the last couple of quarters and there are no indications of near term improvement, Fitch said.

Allied Waste has been unable to achieve price increases sufficient to offset higher costs, especially insurance and health related expenses. As a result, EBITDA expectations continue to moderate and Fitch said free cash flow with which to reduce debt will be lower than it had originally expected.

Although the pace of debt reduction has moderated, the company should remain cash flow positive even under slightly further reduced economic conditions, Fitch added.

S&P raises Rent-A-Center

Standard & Poor's upgraded Rent-A-Center Inc. and removed it from CreditWatch with positive implications. The outlook is stable. Ratings lifted include Rent-A-Center's $300 million 11% senior subordinated notes due 2008, upgraded to B+ from B, and $120 million revolving credit facility due 2004, $203 million term loan B due 2006, $248 million term loan C due 2007 and $125 million term loan D due 2007, all raised to BB from BB-.

S&P said the action is in response to a significant reduction in Rent-A-Center's leverage due to the conversion of its series A preferred stock to common equity and the prepayment of $128 million of term debt in the second quarter of 2002.

The conversion of the preferred stock to common equity eliminated about $200 million of debt-like preferred shares whose dividends would have been payable in cash in August 2003, S&P noted. Rent-A-Center also prepaid $128 million of senior debt in the second quarter after experiencing increased profitability due to higher-than-anticipated revenues and the benefit of cost-control programs.

As a result, the company's leverage has been significantly reduced, with total debt to EBITDA of 2.3 times for the 12-month period ended June 30, 2002, compared with 3.8x in the comparable period of 2001, S&P said.

Moody's puts Coral on review

Moody's Investors Service put Coral Group plc on review for possible downgrade including its senior subordinated notes due 2009 at B3 and Coral Group Trading Ltd.'s senior secured bank facility at B1.

Moody's said the action follows the announced acquisition of Coral by Charterhouse Development Capital for approximately £860 million.

Moody's said the review reflects the potential that Coral's debt levels (excluding the company's deeply subordinated PIK debt) may materially increase given the significant equity element of the acquisition that would be required to maintain or reduce the company's existing debt levels (£245.8 in existing cash pay debt as of April 14, 2002).

Moody's added that it believes there is a strong possibility that the acquisition would result in a refinancing of Coral's existing debt.

Fitch cuts Cornerstone

Fitch Ratings downgraded Cornerstone Propane Partners, LP's $45 million senior notes to D from C and Cornerstone Propane, LP's $365 million senior secured notes to DD from C.

Fitch said the action follows the announcement that the partnership has elected not to make the approximate $5.6 million interest payment on three tranches of Cornerstone's outstanding senior secured notes due on July 31.

In addition, the partnership has announced that it is continuing to review its financial and strategic options, including the commencement of a Chapter 11 case, Fitch noted.

While expected recovery values are highly speculative and cannot be estimated with any precision, a DD rating indicates potential recoveries in the range of 50% to 90%, while a D rating indicates a recovery level below 50%, Fitch said.

S&P says Collins & Aikman unchanged

Standard & Poor's said Collins & Aikman Corp.'s ratings remain unchanged after the company's second quarter earnings announcement. S&P gives Collins & Aikman a corporate credit rating of BB- with a stable outlook.

S&P said earnings of $16 million, and $6.5 million or 9 cents per diluted share excluding one time adjustments, were well below analysts' expected 26 cents per share.

But the rating agency said Collins & Aikman remains focused on improving its financial profile.

Planned synergies and cost reductions, and a book of new business should result in improved earnings and cash flow generation and reduced debt usage, S&P said. Over time, S&P expects EBITDA interest coverage to average 2.5 times and total debt to EBITDA to average between 4.0x and 4.5x, satisfactory levels for the ratings.

Moody's rates Chesapeake notes B1

Moody's Investors Service assigned a B1 rating to Chesapeake Energy Corp.'s planned $250 million senior unsecured notes due 2012 and confirmed its existing ratings including Chesapeake's $108 million 7.875% senior unsecured notes due 2004, $250 million 8.375% senior unsecured notes due 2008 $800 million 8.125% senior unsecured notes due 2011 and $143 million 8.5% senior unsecured notes due 2012 at B1 and its $150 million 6.75% convertible preferred at Caa1. The outlook is positive.

Moody's said the positive outlook reflects the potential over time for Chesapeake to grow its asset base relative to its debt burden on proven developed reserves through reinvestment of excess cash flows.

Chesapeake's cash flows have benefited from $167 million of cash hedging gains in 2001 through the first half of 2002 and $35 million of cash premiums received on hedging activities in the second quarter of 2002, supporting investment spending levels.

Chesapeake's ratings are limited by high financial leverage ($1.02 of debt/proven developed mcfe, pro forma for the note issue and pending acquisitions); a high interest and preferred dividend burden on production ($.72/mcfe, pro forma); and aggressive growth objectives that entail potential for acquisition activity, including possibly large, leveraged acquisitions, Moody's said.

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