Moody's cuts Rite Aid

Moody's Investors Service rated Rite Aid Corp.'s new $250 million of 4.75% convertible notes due 2006 at Caa3 and downgraded all other ratings of the company, including the senior secured notes to Caa1 from B3 but confirmed the redeemable preferred stock at C. The rating outlook is negative.

The ratings reflect Moody's concerns with respect to the long-term sustainability of the company's current capital structure, given the opinion that operating cash flow will not reliably cover cash interest payments going forward.

Moody's believes that operating cash flow may not grow enough to support all of the company's liabilities over the intermediate term, in spite of balance sheet debt reduction of $2 billion during 2001. The negative outlook reflects the possibility that ratings could be lowered again within the next several quarters if liquidity constraints were to cause pressures in paying all obligations according to contractual terms or if the company experienced difficulties in complying with bank agreement covenants. Progress towards substantial leverage reduction, a stronger liquidity position and improved operations will be necessary for rating improvement.

Fitch affirms CMS Energy, takes various actions on units

Fitch Ratings affirmed the senior secured and senior unsecured ratings of CMS Energy Corp. and its Consumers Energy Co. and CMS Panhandle Pipe Line Co. units, downgraded Consumers Energy's preferred securities and changed the outlook on Panhandle Pipe Line to negative from stable, resulting in the outlooks for all three companies being negative. Ratings affected include CMS Energy's senior unsecured debt at BB+ and its preferred stock at BB-, Consumers Energy's senior secured debt at BBB+ and its preferred stock, cut to BB+ from BBB-, and CMS Panhandle Pipe Line's senior unsecured debt at BBB.

Fitch said its action concludes a review that examined CMS' asset and business divestitures and debt reduction.

Fitch noted the actions reduced parent company debt by $613 million between September 2001 and February 2002.

The downgrade of Consumers' preferred and trust preferred ratings reflects Fitch's notching practice to reflect a differential in the ultimate recovery prospects for holders of junior securities relative to senior debt.

The negative rating outlook reflects: the continuing high level of consolidated and parent debt; tight cash flow coverage of projected interest expense due to the elimination of cash flow from the businesses sold in 2001; and unfavorable market environment for further asset sales, Fitch said.

Despite the progress, consolidated debt remains relatively high for the BB+ category, with financial leverage of approximately 66% after completed asset sales, Fitch added. In addition, CMS is burdened by almost $3 billion of debt at the parent level.

Fitch puts Tesoro on negative watch

Fitch Ratings put Tesoro Petroleum Corp. on Rating Watch Negative. Ratings affected include Tesoro's senior secured revolving credit facility at BB+ and subordinated debt at BB-.

Fitch said its action follows Tesoro's announcement it will acquire Valero's 168,000 barrel per day Golden Eagle refinery and 70 associated marketing sites for $945 million plus working capital estimated at $130 million and up to $150 million of contingency payments if California refining industry margins exceed a certain threshold.

Tesoro's initial plans to finance the acquisition include an issuance of new debt and $250 million of equity.

Fitch said the rating watch is until the transaction closes at which point Tesoro's debt will likely be downgraded.

Fitch downgrades US Industries, still on watch

Fitch Ratings downgraded US Industries, Inc.'s $375 million senior secured notes to B- and kept them on Rating Watch Negative. The notes have USI American Holdings, Inc. and USI Global Corp. as co-obligors and are guaranteed by USI Atlantic Corp.

Fitch said the downgrade reflects US Industries' expected highly leveraged profile after the asset disposal program currently underway.

In addition, Fitch said there is still uncertainty about the company's ability to execute anticipated asset sales in a timely fashion and further restructure its bank facilities.

An unfavorable outcome regarding these future transactions could lead to default, hence the Rating Watch Negative, Fitch said.

Moody's cuts Advanced Lighting

Moody's Investors Service downgraded Advanced Lighting Technologies Inc. including lowering its $100 million of 8% senior notes due 2008 to Caa2 from B2. The outlook remains negative.

Moody's said the downgrade reflects Advanced Lighting's "poor operating performance, substantially weakened credit protection measures, and constrained financial flexibility."

The ongoing economic recession and sharply reduced demand for Advanced Lighting's metal halide products, which accounted for 74% of the company's 2001 revenues, have affected the company's financial performance, Moody's said.

The rating agency noted sales growth in metal halide lighting products - about 6% of the worldwide lighting market and 7% of the US lighting market - has become negative after a decade of double-digit annual growth in the 1990s.

In addition, Advanced Lighting's optical coating business has suffered from the slowdown in the telecommunications industry.

Moody's confirms KSL, cuts outlook to negative

Moody's Investors Service lowered its outlook on of KSL Recreation Group, Inc. to negative from stable and confirmed the company's ratings, affecting $636 million of debt including its $239.6 million revolving credit facility due 2004, $48 million term loan A due 2005, $48 million term loan B due 2005 and $175.0 million term loan C due 2005 at Ba3; and its 10.25% $125 million senior subordinated notes due 2007 at B2.

Moody's said its action ends a review of KSL's ratings and reflects the company's ability to absorb the near-term financial impact related to the Sept. 11 attacks.

Although KSL has experienced recent RevPar declines similar to other high-end lodging and resort companies, the company is expected to continue to generate positive free cash flow and apply it towards debt reduction, Moody's said.

The rating agency also noted KSL has high quality assets and a favorable debt maturity profile.

Except for the $275 million non-recourse Grand Wailea Resort Hotel & Spa mortgage notes due in November 2002, there are no material debt maturities until the revolving credit facility expires in 2004. KSL is currently reviewing alternatives related to the refinancing of these mortgage notes, Moody's said.

Moody's confirms Venetian Casino, cuts outlook

Moody's Investors Service lowered its outlook on Las Vegas Sands, Inc. and its co-issuer and subsidiary, Venetian Casino Resort, LLC to negative from stable and confirmed the companies' ratings, ending the ratings review begun after the Sept. 11 terrorist attacks. Ratings affected include the company's $425 million 12.25% mortgage notes due 2004 at Caa1, $97.5 million of 14.25% senior subordinated notes due 2005 at Caa3, and $193 million secured bank facility due 2003 at B2.

Moody's said its action reflects the stabilization of occupancy, average daily rate, and RevPar trends, recent cost cutting efforts, and the third quarter 2001 amendment to the company's bank credit facility. Venetian modified scheduled amortization payments on its term loans and extended the revolver termination date to June 2003 from September 2001, Moody's noted. The company also delayed its planned Phase 1A expansion.

"Combined, these factors provide the company with some additional flexibility to manage through the near-term challenges associated with a slowing economy and travel concerns," Moody's said.

S&P cuts Alliance Atlantis outlook

Standard & Poor's lowered its outlook on Alliance Atlantis Communications Inc. to stable from positive and confirmed the company's ratings including its subordinated debt at B.

S&P said it revised Alliance Atlantis' outlook because of the company's growth strategy during the past two years and in particular its ongoing annual investment in film and television programming which resulted in higher-than-expected debt levels and weaker-than-anticipated credit measures.

Despite an expected strengthening in its business profile, Alliance Atlantis' "aggressive financial policy" will limit the rating, S&P said.

S&P cuts Globix to D

Standard & Poor's lowered the corporate credit and senior unsecured note ratings on Globix Corp. to D from CC after the company failed to make the interest payment due Feb. 1. Ratings affected include Globix's $600 million 12.5% senior notes due 2010.

S&P noted Globix plans to restructure its debt through a voluntary prepackaged bankruptcy proceeding under Chapter 11.

S&P downgrades Shiloh, still on watch

Standard & Poor's downgraded Shiloh Industries Inc. and kept the ratings on CreditWatch with negative implications. Ratings affected include Shiloh's $300 million revolving credit facility due 2005, lowered to B- from BB-.

S&P said its actions reflect its increased concern about Shiloh's near-term operating outlook and its belief that the company's financial flexibility has become "quite constrained."

Shiloh's operating results have come under pressure in recent quarters due to softness in its end markets, S&P said. It recently said its operating results for fiscal 2001 will be significantly worse than the operating results for fiscal 2000 and that it has experienced a significant increase in net loss due to the overall decline in the automotive and heavy truck markets.

S&P said its previous ratings had been based on an expectation that cost-cutting actions would help offset industry pressures and lead to improved operating results. The rating agency no longer believes Shiloh will be able to achieve the expected improvement.

S&P cuts Telesystem International to SD

Standard & Poor's downgraded Telesystem International Wireless Inc.'s corporate credit rating to SD from CC after completion of an exchange offer launched by the company Nov. 29, 2001. Telesystem International's secured debt remains at CCC+ and on CreditWatch with developing implications.

S&P said the exchange, part of a comprehensive recapitalization, involved an offer by Telesystem International of C$45 million for its C$150 million 7% equity subordinated debentures.

S&P said it is counting the exchange as a default because it includes an exchange at a value materially less than the contracted amount, in this case 50 Canadian cents on the dollar.

S&P keeps Heafner Tire on negative watch

Standard & Poor's said Heafner Tire Group Inc. remains on CreditWatch with negative implications. Ratings affected include Heafner's senior secured debt at B- and its senior unsecured debt at CCC+.

S&P made the announcement after Heafner began a tender offer for its outstanding its $150 million 10% senior notes due 2008. The company is offering $375 per $1,000 principal amount of the notes.

The rating agency said it would consider the purchase of debt at the discounted offer price to be tantamount to a default and consequently it will lower the company's senior unsecured debt to D and its corporate credit rating to SD if the tender is completed.

S&P downgrades Blount bonds

Standard & Poor's downgraded Blount Inc.'s bonds, confirmed its bank debt and removed the company from CreditWatch with negative implications. The outlook is negative.

Ratings affected include Blount's $150 million 7% senior notes due 2005, lowered to CCC from B-, its $325 million 13% senior subordinated notes due 2009, lowered to CCC from CCC+ and its $100 million revolving credit facility due 2004 and $340 million term loan due 2006, both left unchanged at B.

Moody's puts Acterna on review for downgrade

Moody's Investors Service put Acterna LLC on review for possible downgrade. Ratings affected include Acterna's 9.75% senior subordinated notes rated B3.

Moody's said its review was prompted by an acceleration in the deterioration of Acterna's operating performance and credit metrics.

The rating agency said Acterna has seen "a substantial decline in net sales over the last several quarters, principally driven by the decline in sales within the optical transport segment of its communications test business."

Sales for the fourth quarter were down 30% year on year, excluding the recently sold ICS Advent business, Moody's noted.

EBITDA (earnings before interest, taxation, depreciation and amortization) has also declined and was negative $13 million in the fourth quarter, excluding charges for restructuring and a write-down for the impairment of assets.

© 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.