S&P cuts SBA, still on watch

Standard & Poor's downgraded SBA Communications Corp. and kept it on CreditWatch with negative implications. Ratings lowered include SBA Communications' $269 million senior discount notes due 2008 and $500 million 10.25% senior notes due 2009, cut to CC from B-, and SBA Telecommunications Inc.'s $300 million senior secured credit facility due 2007, cut to CCC+ from B+.

S&P said it lowered SBA Communications because of its increased concerns over the potential for the company to violate several bank maintenance covenants within the next seven months.

The company experienced a decline in sequential EBITDA in the third quarter of 2002 from the prior quarter due to a cutback in new leasing and network development activities by wireless carriers, S&P noted. With capital expenditures by carriers likely to remain constrained at least through 2003 and the company having already taken major cost reduction measures, SBA Communications may not be able to materially improve EBITDA on a sustainable basis.

This could lead the company to violate its consolidated EBITDA to consolidated interest expense test (which tightens from 1.25x for the fourth quarter of 2002 to 1.20x for the first quarter of 2003, and then to 1.10x for second quarter 2003), annualized adjusted EBITDA to consolidated debt service test (which tightens from 1.10x to 1.00x for the second quarter of 2003), and consolidated fixed charge coverage covenant (which tightens from 1.25x to 1.10x for the first quarter of 2003 and then to 1.00x for the second quarter of 2003), S&P said.

S&P also sees an increased risk of debt restructuring in the near term. SBA Communications recently disclosed that it is actively exploring debt exchange or repurchase among several options that would help reduce leverage.

In addition SBA Communications may be challenged to meet significant debt service in 2003 and still have adequate liquidity to deal with execution risks, S&P said. Based on assumptions of $19 million in quarterly EBITDA, no access to additional capital, and about $50 million in cash that management expects to have at the beginning of 2003, the company could have cash sources of about $126 million in 2003. After applying about $85 million of that for debt service and $10 million in capital expenditures, only about a $31 million cushion is left for working capital needs and risks associated with the difficult operating environment.

S&P cuts Westport Resources

Standard & Poor's downgraded Westport Resources Corp. and put it on CreditWatch with negative implications. Ratings lowered include Westport Resources' $275 million 8.25% senior subordinated notes due 2011, cut to B+ from BB-, $400 million revolving credit facility due 2005, cut to BB from BB+, $75 million convertible preferred stock, cut to B from B+, and Belco Oil & Gas Corp.'s $150 million 8.875% senior subordinated notes due 2007, cut to B+ from BB-.

S&P said the action follows Westport's proposed acquisition of certain oil and natural gas properties from El Paso Corp. for $502 million in cash.

S&P noted that the company's intention to fund its announced acquisition with approximately $500 million of debt follows the debt-financed purchase of properties from Smith Production Co. for $120 million in September. This transaction will result in both a weakened capital structure and decreased liquidity beyond S&P's expectations.

S&P added that it put Westport on CreditWatch because it is concerned that near-term debt reduction may not be sufficient to maintain the current ratings.

While the company intends to pursue asset sales and a proposed equity issuance as a means to reduce debt, the magnitude and timing of these actions remains in question, S&P said. Should Westport Resources fail to substantially reduce its debt levels in the near-term and show clear longer-term plans for maintaining lower leverage, its ratings will likely be lowered further.

Westport's aggressive capital structure will lead to average profitability measures that are at the low end of S&P's expectations. Westport is anticipated to generate EBIT interest coverage averaging between 1x to 2x and EBITDAX coverage of interest expense between 6x to 7x in the near-term including the full impact of interest related to the debt assumed with recent acquisitions. Operating cash flow is expected to be sufficient to fund Westport's capital expenses, with planned 2003 excess cash flow of approximately $100 million used to repay borrowings under its bank credit facility. Debt leverage is expected to remain somewhat aggressive in the near- to medium-term as Westport endeavors to repay debt through various means.

S&P puts Nash Finch on watch

Standard & Poor's put Nash Finch Co. on CreditWatch with negative implications. Ratings affected include Nash Finch's $165 million 8.5% senior subordinated notes due 2008 at B+ and $250 million secured revolving credit facility due 2005 at BB.

S&P said the action follows Nash Finch's announcement that it has postponed releasing its third quarter results because it is reviewing certain practices and procedures related to promotional allowances from vendors that reduce cost of goods sold. The SEC has also begun an informal inquiry into the matter.

Nash Finch has stated that it does not know what effect, if any, the review will have on its previously reported financial results, but it will be unable to comment further until an appropriate time.

S&P said it will meet with management to review the impact of these issues on Nash Finch's existing debt ratings.

Fitch puts Nash Finch on watch

Fitch Ratings put Nash Finch on Rating Watch Negative including its bank credit facility at BB and senior subordinated debt at B+.

Fitch said its action follows Nash Finch's announcement that it is under an informal inquiry by the SEC and its recent postponement of its third quarter earnings, now to be announced Nov. 18.

The SEC is investigating Nash Finch's practices and procedures relating to certain promotional allowances provided to the company by its vendors that reduce the cost of good sold.

Fitch expects to resolve the Rating Watch Negative once clarity is provided by company management and the magnitude of any potential earnings implication is determined.

S&P notes AES tender extension

Standard & Poor's said it will not change the corporate credit rating of AES Corp. (B+/negative watch) following AES' announcement of the extension until Dec. 3 of the tender offer for its December 2002 notes and June 2003 ROARS, with changes in the terms of the offer.

S&P believes the extension reflects difficulty in reaching an agreement given the multitude of parties involved.

S&P reiterated that if the transaction is not consummated, the rating would fall substantially given that liquidity to pay the Dec. 15 maturity would be tight, and the likelihood of rolling the bank debt in 2003 would be lower given that this is currently contingent on the exchange offer.

As such, if the tender is unsuccessful, a default or bankruptcy filing is possible.

Moody's rates Bway notes B3

Moody's Investors Service assigned a B3 rating to Bway Corp.'s planned $190 million senior subordinated notes due 2010. The outlook is stable, resolving the developing outlook assigned on Oct. 4 following the announcement that Kelso & Co. will acquire Bway for approximately $330 million.

The ratings reflect Bway's increased pro-forma financial leverage at the close of the proposed transactions, modest free cash flow relative to total debt, and moderate coverage of interest expense relative to the ratings category, Moody's said.

The rating agency added that this financial profile heightens its concerns about the sustainability of current growth trends in market share, the susceptibility of margins to possible competitive pricing pressures, and to a lesser extent, product conversions to plastics.

The rating incorporates Bway's need for capacity expansion and reflects the likelihood that expenditures should be principally covered with cash generated by operations, Moody's said. The ratings continue to reflect the mature industries in which the company operates.

In Moody's opinion, pro-forma liquidity is adequate throughout the intermediate term. Liquidity should benefit from approximately $30 million of borrowing base availability under the $90 million revolver at closing. Although cash on hand is likely to be minimal throughout the intermediate term, the existence of unencumbered assets and the backing of a financial sponsor serve as secondary and tertiary sources of liquidity.

The ratings also acknowledge some improvement in the company's capital structure pro forma for the approximately $100 million aggregate cash equity contribution from Kelso (approximately $80 million) and management rollover equity (approximately $20 million), yet the ratings reflect the continued absence of tangible equity as pro-forma intangibles well exceed equity, Moody's said. The substantial amount of revenue under long term contracts at around 75%, along with recent new account wins and improved penetration rates within Bway's established customer base, help to mitigate concentration risk (approximately 45% of sales are sourced from the top 10 clients).

S&P says Xcel remains on developing watch

Standard & Poor's said Xcel Energy Inc. remains on CreditWatch with developing implications with its corporate credit rating at BBB.

S&P said it views news that Xcel received a temporary waiver from the SEC's requirement that it maintain at least a 30% equity ratio and that it successfully paid down its $400 million bank facility that matured on Nov. 8 positively in light of the difficult market conditions faced by many players in this sector.

Uncertainty still remains as to the ultimate resolution of NRG's financial challenges and Xcel's ties to that subsidiary should it resort to a bankruptcy filing, S&P added. Therefore, Xcel's ratings remain on CreditWatch with developing implications, meaning that the rating could go up, down, or remain the same, depending on the outcome of the NRG restructuring.

The SEC has temporarily reduced the 30% equity to total capitalization ratio requirement to 24% through March 2003, allowing Xcel to complete its financing plans, S&P said. Xcel has repaid the existing $400 million bank facility from cash on hand and a borrowing under a new facility. While the borrowing costs of the new financing are higher than the expiring bank facility, the borrowing rate is not as onerous as what other companies have been forced to pay and does not materially adversely affect Xcel's consolidated funds from operations/interest coverage ratios (excluding Xcel's subsidiary NRG Energy Inc.).

S&P rates Bway notes B-, loan BB-

Standard & Poor's assigned a B- rating to Bway Corp.'s planned $190 million senior subordinated notes due 2012 and a BB- rating to its new $90 million senior secured credit facility due 2008 and confirmed its existing ratings. The outlook is stable.

Proceeds will be used to refinance existing debt and fund the proposed buyout by Kelso & Co.

The ratings reflect Bway's below-average business position and a very aggressive financial profile, S&P said.

Bway's relatively narrow and mostly domestic product mix is a limiting rating factor, S&P added. Competition is intense in this niche segment, from both direct market rivals and producers of substitute plastic products, owing to low switching costs and relatively consolidated end-markets.

Still, the company benefits from leading niche market shares in paints and coffee containers, strategically located facilities near customer locations, and contractual provisions for pass-through of raw-material price fluctuations to customers, S&P said. Customer concentration is moderate, and therefore a risk factor, with the top 10 customers accounting for around 45% of the company's revenues.

Bway's near-term operating performance has shown meaningful improvement, benefiting from recently completed cost-cutting initiatives (mainly plant rationalizations and headcount reductions), gains in market share, and improved pricing in aerosol containers, S&P said. Operating margins have been restored to historic levels of around 11% in fiscal 2002, ended Sept. 30, from 8% in the previous year.

These positive factors, combined with limited capital spending and improved working-capital management, have enabled the company to apply free cash flow for debt reduction (total debt decreased to $100 million at Sept 30, 2002, from a peak of $147 million in 1999), S&P said.

Upon completion of the proposed acquisition by Kelso, total debt is expected to increase to about $230 million, and the company will be aggressively leveraged with pro forma total debt (adjusted for capitalized operating leases) to EBITDA of about 4.2 times, S&P said.

In the intermediate term, S&P expects that the company will use free cash flow for debt reduction or growth initiatives, while maintaining credit measures at appropriate levels. Accordingly, key credit measures of EBITDA interest coverage and total adjusted debt to EBITDA are expected to average about 2.5x and 4x, respectively, through the business cycle.

S&P says United Surgical unchanged

Standard & Poor's said United Surgical Partners International Inc.'s ratings remain unchanged at B+ for the corporate credit rating with a stable outlook following amendments to its bank credit facility.

S&P added that the increase in size to $115 million from $85 million and extension in maturity to Nov. 7, 2005, from Dec. 19, 2004 are positive since they somewhat lengthen the company's debt maturities and enhance its capacity to fund further expansion of its rapidly growing U.S. network.

The action also follows a successful October 2002 secondary common stock offering. The offering, which yielded about $49 million, enabled the company to repay outstanding bank debt ($14.2 million), fund two acquisitions ($13.7 million), and build cash ($32 million at Sept. 30, 2002). S&P said these measures supplement healthy operating cash flow and both deepen and diversify funding sources for an aggressive growth program.

Moody's cuts Texon

Moody's Investors Service downgraded Texon International plc's DM245 million 10% senior notes to C from Caa3 and left the bank facilities unchanged at Caa1. Moody's also withdrew its ratings on Texon and United Texon Ltd.

Moody's said the downgrade reflects its recovery expectations for Texon's different classes of creditors following its 75% debt for equity swap agreement.

At the same time Moody's withdraws all ratings on Texon

International PLC and United Texon Ltd.

Moody's puts Avecia on review

Moody's Investors Service put Avecia Group plc on review for downgrade. Ratings affected include Avecia's $540 million senior notes at B3 and $45m PIK preference shares at Caa1.

Moody's said it began the review after Avecia announced the U.S. launch of AstraZeneca's "Crestor" drug will be delayed and its negative impact on Avecia which manufactures the intermediates for this drug.

Moody's also noted that this delayed customer drug launch and the slowdown in pharmaceutical sales have prompted the company to review its cost structure.

Avecia's electronic materials division has also been negatively impacted by weak printer sales and visibility in this division remains low.

Moody's believes there may be lower operating cash flow generation over the next 12 months as a result of expected continued weakness in two of the group's four core divisions.

This scenario, in conjunction with further significant capex in 2003, could lead to a deterioration in debt protection measures from already weak levels.

For the 12 months to Sept. 30, 2002 Avecia generated sales of £587 million (excluding Stahl's division) and operating profit of £26 million. Net debt/(EBITDA-capex) was about 9.5x.

S&P cuts Titan International

Standard & Poor's downgraded Titan International Inc. The outlook is stable. Ratings lowered include Titan International's $150 million 8.75% senior subordinated notes due 2007, cut to CCC from CCC+.

S&P said the action is in response to depressed conditions in Titan's end markets and lack of visibility on the timing of a return to profitability.

The ratings reflect Titan's very weak operating results and sub-par credit protection measures, combined with its below-average business profile as a manufacturer of steel wheels and tires for off-highway vehicles, S&P said. Liquidity, however, remains adequate for the near term.

Although Titan dominates the domestic market for off-the-road wheels, financial performance in the past several years has been depressed by the combination of high costs related to labor issues and the ongoing economic downturn that has hurt demand for the company's products, S&P said.

Titan's sales are derived from three business segments: agricultural sales contribute about 60% of the total; environmental/construction, 30%; and consumer, 10%. Agricultural sales increased for the nine months ended Sept. 30, 2002, due largely to market share expansion, while the construction and consumer segments declined. Weak market fundamentals are expected to depress Titan's financial performance through 2002 and into 2003, S&P said. Benefiting the company's financials, however, are the recent resolution of a long and costly labor dispute and Titan's cost-reduction actions.

Credit protection measures are weak, with total debt to EBITDA (adjusted for strike settlement costs) exceeding 10.0 times for the 12 months ended Sept. 30, 2002. Standard & Poor's expects the company's operating results to remain weak for the near term.

S&P cuts Trenwick

Standard & Poor's downgraded Trenwick America Corp. and kept it on CreditWatch with negative implications. Ratings lowered include Trenwick America's $75 million 6.7% notes due 2003, cut to CCC+ from B, Trenwick Capital Trust I's $110 million 8.82% subordinated capital income securities (SKIS), cut to CC from CCC, Chartwell Re Corp.'s $75 million 10.25% senior notes due 2004, cut to CCC+ from B, and LaSalle Re Holdings Ltd.'s $75 million perpetual preferred shares series A, cut to CC from CCC.

S&P said the action follows Trenwick Group Ltd.'s third-quarter net loss of $136.9 million, with $90.7 million of reserve additions and $54.5 million of deferred tax writedowns.

With the reserve additions there is a diminished likelihood of sufficient dividends from the operating companies and, as a result, more uncertainty surrounding Trenwick's ability to meet its 2003 debt repayment and debt service requirements, S&P said.

Considerable uncertainty remains about whether banks will renew letters of credit that allow continued underwriting at Lloyds, as well as the potential for additional reserve development from the fourth-quarter 2002 reserve study, S&P added.

Moody's raises Bay View

Moody's Investors Service upgraded Bay View Capital Corp. and its subsidiaries and kept it on review for further upgrade. Ratings raised include Bay View Bank, NA's subordinated debt, raised to Baa3 from B1, Bay View Capital's subordinated debt, raised to Baa3 from B3, and Bay View Capital I's trust preferred stock, raised to Ba3 from Caa1.

Moody's said the upgrade and continuing review reflect Bay View's sale of its branch network, related deposits and some loans to U.S. Bank, NA and Bay View's progress in liquidating other assets and liabilities.

Moody's noted that Bay View intends to redeem early its various public debt issues.

Moody's believes that the company's liquidity position should be sufficient to satisfy much of the remaining deposit and subordinated debt obligations. However, the company's trust preferred debt may remain outstanding for a longer period of time. The proceeds for final redemption of that obligation will depend upon Bay View's success in liquidating its remaining assets.

S&P raises Interep outlook

Standard & Poor's raised Interep National Radio Sales Inc. to positive from negative and confirmed its ratings including its subordinated debt at CCC-.

S&P said the action follows Interep's private placement of $10 million in 8.125% senior secured notes due 2007.

The cash provided by the new notes relieves Interep's liquidity pressures and will help it meet its near-term financial obligations, S&P said.

In addition, Interep's profitability has started to rebound as a result of currently positive trends in national radio advertising demand and the company's cost-reduction measures, S&P added. A continuation of these trends and an absence of additional contract buyouts could improve the company's financial profile sufficiently to warrant an upgrade in 2003.

However, the sustainability of these trends is uncertain given continued economic weakness and still limited revenue visibility, S&P cautioned.

Operating EBITDA, which excludes contract termination revenue, restructuring expenses, and option repricing costs, increased to $10.4 million in the first nine months of 2002 from $4.8 million in the same period in 2001, S&P said. Nonetheless, operating EBITDA of $14.5 million for the 12-months ended Sept. 30, 2002, remains well below the $23.4 million achieved in 2000.

Fitch rates Allied Waste notes BB-

Fitch Ratings assigned a BB- rating to Allied Waste North America's new $250 million senior notes due 2012. The Rating Outlook is Negative. Fitch currently rates Allied Waste North America's bank debt at BB, senior secured notes at BB- and senior subordinated notes at B.

Fitch said Allied Waste Industries, Inc.'s ratings are based on the company's high leverage position, which leaves the company with reduced flexibility in times of economic weakness. Mitigating factors include a geographically diverse asset base, strong market positions, and industry-leading EBITDA margins. Also incorporated into the rating is the capital intensity of the waste industry and the industry's relatively low risk profile.

The weak economy has had a negative affect on Allied Waste's ability to increase prices in certain business segments, pressuring margins and free cash flow generation, Fitch said. 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 although signs of improvement remain limited, a modest upturn in commodity prices has served to alleviate a degree of margin pressure.

Long-term pricing fundamentals remain positive, although during the recent economic weakness, Allied Waste has been unable to achieve price increases sufficient to offset higher costs, especially insurance- and health-related expenses, Fitch said. As a result, EBITDA expectations have moderated and free cash flow with which to reduce debt has been limited.

S&P rates Allied Waste notes BB-

Standard & Poor's assigned a BB- rating to Allied Waste North America Inc.'s new $250 million senior notes due 2012, guaranteed by its parent, Allied Waste Industries Inc. S&P also confirmed Allied Waste's existing ratings. The outlook is stable.

S&P said Allied Waste's ratings reflect a strong competitive business position, offset by a relatively weak financial profile.

Although the U.S. solid waste industry is mature and competitive, its overall risk characteristics are favorable, supported by the essential nature of services, relatively strong and reliable cash flows, and considerable resilience to economic swings, particularly in the more predictable residential and light commercial segments, S&P said.

Allied Waste's market position is enhanced by a low cost structure, very good collection-route density, and a relatively high rate of waste internalization, S&P added.

Still, the economic slowdown has had a moderately adverse effect on the firm's volumes - especially in the industrial and roll-off segments (about 20% of revenues) - and pricing flexibility in core services, the latter stemming partly from greater competition for the remaining waste, S&P said.

Consequently, Allied Waste's historically very impressive profit margins in the mid-30s percent area declined to the low 30s percent area in 2002, S&P said. As a result, the anticipated improvement in currently sub-par credit protection measures has been delayed. Gradual strengthening in the credit profile is expected over time, aided by additional debt reduction, primarily from internally generated funds. In the intermediate term, debt to EBITDA should be about 4.5 times, EBITDA and EBIT interest coverages approximately 2.5x and 1.75x, respectively, and debt to capital about 80%.

Moody's puts Presidential Life on review

Moody's Investors Service put Presidential Life Corp. and its parent Presidential Life Insurance Co. on review for downgrade include Presidential Life Corp.'s senior unsecured debt at B1.

Moody's said it began the review in response to the sizable credit losses Presidential Life has incurred in its fixed-income portfolio over the past 18 months, and said that these losses accelerated in the third quarter. The rating agency said that these realized credit losses have resulted in a significant net loss for Presidential Life through the first nine months of 2002.

These realized losses, coupled with the statutory strain associated with the rapid growth of the company's fixed annuity portfolio, have resulted in a significant decline in statutory capitalization at Presidential Life Insurance Co., Moody's said.

Excluding realized capital losses, the company's operating results were strong through the first three quarters of 2002, Moody's added.

S&P cuts Ntelos, on watch

Standard & Poor's downgraded Ntelos Inc. and put it on CreditWatch with negative implications. Ratings lowered include Ntelos' $100 million senior secured revolving credit facility due 2007, $75 million senior secured tranche A term loan due 2007 and $150 million senior secured tranche B term loan due 2008, cut to B- from B+, and $280 million 13% notes due 2010 and $95 million 13.5% subordinated notes due 2011, cut to CCC- from CCC+.

S&P said the action follows Ntelos' announcement that it has engaged UBS Warburg as its financial advisor to analyze its business plan for 2003 and beyond and to address its capital structure.

The company indicated that its projections for continued wireless subscriber growth in 2003 are expected to place pressure on its liquidity position and its ability to comply with bank loan financial maintenance covenants that become effective in 2003, including leverage and senior leverage ratios and interest and fixed charge coverage ratios, S&P noted. The maximum debt to rolling four-quarter EBITDA and senior debt to rolling four-quarter EBITDA allowed under the bank covenants, as defined by the bank agreement, of 9 times and 4.25x, respectively become effective in March 2003, and tighten significantly through the year to 7x and 3x, respectively by year-end 2003. The minimum EBITDA interest coverage requirement, as defined by the bank agreement, is initially 1.25x for March 2003, increasing up to 2.5x by year-end 2003. For the three months annualized performance through September 30, 2002, debt to EBITDA totaled 8.7x and EBITDA interest coverage was 0.9x.

The downgrade reflects the potential for the company to violate covenants under the current business plan, S&P said. Even though the company has been able to improve profitability at its wireless operations through aggressive expansion of its postpaid like customer base, the expected level of EBITDA improvement in the wireless business in 2003 under the current business plan is not expected to be sufficient to meet financial covenants.

Moreover, the business risk for regional wireless carriers such as Ntelos has increased materially over the last nine to 10 months, given more aggressive marketing and pricing by the national carriers, as well as entry into certain of Ntelos' markets by new regional competitors, such as West Virginia Wireless, S&P added.

Moody's rates Allied Waste notes Ba3

Moody's Investors Service assigned a Ba3 rating to Allied Waste North America, Inc.'s new $250 million guaranteed senior secured notes due 2012 and confirmed the existing ratings of Allied Waste North America and its parent Allied Waste Industries, Inc., affecting $11 billion of debt. Allied Waste's bank debt and senior secured notes are rated Ba3 and its senior subordinated notes B2. The outlook remains negative.

The ratings continue to reflect Allied's leading market position as the second largest integrated solid waste company in the United States, the company's strong management, and its track record of profitable growth, Moody's said.

The ratings also incorporate the company's high leverage, with total debt to last 12 months EBITDA of 5.2 times, and deeply negative tangible equity resulting from minimal equity and sizable goodwill comprising 60% of total assets, the rating agency added.

The ratings also reflect Allied's modest interest protection measurements with EBIT-to-interest at 1.4 times and the fixed charge coverage at 1.1 times (inclusive of $266 million of current maturities of long term debt), as well as a moderate EBIT return on total assets of 8.3%, Moody's said.

The negative outlook reflects the company's high leverage relative to free cash flow (cash from operations less capex) of 18 times for the 12 months ending Sept. 30, 2002. Moody's is concerned with the limited potential to substantially reduce debt via free cash flow, in order to address the company's sizable bank debt maturities over the intermediate term.

While the economic downturn and higher SG&A negatively impacted Allied's operating margins, the primary limitation on growth in cash is correlated to the industry's maturation, Moody's said.

S&P puts Sparkling Spring on positive watch

Standard & Poor's put Sparkling Spring Water Group Ltd. on CreditWatch with positive implications. Ratings affected include Sparkling Spring's $100 million 11.5% notes due 2007 at CCC+.

S&P said the positive watch reflects the announcement by Sparkling Spring's parent company, Sparkling Springs Water Holdings Ltd., that it has entered into a definitive agreement for the sale of all of its outstanding stock to Groupe Danone.

The terms of the sale were not released, but Danone is expected to assume all of Sparkling Spring's debt outstanding, S&P said.

Fitch cuts FertiNitro

Fitch Ratings downgraded FertiNitro Finance Inc.'s $250 million 8.29% secured bonds due 2020 to CCC from B-. The rating remains on Rating Watch Negative.

Fitch said the downgrade reflects FertiNitro's escalating financial deterioration, resulting in heightened dependence on external liquidity sources to address the project's immediate cash needs.

The combination of lower-than-expected production levels, weaker-than-projected fertilizer prices, and a higher level of senior debt has contributed to FertiNitro's distressed liquidity position and limited debt service capacity, Fitch said. While the project has been generating sufficient cashflow to cover fixed operating expenses on a monthly basis, FertiNitro will require external liquidity to fully cover its $44 million debt service payment in April 2003, funds of up to $10 million to finance capital expenditures related to critical repairs, and up to an additional $15 million to cover costs associated with the extended outage for the repairs. FertiNitro views these critical repairs to be necessary to enhance the plant's ability to operate at production levels closer to its nameplate capacity on an ongoing basis. Furthermore, management believes that the costs related to the critical repairs should be covered under the EPC Contractor's warranty obligations. Currently, the warranty-related capital costs are under dispute with the EPC Contractor and,if negotiations are unsuccessful, could result in arbitration.

While FertiNitro achieved completion earlier this year, due to subsequent problems, the plant has not yet demonstrated its ability to consistently perform at steady-state production levels close to nameplate capacity, Fitch said. From January through October 2002, ammonia and urea production averaged 73% and 59%, respectively, of base case projections. It is uncertain whether FertiNitro will be able to sustain more normal production levels absent the critical repairs that are needed by early 2003.

Fitch rates AmeriSourceBergen notes BB+

Fitch Ratings assigned a BB+ rating to AmeriSourceBergen Corp.'s new $275 million ten-year senior unsecured notes and confirmed its existing ratings including its senior unsecured notes at BB+, unsecured convertible subordinated notes and unsecured exchangeable subordinated debentures at BB and Trust Originated Preferred Securities at BB-. The Rating Outlook is positive.

Fitch noted it raised the outlook to positive on Sept. 20 in response to AmeriSourceBergen's better-than-anticipated financial performance/credit metrics and legitimate prospects for continued improvement in the company's credit profile.

Driven by strong pharmaceutical distribution revenue growth and savings from merger synergies (related to the integration of the former AmeriSource Health Corporation and Bergen Brunswig Corporation), AmerisourceBergen continues to exceed Fitch's expectations, the rating agency said.

A robust generic drug market and AmerisourceBergen's ability to generate stronger margins from generics lends additional confidence to the sustainability of the company's recent profitability gains, Fitch added. Additionally, profitability gains appear sustainable given the efficiencies created by the company's continuing integration efforts, namely an aggressive distribution center rationalization strategy designed to position the company with a significantly more efficient distribution network.

Fiscal year 2002 (ended Sept. 30, 2002) operating revenue growth was approximately 16%, slightly above Fitch expectations of 15%. However, strong synergy capture increased profitability versus pro forma 2001 and Fitch expectations. Credit metrics for fiscal year 2002 met or exceed Fitch expectations with coverage (EBITDA/interest) of 5.7 times and leverage (total debt/EBITDA) of 2.3x.

S&P cuts Levi Strauss bank debt

Standard & Poor's downgraded Levi Strauss & Co.'s bank loans to BB from BB+ and its corporate credit rating to BB- from BB and confirmed its senior unsecured debt at BB-. The outlook is stable.

S&P said the action reflects its expectation that credit measures, already weak for the previous rating, will not improve significantly in the near term.

Levi Strauss recently announced entry into the mass market, a factor that S&P views as positive in the long term. However, there is significant execution risk associated with logistics, production, and delivery response to serve the mass channel.

The effect on the brand franchise given the new value-channel positioning and existing retailers' reaction will also be a concern as the mass market program is rolled out, S&P said. Levi Strauss plans to ship the new signature brand in June 2003, in time for the key back-to-school season.

The ratings reflect Levi Strauss' leveraged financial profile and its participation in the highly competitive denim and casual pants industry, S&P said. The ratings also reflect the inherent fashion risk in the apparel industry. Nevertheless, the company's well-recognized brand names in jeans and other apparel, its new customer-focused strategy, and its satisfactory operating cash flow generation somewhat mitigate these factors.

Levi Strauss' sales have declined significantly in recent years, to $4.3 billion in fiscal 2001 from more than $7.0 billion in fiscal 1996, S&P said. Although the company has made progress in stemming the decline, the weak U.S. and Japanese markets continue to be problematic. New customer-focused strategies, including an emphasis on improved product innovation, better presentation at the retail level, and more effective advertising, are expected to stabilize sales volume.

Credit measures continue to be weak with lease-adjusted total debt to EBITDA of 4.2 times and adjusted EBITDA interest coverage of about 2.2x for the 12 months ended Aug. 25, 2002, S&P added. S&P said it expects Levi Strauss to continue to use financial resources to support its new mass strategy and for modest debt reduction. Due to the additional working capital requirements and inventory investment to support the new initiative, S&P expects credit protection measures to remain relatively unchanged in the near term.

S&P rates R.H. Donnelley bank loan BB, notes B+

Standard & Poor's assigned a BB rating to R.H. Donnelley Inc.'s planned $1.55 billion senior secured credit facility and a B+ rating to R.H. Donnelley Finance Corp. I's planned $300 million senior unsecured notes due 2010 and $450 million subordinated notes due 2012. S&P also confirmed R.H. Donnelley's senior secured debt at BB and subordinated debt at B+. The outlook is stable.

In September 2002, R.H. Donnelley agreed to purchase Sprint Publishing & Advertising for $2.23 billion in cash. The transaction will transform R.H. Donnelley from a sales agent and pre-press yellow pages vendor to a yellow pages directory publisher.

Ratings reflect the company's substantial pro forma debt levels, with debt to estimated 2002 EBITDA in the high-5 times area, and a meaningful debt amortization schedule following the Sprint Publishing acquisition, S&P said. In addition, R.H. Donnelley faces mature industry conditions and revenue concentrations in the Chicago metropolitan area, Las Vegas, and Florida. Sprint Publishing's bad debt expense was sharply higher in 2001. However, this is improving as Sprint Publishing has strengthened its billing and collections operations. Both R.H. Donnelley and Sprint Publishing have not yet developed an online strategy, which could become a more significant factor in several years.

These aspects are mitigated by the significantly better business profile resulting from the Sprint Publishing transaction. R.H. Donnelley will be a much more geographically diversified company, with greater critical mass. The firm's pro forma estimated 2002 EBITDA base increases to about $400 million, from about $150 million, S&P said.

In addition, R.H. Donnelley's revenue and EBITDA streams are relatively stable throughout the advertising revenue cycle. Capital expenditures are modest, resulting in healthy and fairly predictable free operating cash flow generation. The company has strong market positions as the incumbent directory publisher with long-standing relationships with a large base of small- and medium-size businesses, many of which rely on the directories as their sole form of advertising. Customer retention rates are high, and demographics of the service territory are favorable.

Moody's downgrades Graftech notes

Moody's Investors Service downgraded GrafTech Finance, Inc.'s $550 million 10.25% guaranteed senior unsecured notes due 2012 to B3 from B2 and confirmed GrafTech International Ltd.'s $131 million guaranteed senior secured bank term loan due 2007 and €200 million guaranteed senior secured revolving credit facility at Ba3. The outlook remains stable.

Moody's said the downgrade of GrafTech Finance's senior implied and senior unsecured debt ratings reflect the company's delayed progress toward reducing operating and general and administrative costs and the impact this has had on its cash flow, debt balance and credit metrics.

GrafTech's debt to EBITDA ratio is likely to end the year at around 9 times, assuming no change in debt in the current quarter, whereas it was less than 5 times at the end of 2001, Moody's said, adding that it had anticipated that cost savings would offset the impact of lower graphite electrode prices in 2002 and enable GrafTech to maintain its EBITDA at 4Q01 levels of about $30 million per quarter.

However, GrafTech's average graphite electrode production costs increased slightly in the second and third quarters of 2002, primarily as a result of unexpectedly high costs associated with the transition of graphite electrode production capacity from the U.S. to Mexico, Moody's added.

Gross profits at the company's Advanced Energy Technology division have also fallen below Moody's expectations, primarily due to reduced spending in the telecom and technology sectors.

As a result, the company's 2002 EBITDA is likely to be around $77 million, which is about $40 million below Moody's expectations. In addition, the company's sale of non-core assets has been delayed.

S&P rates AmeriSource notes BB-

Standard & Poor's assigned a BB- rating to AmeriSource-Bergen Corp.'s new $275 million senior notes due 2012.

S&P cuts El Paso to BBB-

Standard & Poor's lowered El Paso Corp.'s senior unsecured rating on El Paso to BBB- from BBB, and other ratings along with its units' ratings, to more adequately reflect debt-service coverage from cash flow. All ratings remain on negative watch.

El Paso has about $17 billion in debt.

Of concern is that cash flow from the trading and marketing unit will be minimal, if any, over the next few years due to an increasingly poor environment, S&P said. Also, El Paso has decided to seek to carve away its energy trading book into a new entity, Travis Energy Services L.L.C., in an effort to liquidate its positions.

Notably, El Paso has strengthened itself remarkably well since Enron Corp.'s bankruptcy by lowering its business risk, reducing debt, issuing equity and improving its liquidity.

However, the extreme turmoil in the energy sector has caused a decline in credit quality.

Sizable execution risk exists in El Paso's debt-reduction program. Key is the asset sale program for $4 billion in 2002 and $2 billion in 2003, which is absolutely necessary to offset cash flow shortfall of about $2.8 billion less capital spending of $3 billion and dividend requirements of $500 million in 2003.

Resolution of the watch will depend on greater clarity regarding the ongoing investigation into market manipulation in California, which could cause El Paso's corporate credit rating to be lowered into the BB category, S&P said.

El Paso's liquidity cushion is buoyed by a $4 billion credit facility backstopping minimal commercial paper borrowings, and cash and cash equivalents of $1.3 billion.

Additional means to meet the company's obligations are expected asset sale proceeds of nearly $4 billion through 2003. El Paso should have no difficulty in meeting debt maturities of about $240 million in 2002 and $1.7 billion in 2003.

With the elimination of rating and stock price triggers on all but $300 million of the company's financings, S&P believes that El Paso's liquidity cushion is ample.

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