S&P cuts Vishay convert to B+

Standard & Poor's lowered the ratings of Vishay Intertechnology, including the 0% convertible due 2021 to B+ from BB-, following its acquisition of Netherlands-based BCcomponents Holdings BV for $350 million in cash, debt and warrants.

The outlook is stable, incorporating an expectation that subsequent to the acquisition, Vishay will focus on cutting costs and maintaining adequate liquidity. It also considers that Vishay will not undertake other material debt-financed acquisitions until it restores further balance-sheet strength.

Vishay has about $748 million of debt outstanding.

In addition to adding leverage to the balance sheet, the acquisition will increase exposure to passive components that have suffered from significant pricing pressure and margin erosion over the past 18 months due to deterioration in demand and excess capacity, S&P noted.

Prolonged weak operating profitability in passive components combined with higher debt levels will likely put pressure on the company's debt protection measures.

Operating cash flow has historically been $200 million-$250 million annually (with the exception of 2000, when it was $767 million) and is expected to remain near these levels.

Post-acquisition, Vishay is still expected to maintain cash balances in excess of $300 million.

Vishay recently reduced the size of its revolving bank facility to $500 million from $660 million, and availability following the acquisition will be about $375 million. Along with the reduction in size, overall leverage and senior debt ratio covenants were revised.

Vishay should be able to remain within covenants, which are 3.5x leverage ratio and 1.75x senior debt ratio effective through Dec. 30, 2003, and stepping down in subsequent years, S&P said.

Vishay also faces potential cash use for the put on the convertibles in June 2004, when there will be an accreted value of $331 million. Vishay has the option of settling the put in cash and/or stock.

Moody's keeps New World on review

Moody's Investors Service said it is keeping New World Infrastructure Ltd.'s $170 million of 1% convertible due April 2003 rating of Ba3 on review, direction uncertain, following the announcement that completion of its restructuring has been pushed back to Jan. 30.

Moody's noted that the New World's restructuring plan has already obtained approvals from shareholders of New World Development Co. Ltd., New World Infrastructure Ltd. and Pacific Ports Co. Ltd.

Moody's said it understands that it is New World's intentions to fully repay the convertibles with a bridge bank financing arranged by Pacific Ports (proposed change of name to NWS Holdings Ltd.).

The rating is likely to be placed on review for upgrade or upgraded depending on the conditions precedent to drawdown and confirmation that funds will be used to repay the convertibles.

Should the restructuring not go ahead and hence the bank financing also not go ahead, the rating will be put on review for possible downgrade.

Moody's cuts Ahold ratings

Moody's downgraded the senior unsecured ratings of Koninklijke Ahold NV and its guaranteed obligations to Baa3 from Baa1, and group rated subordinated debt issues to Ba1.

The outlook on all ratings is stable.

The downgrade reflects Moody's view that Ahold's credit metrics, which have been weak for the category for some time, are not likely to improve significantly over the intermediate term.

Overall Moody's said it considers Ahold's liquidity to be satisfactory but notes that in the absence of access to the capital markets it would be heavily reliant upon its banking facilities for refinancing.

S&P cuts Charter ratings

Standard & Poor's lowered its corporate credit rating on Charter Communications Inc. to CCC+ from B, based on rising concern about a possible public debt restructuring.

All ratings on related entities were also lowered and are still on negative watch.

Charter had about $18.5 billion total debt outstanding as of Sept. 30.

Given depressed debt trading levels and the company's operational challenges, Charter could be further pressured to reduce debt through a restructuring, said S&P credit analyst Eric Geil.

The downgrades are also based on greater uncertainty regarding management's financial strategy.

The watch reflects the potential for further downgrades in the event that Charter announces a sub-par exchange offer to bondholders.

The watch also reflects uncertainty about the outcome of a federal grand jury investigation into the company's accounting policies.

S&P rates Wan Hai convertibles BB+

Standard & Poor's assigned a BB+ rating to Wan Hai Lines Ltd.'s new $143.75 million zero-coupon convertible bonds due 2008. The outlook is stable.

S&P noted the issue is rated lower than the corporate credit rating due to the amount of secured debt held by Wan Hai.

The ratings on Wan Hai reflect the company's leading market position in intra-Asia shipping routes, low cost position, and moderate financial profile, S&P added.

However, these strengths are offset by the cyclical nature of the container shipping industry and intense competition, which regularly results in downward pressure on freight rates, S&P added.

Because of Wan Hai's enhanced cost position, the company's lease adjusted operating margin is expected to rise to 27% in 2002 from 19% in 2001, while its leased adjusted EBITDA interest coverage ratio should improve to 11x in 2002 from 6x in 2001, S&P said. In line with Wan Hai's strong earnings recovery, its ratio of lease-adjusted funds from operations to total debt is expected to rise to 45% in 2002, from 31% in 2001. Wan Hai's ratio of leased adjusted total debt to capital ratio is currently about 44%.

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