S&P cuts Adelphia to D

Standard & Poor's lowered the corporate credit rating on Adelphia Communications Corp. to D from CCC- following a missed interest payment on the $500 million 9.375% senior unsecured note. The rating on that issue was also lowered to D from CC.

Also S&P lowered Adelphia's other unsecured debt to C from CC and kept the ratings on negative watch. The ratings on the secured bank loans at its operating subsidiaries are unchanged at CCC but remain on negative watch, as well as the C rated preferreds.

S&P said it anticipates Adelphia will miss payments on other unsecured, subordinated and preferred issues. When interest payments are missed, the ratings on those issues will be lowered to D.

Maintenance of the secured bank loan ratings reflects prospects that, given the value of the cable television properties in the respective bank credit agreements, these creditors have reasonable prospects to ultimately receive full repayment in a liquidation scenario, S&P said.

Moody's rates new Waste Management notes at Ba1

Moody's assigned a rating of Ba1 to Waste Management Inc.'s proposed $500 million of guaranteed senior notes due 2032. The outlook was revised to stable from negative, and the company's long-term ratings were affirmed, including the $31 million of 2% convertible subordinated notes due 2005 at Ba2.

The stable outlook reflects seasonal revenue increases and improving trends due to the economic environment.

In addition, the implementation of software related to client profitability and fleet management led to opportunistic price increases and improved operating leverage respectively.

Any significant asset impairments related to FAS 142, decapitalization, extended underinvestment in capital expenditures or a reversal of recent economy-driven earnings improvements could place negative pressure on the rating.

On the other hand, improvements in leverage, EBIT return on assets and retained cash flow to debt, after any dividends or share repurchases, could have a positive impact on the ratings.

In first quarter, Waste Management's revenues decreased 4%, to $2.61 billion a year earlier. The internal growth rate declined 3.6% primarily as a result of lower volume that primarily related to the economic slowdown in the U.S.

This resulted in a slight deterioration of profitability margins because of revenue mix.

Nevertheless, as a result of cost cutting initiatives, improved customer information systems and the restructuring of field based operations, the company was able to improve its gross profit margin by 50 bps, to 40%.

As a result of a $1.1 billion year-over-year decline in debt balances and a lower cost of borrowing, the company's debt protection measures improved.

As such, interest coverage, as measured by EBITA to interest, improved to 2.9 times in first quarter from 2.6 times a year prior. Likewise, EBITDA to interest improved to 5.3 times from 4.4 times.

Leverage, measured as total debt to trailing 12-month ending March 31EBITDA improved to 2.6 times from 2.8 times a year ago.

Measured as total debt to free cash flow, defined as cash flow from operations after capex and dividends, leverage is still high, albeit decreasing. As such, total debt to free cash flow decreased to 7.7 times for trailing 12 months ending March 31 from over 14.1 times.

Fitch rates new Waste Management notes at BBB

Fitch Ratings assigned a BBB rating to Waste Management Inc.'s proposed $500 million of senior notes due 2032. The outlook is stable.

The ratings are based on a strong asset base, entrenched market positions and geographically diversified operations that produce high levels of free cash flow relative to financial obligations.

Over the past several years, the successful execution of its asset divestiture program has resulted in substantial debt reduction and heightened discretion over its capital structure, Fitch said.

The rating also benefits from moderate cash flow volatility in relation to economic cycles, and the long-term value of the company's landfill assets that should translate into enhanced pricing.

WMI expects to generate $1.1 billion in free cash flow during 2002 following $1.3 billion capital spending.

While WMI will continue to make relatively small, tuck-in acquisitions, the company's focus going forward will continue to focus on free cash flow generation rather than acquisition-related growth. Free cash flow will primarily be directed towards share repurchases and a residual litigation settlement.

Fitch would expect WMI to curtail share repurchases if necessary to maintain its existing credit profile and strong liquidity.

Offsetting factors include operating margins that have trailed industry competitors and which may be difficult to improve under current economic conditions.

Moody's puts Cable & Wireless on review for downgrade

Moody's placed the A2 long-term debt ratings and the Prime-1 short-term debt ratings of Cable & Wireless plc on review for a possible downgrade, including the $1.5 billion 0% exchangeable due 2003.

The review, Moody's said, was prompted by concerns over the operating performance and market conditions affecting Cable & Wireless Global. The review is not expected to exceed six weeks.

The review will focus on C&W Global's ability to grow their revenue amid poor market conditions, which in Moody's opinion are unlikely to improve near term.

Moody's said it will also consider the potential impact of any further exceptional cash expenditures in the restructuring of C&W Global, particularly regarding the integration of the more recently acquired web hosting businesses, while also factoring the longer-term benefits from cost reduction initiatives and the company's ability to win more business in key markets such as the U.S. and U.K.

Furthermore, Moody's will also assess the underlying credit risk that C&W may have once market conditions become more benign, while taking account of a period of static and declining market conditions.

S&P says Juniper acquisition has no impact to ratings

Standard & Poor's said there was no rating effect from Juniper Networks Inc.'s (B+/stable) announced $740 million acquisition of Unisphere Networks Inc. from Siemens AG for $375 million in cash and 36.5 million shares.

The acquisition of Unisphere's edge-router product line complements Juniper Networks' service-provider backbone routers and will enable Siemens to market Juniper Networks' entire product line through its worldwide sales channels, S&P said.

The transaction is expected to slightly reduce Juniper Network's earnings this year but be accretive in 2003. Juniper Networks had $1.7 billion in financial assets at March 31.

S&P rates new Waste Management notes at BBB

Standard & Poor's assigned a BBB rating to Waste Management Inc.'s $500 million senior unsecured notes due 2032. At the same time, S&P affirmed its ratings on the company. The outlook is stable.

The ratings on Houston, Texas-based Waste Management reflect its position as the largest solid waste management firm in the U.S. and Canada and an overall satisfactory financial profile.

The ratings incorporate expectations that management will maintain good liquidity and pursue a moderate financial policy and disciplined capital allocation regarding share repurchases and acquisitions from its sizable free cash flow of about $1 billion. The company announced in early 2002 that it authorized a common stock buy-back program for up to $1 billion in annual repurchases.

S&P expects that Waste Management will curtail or suspend share repurchases if operations do not generate the necessary cash flow.

The reduction of about $4 billion in debt in 2000 and 2001, primarily from asset sales, and to a smaller extent, from internally generated funds and better working capital management, improved liquidity, the capital structure and financial flexibility. As a result, the funds from operations to debt ratio, an important credit protection measure, should be at an appropriate 30%, given the firm's strong business profile.

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

The slower economy has had a moderately adverse effect on performance to date through lower volume trends in the manufacturing, special waste, and commercial construction sectors; related margin pressures; and continued weakness in the commodity markets.

As a consequence, the internal growth is likely to be very low in the intermediate term, with limited pricing flexibility.

S&P rates Charming Shoppes convertible at BB-

Standard & Poor's assigned a BB- rating to Charming Shoppes Inc.'s proposed $130 million convertible senior unsecured notes due in 2012.

The BB- corporate credit rating on the company was also affirmed at that time. Bensalem, Pa.-based Charming Shoppes had total debt outstanding of $263 million as of Feb. 2.

The ratings on Charming Shoppes reflect the company's high business risk, given its participation in the highly competitive and volatile specialty apparel industry. This is mitigated, somewhat, by the company's good position in the faster-growing large-size women's specialty apparel segment.

Charming Shoppes operates almost 2,500 women's specialty apparel stores in 48 states, primarily under the names Fashion Bug, Fashion Bug Plus, Catherine's Plus Sizes, and Lane Bryant.

After a period of consistent sales and profit growth, Charming Shoppes' sales were impacted by the weakening economy, resulting in a comparable-store sales decline of 4.0% in 2001 and a decline in its operating margin to 13.8% in 2001 from 15.5% in 2000. The margin erosion was due to a lack of sales leverage, higher promotional activity, and an increase in occupancy expense. The company's comparable-store sales also declined 1% in the first quarter of 2002.

Credit protection measures are adequate for the rating category, with EBITDA coverage of interest at 2.2 times and funds from operations to total debt of 20.1%. Leverage is high, with total debt to EBITDA at 6.3 times. The proposed debt transaction is not expected to materially change the company's capital structure.

Liquidity is provided by a $300 million secured revolving credit facility, of which $185 million was available on Feb. 2 and $85 million of cash and marketable securities also on the balance sheet on Feb. 2. The company has no significant debt maturities until 2006.

S&P affirms Dominion Resources ratings

Standard & Poor's affirmed its ratings and outlook on Dominion Resources Inc. (BBB+/Stable/A-2), including the preferreds at BBB-, its utility subsidiaries Consolidated Natural Gas Co. (BBB+/Stable/A-2) and Virginia Electric & Power Co. (A/Stable/A-1), and other subsidiaries.

Rating triggers contained in Dominion's financing for Dominion Fiber Ventures are factored into the current ratings.

S&P believes Dominion and its main subsidiaries maintain access to bank facilities and capital markets to adequately mitigate liquidity risks arising from its ratings triggers.

S&P currently sees no evidence of a liquidity crisis at Dominion. Among the existing liquidity facilities are bank revolvers consisting of $1.25 billion in 364-day loans with a one-year term out and $750 million in 3-year loans. Currently, $752 million of the $2 billion total is available.

The revolver, which is used to back up commercial paper programs and for general corporate purposes, can be used by any of three borrowers - Dominion, Consolidated Natural Gas and Virginia Power. In the unlikely event of significant credit deterioration, Dominion can create additional liquidity by restructuring its capital expenditure program.

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