S&P keeps EchoStar on developing watch, Hughes, PanAmSat on negative watch

Standard & Poor's said it is keeping its ratings on EchoStar Communications Corp. and related companies on CreditWatch with developing implications and its ratings on Hughes Electronics Corp. and its 81%-owned subsidiary PanAmSat Corp. on CreditWatch with negative implications. Affected ratings include EchoStar's B- subordinated debt, EchoStar Broadband Corp.'s B senior unsecured debt, EchoStar DBS Corp.'s B+ senior unsecured debt, Hughes' BBB- corporate credit rating and PanAmSat's BBB- senior unsecured debt.

S&P made its comments following the announcement that EchoStar will acquire Hughes.

The rating agency said that EchoStar's ratings could see upside from the "significant cost and revenues synergies" that could be achieved if DirecTV operations are combined with EchoStar's, as well as the overall improved competitive position of the combined company.

S&P said there is "a smaller probability of a downgrade" to EchoStar but side there are "significant" integration and regulatory risks, which may delay the achievement of synergies. It also cautioned that the $5.5 billion cash component of the deal will add "significant leverage to EchoStar's already leveraged balance sheet."

While PanAmSat will be a stronger credit than the merged EchoStar and Hughes, S&P said its rating will be constrained by the parent.

S&P rates Land O'Lakes planned $300 mln notes at BB

Standard & Poor's rated Land O'Lakes Inc.'s planned $300 million of senior notes due 2011 at BB and confirmed the company's BBB- senior unsecured debt and Land O'Lakes Capital Trust I's B+ preferred stock. The outlook is stable.

S&P said the senior unsecured notes are rated one notch below the corporate credit rating because of the substantial amount of senior secured debt outstanding.

The rating agency said its assessment reflects the company's "diverse product line, geographic coverage and strong consumer brand franchise. These factors are offset by an aggressive financial profile, modest discretionary cash flow, and a sizable debt amortization schedule."

S&P keeps Newport News Shipbuilding on positive watch

Standard & Poor's said it is keeping Newport News Shipbuilding Inc. on CreditWatch with positive implications following the U.S. Department of Defense support for Northrop Grumman Corp.'s $2.1 billion bid to acquire Newport News. S&P rates Newport News Shipbuilding's senior unsecured debt at BB and its subordinated debt at B+. It rates Northrop Grumman at BBB- with a negative watch.

S&P said it will keep Northrop's rating on CreditWatch until the terms are finalized and it can assess the impact on credit quality.

On the terms currently stated, S&P said it will upgrade Newport News and affirm Northrop Grumman, removing it from CreditWatch but assigning a negative outlook.

If the cash component is boosted "materially" - currently 75% of the bid is in stock - Northrop could be lowered and Newport News raised.

S&P changes Friendly Ice Cream outlook to developing from negative

Standard & Poor's revised its outlook on Friendly Ice Cream Corp. to developing from negative and affirmed its B- corporate credit and senior secured bank loan ratings and its CCC+ senior unsecured debt rating.

S&P said it made the revision because of Friendly's refinancing plan under which it will replace its existing credit facility, improving its financial flexibility. The rating agency said Friendly has engaged Bank of America Securities LLC as a financial adviser to help evaluate refinancing alternatives that focus on real estate-based financing. The new financing plan includes a $35 million revolving credit facility, $55 million of mortgage financing, and a $35 million sale and leaseback.

The rating agency said Friendly is facing added liquidity pressures from the March 2001 amendment to its credit facility that requires principal payments of about $75 million in 2002.

S&P added that with the closing of 135 underperforming restaurants since March 2000 Friendly's operating performance "improved somewhat" in the first nine months of 2001. Same-store sales rose 1.5% in the third quarter of 2001 following a 1.4% increase in the second quarter and a 1.0% increase in the first quarter, after declining 3.3% in all of 2000. But S&P said credit protection measures are weak, with EBITDA coverage of interest for the 12 months ended Sept. 30, 2001, at 1.7 times and total debt to EBITDA at 5.6x for the same period.

Moody's downgrades Milacron senior notes to B1 from Ba1

Moody's Investors Service downgraded Milacron Inc., affecting $575 million of long-term debt including cutting to B1 from Ba1 both Milacron's $115 million of 8 3/8% senior unsecured notes due 2004 and Milacron Capital Holdings BV's €115 million 7 5/8% senior unsecured notes due 2005. Moody's also cut Milacron's senior secured revolving credit facility due 2005 to Ba3 from Ba1. The outlook is negative.

Moody's said the downgrade and negative outlook reflect Milacron's "sharply lower revenues and margins, together with increased pressure on working capital across almost all of its Plastics Technologies and Metalworking Technologies business lines throughout 2001."

The rating agency said its North American results have been "particularly poor, due to the region's worst downturn in capital spending for plastics processing equipment in more than two decades along with sharply lower general industrial manufacturing activity and reduced auto and auto parts production."

Moody's noted Milacron management had detected the decline in demand early and took aggressive action.

Moody's also observed that Milacron will experience increased pressure to access the high yield bond market in 2002 given the revolving credit commitment step-downs built into its amended senior secured bank credit agreement.

S&P downgrades Protection One

Standard & Poor's lowered its corporate credit and senior unsecured debt ratings on Protection One Alarm Monitoring Inc. to B from B+, and its subordinated note ratings to CCC+ from B-. The outlook remains negative.

The downgrade is based on Topeka, Kan.-based security company's deteriorating operating performance resulting in weaker credit protection measures, S&P stipulated.

"Revenues have declined by nearly 15% over the past year as the subscriber base declined, hampering profitability and credit measures. The company's annualized customer attrition rate for the first nine months of 2001 remained high at nearly 16%. Efforts to streamline operations through customer service facility consolidation and staff rationalization have reduced costs, but not fast enough to offset the decline in revenues," S&P report stated.

The release added that S&P is concerned about the company's reliance on its credit facility that expires in early 2002. The facility is provided by Westar Industries, which owns 87% of Protection One's stock. As of Sept. 30, 2001 the company had $138 million outstanding on the credit facility.

S&P cuts Focal Communications sr unsec to D

Standard & Poor's cut its corporate credit rating on Focal Communications Corp. to SD from CC and lowered its senior unsecured debt rating to D from C. The ratings were removed from CreditWatch negative. Focal's senior secured bank loan, rated CCC+, remains on CreditWatch with negative implications.

S&P took the action on completion of Focal's $430 million recapitalization. Bondholders received 44 cents on the dollar which falls under S&P's definition of a default. S&P considers exchanges where the value received is materially less than the originally contracted amount as a default.

S&P removes Atlantic Coast Airlines from watch

Standard & Poor's removed Atlantic Coast Airlines Holdings Inc. from CreditWatch, where they were placed Sept. 13, 2001. The ratings were subsequently lowered to current levels on Sept. 20,

2001. The outlook is negative. Affected ratings include the $24.734 mil 7.35% passthroughs series 1997-1B due 2011 at BB, the $57.714 mil 7.2% passthroughs series 1997-A due 2014 at BBB+ and the $23.333 mil 8.75% passthroughs series 1997-1C due 2007 at B+.

S&P said its action reflects Atlantic Coast's "continuing relatively strong performance, despite a very adverse airline industry environment."

Atlantic Coast reported a profit of $12.8 million in the third quarter of 2001 (including $4.6 million pretax aid from the federal government), versus $2.7 million in the prior-year period, when the company was negatively impacted from disruptions in United's level of flying.

S&P noted fee-per-departure flying enables both United and Delta - which Atlantic Coast feeds - to take full control of seats Atlantic Coast flies for them as well as responsibility for all risks, including fuel and the sale of seats. This reduces operating and financial risks.

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