S&P downgrades Adelphia

Standard & Poor's downgraded Adelphia Communications Corp. and changed the CreditWatch to developing from negative. Ratings affected include Adelphia's senior notes, senior PIK notes and senior debentures, cut to B- from B+, its convertible subordinated notes, cut to CCC+ from B, its exchangeable preferred stock and preferred stock, cut to CCC from B-, its subsidiaries' bank debt, cut to B+ from BB, FrontierVision's senior notes, cut to B- from B+, FrontierVision's senior subordinated notes, cut to CCC+ from B, FrontierVision's bank debt, cut to B+ from BB.

S&P said it lowered Adelphia because of its concerns about regarding the impact of co-borrowings by Adelphia subsidiaries and managed entities owned by the Rigas Family. The developing CreditWatch indicates that the ratings may be raised or lowered.

Adelphia disclosed that the managed entities had outstanding borrowings of almost $2.3 billion at Dec. 31, 2001. While guaranteed by Adelphia, this debt is not consolidated on Adelphia's balance sheet.

S&P said the off-balance-sheet debt has materially weakened the company's overall financial profile.

"While analytical consolidation of the off-balance-sheet debt would result in limited weakening of financial parameters, given investor reaction to the disclosures, Standard & Poor's views Adelphia's financial flexibility to be severely impaired, at least for the near term," S&P said.

S&P also cautioned that if the $2.3 billion at year-end 2001 increases materially during 2002 then the parent debt covenant limiting indebtedness to no more than 8.75 times annualized pro forma EBITDA "could be increasingly difficult to meet." Adelphia management has indicated to S&P that it expects the company to be in compliance with the covenant for the first quarter of 2002.

If the developing CreditWatch results in Adelphia's ratings being raised the corporate credit rating is unlikely to be higher than B+ because S&P will still attribute some or all of this obligation to Adelphia, which would weaken its financial parameters. Also, Adelphia's impaired access to capital markets would constrain any upgrade.

In addition, despite the announcement of potential asset sales, if it becomes clear that much of Adelphia's recent deleveraging was actually financed with debt for which the company is liable, S&P said it question management's commitment to any form of long-term debt reduction.

S&P upgrades Beazer, rates new notes BB

Standard & Poor's upgraded Beazer Homes USA Inc. and assigned a BB rating to its planned offering of $350 million senior unsecured notes due 2012. Ratings raised include Beazer's $100 million 8.875% senior unsecured notes due 2008 and $200 million 8.625% senior unsecured notes due 2011, both lifted to BB from BB-. The outlook is stable.

S&P said Beazer's ratings reflect its improved profitability, sound financial position and the good strategic fit and relatively credit neutral structure of its expected merger with Crossmann.

The merger will make Beazer the sixth largest U.S. homebuilder and adds significant scope, expanding operations to 40 markets in 16 states from 35 markets in 14 states, S&P said.

Integration is expected to be relatively smooth given the good strategic fit of the two companies, the expected retention of key Crossmann personnel and Beazer's good track record of successfully integrating previous, albeit much smaller, acquisitions, S&P said.

EBIT interest coverage has been very stable, averaging just over 3.5 times for the past three fiscal years and a solid 4.4 times for fiscal year 2001, the rating agency added.

Moody's rates Beazer Ba2

Moody's Investors Service assigned a Ba2 rating to the proposed $350 million issue of senior notes due 2012 of Beazer Homes USA, Inc. and confirmed the company's existing ratings including its $100 million 8.875% senior notes due 2008, $200 million 8.625% senior notes due 2011 and $250 million unsecured revolving credit facility due 2004, all at Ba2. The outlook is stable.

Moody's said Beazer's ratings are helped by its strong revenue and earnings growth, geographic diversification, conservative land policies, rapid asset turnover, healthy interest coverage and the growth of its equity base.

However, the ratings also reflect the integration risk associated with the Crossmann acquisition, below-peer-group-average margins and returns, and the cyclical nature of the homebuilding industry, Moody's added.

The Crossman acquisition will provide a strong entry for Beazer into solid Midwest markets, as Crossmann has been the number one builder in Indianapolis, Ind. and a top five homebuilder in Cincinnati and Columbus, Ohio, Moody's noted. Beazer will also move up to number one in Charlotte, N.C. from number four and number four in Raleigh, N.C. from number six and add Memphis, Tenn. as a new market in addition to Nashville, Tenn.

Pro forma for the Crossman acquisition, Beazer's capital structure will change very little, with total debt/capitalization rising from 53.5% as of Dec. 31, 2001 to 53.8%, Moody's said. EBITDA interest coverage remains strong, at a pro forma 4.6 times, although reduced from the pre-transaction level of 5.0 times for the 12 months ended Dec. 31, 2001.

S&P rates Western Oil Sands notes BB+

Standard & Poor's confirmed the BB+ rating on Western Oil Sands Inc.'s planned offering of $425 million senior secured bonds. The outlook is stable.

S&P said the ratings reflect Western Oil Sands Inc.'s 20% ownership interest in Shell Canada Ltd.'s oil sands project, the Athabasca Oil Sands Project and the above-average exploration and production characteristics of the oil sands mining operations, specifically its competitive cost position, stable production profile and above-average reserve life index of about 30 years.

In addition, the project's initial 1.7 billion barrels of reserves and additional reserves on adjacent expansion sites, which together provide a total of 8.8 billion barrels of resources, and nondeclining production profile mitigate the risks associated with a single-asset project, S&P added.

Furthermore, the strong credit profiles of the other joint-venture partners serve to support Western Oil Sands' strong business risk profile, the rating agency said. As the Athabasca project represents a key component of Shell Canada's future growth strategy, S&P said it expects Western Oil Sands' business profile will continue to benefit from its participation in one of Shell Canada's strategic growth initiatives.

Once synthetic crude oil production ramps to full capacity, likely by the second quarter of 2003, S&P said it expects the ratings to benefit from the project's above-average production economics.

Moody's rates Champion Home notes B2, lowers Champion Enterprises

Moody's Investors Service assigned a B2 rating to the proposed senior notes due 2007 of Champion Home Builders Co., an intermediate holding company subsidiary of Champion Enterprises, Inc., lowered Champion Enterprises, Inc.'s 7.625% senior notes due 2009 to B3 from B2, and confirmed Champion Enterprise, Inc.'s other ratings. The outlook remains stable.

Moody's said it downgraded Champion Enterprises' existing notes because they will now carry a subordinated guarantee of Champion's operating subsidiaries.

Moody's said its ratings reflect the current difficult industry conditions still challenging Champion, including excess inventory throughout the industry that creates very competitive markets at both the wholesale and retail levels; repossessions that should peak at the current level of 90,000 units per year (versus a more "normal" 30,000 units per year); and pressure on the availability of floor plan financing as a result of the exiting of some major floor plan lenders, the latest of which was Conseco Finance.

The ratings also reflect Champion's weakened credit measures as demonstrated by the declining coverages, margins and returns as well as the increased debt leverage for the last three years and the integration risk associated with managing a new consumer finance business, Moody's said. In addition, the ratings also incorporate the company's significant contingent liabilities at year-end 2001.

However Champion benefits from an industry-leading position, effective cost cutting and other restructuring measures, enhanced liquidity as a result of the proposed new senior note offering and strong cash flow generating ability.

Moody's rates Crescent Real Estate notes Ba3

Moody's Investors Service assigned a Ba3 rating to the proposed $375 million unsecured notes of Crescent Operating LP and Crescent Financing Corp. and confirmed its Ba3 senior unsecured debt rating of Crescent Real Estate Operating and its B2 preferred stock rating of Crescent Real Estate Equities, Inc. The outlook remains negative.

Moody's said the ratings reflect Crescent's leveraged capital structure, still-constrained financial flexibility, deterioration in operating performance due to a weak economy and Moody's expectation that Crescent's operating trends will remain weak over the near term.

Crescent had been operating with a strained credit profile even during a more robust operating environment, Moody's said. But current market conditions have crimped performance in the REIT's non-core property investment portfolio.

On-going challenges related to certain of these investments, combined with weakening office market fundamentals, will likely delay the firm's progress in improving its credit statistics, the rating agency said.

Moody's expects a modest decline in Crescent's debt protection measures and coverage ratios in particular in the near term. The bond financing will lengthen maturities but Crescent will remain highly leveraged, with pro forma debt and preferred as a percentage of gross assets at about 55%, and fixed charge coverage of approximately 2.0 times.

Moody's downgrades Ryerson Tull

Moody's Investors Service downgraded Ryerson Tull, Inc. including cutting its $100 million senior unsecured notes due 2006 to B1 from Ba3. The outlook is negative.

Moody's said it cut Ryerson Tull because of the company's limited financial flexibility, driven by weak operating performance that has affected its debt protection measures.

The negative outlook reflects uncertainty about when demand for processed metals will improve.

Moody's said Ryerson's operating profit performance has weakened materially due to its inability to pass along to its customers a profit margin for its value-added services.

Average selling prices declined by 9% during 2001 to $764 per ton in the fourth quarter from $840 per ton in the fourth quarter of 2000, as shipments contracted by 15.6% for the year, Moody's noted. Exacerbating pricing weakness and lower production volumes was the impact of Ryerson's LIFO inventory liquidation as older, higher-cost inventory layers were penetrated and profit margins were narrowed further.

As a result, Ryerson's operating margin (excluding charges) for 2001 decreased sharply to -2.3% on $2.2 billion of revenues from 0.7% on $2.8 billion of revenues in 2000; EBITDA for 2001 was -1%, the rating agency said although it added that Ryerson generated $228 million of free cash flow through strict working capital management.

Moody's downgrades Unifi

Moody's Investors Service downgraded Unifi, Inc. including cutting its senior unsecured rating to B1 from Ba2. The outlook is negative.

Moody's said it cut Unifi because of the impact of the sharp decline in demand for its polyester and nylon yarn on cash flow generation and debt protection measures, as well as the uncertain outlook for demand improvements over the intermediate term.

While some pick-up in volume is possible in the near term should industry conditions improve, volumes may not return over the longer term to levels that will generate a significantly higher return on assets and substantially increase the level of efficiency at Unifi's production facilities, Moody's said.

The negative outlook is based on the uncertain prospects for a sustainable and significant improvement in profitability, return on assets and cash flow generation, as well as the uncertainty caused by DuPont's request for arbitration to resolve a breach of contract claim relating to its manufacturing alliance with Unifi, the rating agency added.

S&P cuts Caraustar

Standard & Poor's downgraded Caraustar Industries Inc. Ratings affected include Caraustar's $200 million 7.375% senior notes due 2009, $29 million 7.25% senior notes due 2010 and $75 million revolving credit facility due 2004, all cut to BB from BB+, and its $285 million 9.875% senior subordinated notes due 2011, cut to B+ from BB-. The outlook is stable.

S&P said it cut Caraustar because it expects weak market conditions amid continuing overcapacity will prevent the company from improving credit measures to levels expected for the prior rating.

Although most of the company's operating issues have been remedied and new business volumes are starting to ramp up, recycled paperboard demand is unlikely to rebound sufficiently in the near term to significantly boost performance, S&P said.

Operating margins (before depreciation and amortization) have fallen steadily over the past few years to about 12% from almost 20%, the rating agency noted, adding that the decline was due to a drop in operating rates following a series of acquisitions, the inability to fully pass through cost increases, the loss of gypsum facing paper volumes from Georgia-Pacific, operating issues at the company's Sprague, Conn. mill, and lowered demand stemming from the recession. With the correction of the Sprague mill issues, the favorable impact of the ramp up of new business volumes, and the anticipated economic recovery, operating margins should modestly improve over the next two years.

Moody's rates new Vimpelcom notes B3

Moody's Investors Service assigned a B3 rating to Open Joint Stock Company Vimpel-Communications planned offering of $200 million senior unsecured notes to be issued by, but without recourse to J.P. Morgan AG, to finance its loan to VimpelCom. Moody's also assigned a B3 rating to VimpelCom BV's $75 million 5.5% Convertible Notes due 2005 that were issued in July 2000. The outlook is stable.

Moody's said the ratings reflect VimpelCom's strengthening position as a leading mobile operator in Russia and strongly improving cash flow generation from core operations.

However Moody's said it expects that consolidated debt levels will increase above the moderate levels at year-end 2001 and that VimpelCom will increase its risk profile by developing mobile opportunities in the Russian regions.

The ratings also take account of the company's relative competitive position, smaller size and less financial flexibility compared to Mobile TeleSystems OJSC which is currently the largest operator in the Russian market in terms of revenues and subscribers.

Moody's rates Telkomsel notes B3

Moody's Investors Service assigned a B3 rating to Telekomunikasi Selular Finance Limited proposed $100 million offering of senior notes due 2007 to be guaranteed by PT Telekomunikasi Selular. The outlook is stable.

Moody's said Telkomsel's ratings reflect risks associated with: large scale political, economic and social uncertainties in Indonesia; operating in a regulated industry at an immature stage where the government may change the industry structure or rates to meet its needs; the challenges of servicing foreign currency debt obligations with cash flow primarily denominated in rupiah; ability to fund high ongoing capital expenditure given restricted access to capital markets with a weak domestic bank/bond market and operating under a low sovereign ceiling (B3); and the potential requirement for Telkomsel to support either PT Telkom, its parent, or the Indonesian Government, its ultimate parent.

However the ratings benefit from: the strategic importance of cellular telecommunications in assisting Indonesian economic recovery; the operational, financial and political benefits of Singapore Telecommunications Ltd.'s (SingTel) presence (current stockholding 22.3% with proposed increase to 35%); and Telkomsel's leading position in the high growth cellular market enabling strong internally generated cash flows, Moody's said.

S&P rates Telkomsel notes B+

Standard & Poor's assigned a B+ rating to the proposed $100 million bonds due 2007 to eb sold by PT Telekomunikasi Selular's PT Telekomunikasi Selular Finance Ltd. unit.

S&P rates VimpelCom notes B

Standard & Poor's assigned a B rating to the $200 million notes to be issued by J.P. Morgan AG to fund a loan of similar size to Russian mobile telecommunications company JSC Vimpel-Communications.

S&P said VimpelCom's ratings reflect its strong competitive position in the key City of Moscow market, together with the operational and financial benefits brought to the company by VimpelCom's strategic investors.

The company's credit profile has been further enhanced by the continuing growth of the Russian economy, S&P added. These strengths have translated into an improved financial profile, with relatively strong margins and adequate credit measures in 2001.

The ratings are constrained by the risks associated with operating in the rapidly growing Russian telecoms sector, the execution of VimpelCom's regional expansion plans and the increasing level of foreign exchange risk faced by the company, the rating agency said.

Fitch rates Telkomsel notes B-

Fitch Ratings assigned a B- rating to PT Telekomunikasi Selular proposed issue of $100 million notes due 2007. The outlook is stable.

Fitch said the ratings reflect Telkomsel's leading market position in the rapidly expanding Indonesian cellular market.

Telkomsel has the largest mobile network, with a market share exceeding 50%, the highest levels of profitability and a very sound financial profile, Fitch said.

The ratings also take into consideration the company's exposure to political, civil, economic and currency instability that have in the past plagued Indonesia, and the potential of these factors to impinge upon business prosperity and upon the evolution of the telecommunications regulatory framework (the latter is in an early stage of development), Fitch added. Telkomsel's foreign currency rating of B- is constrained by the Republic of Indonesia's foreign currency rating.

S&P downgrades ShoLodge

Standard & Poor's downgraded ShoLodge Inc. The outlook is negative.

Ratings affected include ShoLodge's $57.5 million convertible subordinated debentures due 2004, $30 million 9.75% senior subordinated notes due 2006 and $25 million 9.55% senior subordinated notes due 2007, all cut to CC from CCC-.

S&P cuts Evercom

Standard & Poor's downgraded Evercom, Inc. and put the company on CreditWatch with negative implications. Ratings affected include Evercom's $115 million 11% senior notes due 2007, lowered to CC from CCC-.

S&P said the action follows Evercom's announcement it was in default of covenants on its credit facility as of March 31.

"Evercom has entered into a forbearance agreement with the bank lender until June 7, 2002, during which time it will try to obtain amendments to the bank agreement to remedy the default," said S&P. "If the company is not able to revise its bank covenants, the corporate credit will be lowered to CC, pending either a bankruptcy filing or actual debt-servicing default, at which time the corporate credit rating would be lowered to D."

S&P puts Associated Materials on watch

Standard & Poor's put Associated Materials Inc. on CreditWatch with negative implications, changing the watch from developing implications.

Ratings affected include Associated Materials' $75 million 9.25% senior subordinated notes due 2008 rated B+ and its $50 million secured revolving credit facility due 2002 at BB+.

S&P rates new Compass notes B

Standard & Poor's assigned a B rating to Compass Minerals Group Inc.'s new offering of $75 million 10% senior subordinated notes due 2011.

Moody's rates Swift Energy notes B3, cuts existing

Moody's Investors Service assigned a B3 rating to Swift Energy Co.'s planned offering of $150 million senior subordinated notes and downgraded the company's senior implied rating to B1 from Ba3 and its $125 million 10.25% senior subordinated notes due 2009 to B3 from B2. The outlook is positive.

Moody's said the outlook is positive pending the degree of Swift's success in New Zealand and other new U.S. core areas, such as Lake Washington.

Moody's said the downgraded reflects bondholders' exposure to performance, cost and decline curve risk as the company continues to delineate and develop reserves in its geologically complex New Zealand core area of Rimu/Kauri and other new core areas in the U.S., while at the same time sustaining overall production volumes at competitive finding and development costs.

However the positive outlook reflects potential for credit accretion from the combination of commodity price recovery since the end of 2001, more productive spending in 2002 to increase its funded reserve base and production rate relative to its debt and interest expense burden, and the possible future addition of significant reserves if volume expectations from the continuing delineation and development of its NZ and Lake Washington programs are met, Moody's added.

S&P keeps Starwood on negative watch

Standard & Poor's said its ratings for Starwood Hotels & Resorts Worldwide Inc. remain on watch with negative implications following the company's announcement of a $1 billion senior note offering, which is earmarked to repay Starwood's increasing rate notes and also a portion of itssenior credit facility.

S&P assigned a BBB- rating to the proposed $1 billion senior notes.

S&P expects to affirm the existing ratings once management makes material progress on a plan to address the significant amount of debt scheduled to mature by the end of February 2003. The note offering in addition to management's near term intention to refinance its senior credit facilities are sufficient to address the concerns, said S&P credit analyst Craig Parmelee.

Fitch rates new Starwood notes at BB+

Fitch Ratings assigned a BB+ rating to Starwood Hotels & Resorts Worldwide Inc.'s proposed $1 billion in senior notes. The outlook is negative. Fitch also affirmed the $507 million in series A & series B convertible notes due 2021.

The ratings reflects strong brand names, ownership of key assets in markets with high barriers to entry, and global diversity of cash flows, largely derived in Europe and Latin America. Offsetting factors include the some $1.3 billion in bank debt proforma for the issuance and $250 million in notes maturing in 2003. The new debt issuance addresses in part these pending maturities and bank refinancing is expected to occur over the upcoming months.

Following planned capital expenditures of $300 million (which was reduced from $477 million in 2001), HOT expects discretionary cash flow to approximate $500 million during 2002.

Application of excess cash to debt reduction, a continued improvement in the operating environment and the successful refinancing of bank credit agreement could lead to a stable outlook in the near term, Fitch said.

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