S&P cuts Teleglobe to junk

Standard & Poor's downgraded Teleglobe Inc. and kept it on CreditWatch with negative implications. Ratings affected include Teleglobe's senior unsecured notes, bank loan and debentures, all cut to B- from BBB+.

S&P said the downgrade is because of heightened concerns about Teleglobe's ability to obtain additional sources of funding given a reevaluation by BCE Inc. of Teleglobe's longer term strategic importance.

The downgrade also reflects heightened uncertainty regarding Teleglobe's ability to amend the terms under the fully drawn US$1.25 billion facility, which becomes due July 22, 2002, S&P said.

The new ratings are stand-alone for Teleglobe, S&P continued. Its credit profile has weakened considerably due to significantly lower revenue and EBITDA in 2001 due to a sharp decline in wholesale revenues from carrier customers. The ratings also take into account limited rating support due to the BCE relationship. Continued weakness in the sector places increasing uncertainty regarding the growth potential of Teleglobe's high-margin global enterprise business, which was expected to offset declines in the carrier segment.

Moody's rates Philippine Long Distance notes Ba3

Moody's Investors Service assigned a Ba3 rating to Philippine Long Distance Telephone Co.'s proposed $350 million bond issue and continued its review for possible downgrade.

Moody's said it will confirm PLDT's ratings with a stable outlook if it is successful with the bond issues at the proposed level of $350 million.

Such a transaction would materially reduce refinancing pressures the company faces, Moody's said.

Moody's cuts Colt Telecom to B3 from B1

Moody's Investors Service lowered the senior unsecured ratings of Colt Telecom Group plc to B3 from B1. The outlook is negative and likely to remain negative until market conditions begin to show improvement.

The downgrade reflects slower than anticipated growth trends that are not anticipated to improve near term and concerns about longer-term ability to grow cash flows in line with debt service obligations, the rating agency said.

Nonetheless, Moody's noted that Colt has adequate cash on hand in the medium term to supplement cash interest expense and fund capital expenditure.

The ratings continue to be supported by a strong liquidity position and balance sheet as well as the continued support from equity holders who injected almost £500 million in late 2001. The ratings also take into consideration the relatively low cost of debt, with cash interest expense less than 5.5% per annum.

Nonetheless, Moody's believes Colt's ability to grow cash flow to a level sufficient to adequately cover ongoing maintenance, capital expenditures and service debt is increasingly uncertain given recent operating trends and the challenging operating environment for alternative telecom operators in Europe, more broadly.

The negative outlook reflects concerns about persistent weakness in core markets that adversely impacts revenues and cash flows.

Moody's rates Western Oil Sands notes Ba2

Moody's Investors Service assigned a Ba2 rating to Western Oil Sands Inc.'s upcoming offering of $425 million of 10-year senior third priority secured notes and confirmed the company's existing ratings.

Moody's said the project being financed by the notes has strong potential to become a world scale long-lived syncrude producer.

But it warned that in the near term there are inherent complexities, uncertainties and environmental issues in attaining design performance of a multi-stage oil sands project.

Other negatives are Western Oil Sands' leverage, the notes' junior collateral position, partner calls on the collateral at 80% of cost and carveouts for C$75 million of additional second secured debt.

Moody's warned the ratings may suffer if there are material new overruns, delays or failure to approach 2003 projections.

Moody's estimates Western Oil Sands may need a WTI oil price in the range of US$16/barrel to cover costs, excluding capital cost recovery.

Moody's downgrades Maxtor

Moody's Investors Service downgraded Maxtor Corp., completing a review begun on the announcement of the company's planned merger with Quantum Corp.'s Hard Disk Drive Group, now completed. The outlook is negative. Ratings affected include Maxtor's $74 million 5¾% subordinated debentures due 2012, lowered to Caa1 from B3.

Moody's said it cut Maxtor's ratings because of significant changes to its business model following the merger with Quantum's hard disk drive operation.

In particular, Moody's noted the increased operating expenses recorded to date and current projections for substantially larger outlays on capital expenditures in fiscal 2002.

Due to near-term capacity constraints and existing contractual obligations, the company elected to proceed with dual production platforms, which have contributed to a decrease in gross margins after the merger was closed at the beginning of the fiscal 2001 second quarter.

The ratings could be lowered further if continuing operating losses and capital spending requirements significantly erode the current cash position, Moody's said.

Fitch downgrades Turkcell/Cellco bonds

Fitch Ratings downgraded the outstanding notes of Turkcell Iletisim Hizmetleri AS guaranteed special purpose financing vehicle Cellco Finance NV, cutting its $400 million senior unsecured notes due 2005 to B- from B and its $300 million senior subordinated notes due 2005 to CCC+ from B. Fitch also confirmed its B foreign currency senior unsecured rating for Turkcell and downgraded its local currency rating to B from B+. All ratings were removed from Rating Watch Negative and given a stable outlook.

Fitch said the stable outlook indicates it believes the debt markets will remain open to Turkcell.

Fitch noted that Turkcell's credit metrics would appear to justify a higher rating but all its debt matures before the end of 2005 and it is becoming increasingly dependent on Turkish domestic banks for short-term funding and refinancing to support its liquidity.

Fitch said Cellco's senior unsecured and senior subordinated noteholders would be in a substantially weaker position than that of any current and future secured creditors, or possibly even providers of vendor financing in the event of a capital restructuring.

Fitch said it remains satisfied with Turkcell's operational performance but is concerned about the capacity of the Turkish financial markets to support the refinancing of the group's debt maturities in particular after 2002 and ahead of the maturity of its Cellco notes in 2005.

S&P downgrades Dollar General to junk

Standard & Poor's downgraded Dollar General Corp. and removed it from CreditWatch with negative implications. The outlook is negative. Ratings affected include Dollar General's $200 million 8.625% senior unsecured notes due 2010 and $175 million bank loan due September 2002, both cut to BB+ from BBB-.

S&P said it lowered Dollar General because of its restatement of financial results, reduced financial flexibility and the challenges management faces in improving its financial and operating controls while expanding rapidly within a highly competitive industry.

Although the restatement did not materially impact cash flow for the restated years, it still points to inadequate financial controls, S&P said. These issues are being addressed by the new financial management team.

Store-level execution has been inconsistent, despite good historical same-store sales, in large part due to the demands of rapid store expansion, the rating agency added. To help improve execution, management is moderating the pace of growth somewhat and implementing numerous operational changes. The company will open about 600 stores in 2002, which is still aggressive but below 2000's record 750-plus store opening program.

Cash flow coverage for the restated years and for fiscal 2001 was adequate but near-term financial flexibility is somewhat constrained due to significant refinancing needs in 2002 including the maturities of $383 million in synthetic leases and a $175 million revolving credit facility in September 2002 as well as an anticipated shareholder litigation settlement, S&P said.

S&P downgrades Building Materials notes

Standard & Poor's downgraded the senior notes of Building Materials Corp. of America, confirmed its corporate credit rating at B+, removed the company from CreditWatch with negative implications and assigned a negative outlook. Notes downgraded to B from B+ are its $100 million 8.625% senior notes due 2006, $100 million 8% senior notes due 2007, $150 million 7.75% notes due 2005 and $155 million 8% senior notes due 2008.

S&P said it lowered Building Materials' notes because of the meaningful amount of priority debt relative to total assets.

The confirmation of the company's corporate credit rating reflects S&P's expectation that Building Material's credit quality will not be impaired by the Chapter 11 bankruptcy proceedings of the company's parent, G-1 Holdings Corp., nor by the asbestos litigation pending against it.

Moody's downgrades Woolworths

Moody's Investors Service downgraded the senior unsecured and issuer ratings of Woolworths Group plc to Ba1 from Baa3 affecting £250 million of debt. The outlook is stable.

Moody's said the lower ratings reflect its view that it is likely to take longer for Woolworth's profit recovery and coverage ratios to attain the levels anticipated at the time the original rating was assigned, given a more challenging UK retail environment and Woolworths' transitional stage.

Moody's said that while the foundations of the turnaround, including an experienced management team, are now in place, debt protection measures are likely to take longer to reach levels consistent with an investment-grade rating.

Moody's rates Kinetek's bank loan and notes B2

Moody's Investors Service assigned a B2 rating to Kinetek Industries Inc.'s $50 million senior secured revolver due December 2005, proposed $15 million 5% senior secured notes due May 2007 and proposed $11 million 10% senior secured notes due May 2007. Also, Moody's confirmed the ratings of parent company Kinetek Inc., including the Caa1 rating on its $270 million 10.75% series D senior unsecured notes due 2006, its B3 senior implied rating and its Caa1 issuer rating. The rating outlook was changed to stable from negative.

Negative factors reflected in the ratings include high debt leverage, a weak balance sheet, deteriorating operating performance and financial difficulties at the parent company, Moody's said.

Positive factors reflected in the ratings include Kinetek's strong niche market position and expertise in the specialty motor and motion control businesses and improved liquidity due to the refinancing of its credit facility, the release said.

The senior secured notes will be issued at a discount, according to Moody's, generating a total of approximately $20.3 million in proceeds, which will be used to pay down outstanding debt under the revolver and to purchase 80% of De Sheng Electric Motor Co., Ltd.

Following the financing, Kinetek's pro forma debt will total approximately $310 million, or six times 2001 EBITDA, Moody's said. Pro forma debt would represent about 108% of 2001 revenues. The balance sheet has goodwill accounting for about 55% of total assets and a tangible equity deficit of about $185 million. The net book value of property, plant and equipment was about $19.6 million at the end of 2001.

S&P rates Kinetek's notes B+

Standard and Poors' assigned a B+ rating with a negative outlook to Kinetek Industries Inc.'s $15 million 5% senior secured notes due 2007 and $11 million 10% senior secured note due 2007. Also, the long-term credit rating for Kinetek was affirmed.

Proceeds from the notes are expected to be used to pay down outstanding bank loan debt, S&P said.

"The corporate credit rating on Kinetek, a wholly owned non-restricted subsidiary of closely held Jordan Industries Inc., reflects its solid positions in small niche markets and its very aggressive financial profile," S&P explained.

According to S&P, EBITDA to interest declined to 1.7 times while total debt to EBITDA rose to about 5.6 times at Dec. 31, 2001. Although total debt to EBITDA may rise towards the 6 times area in the next couple of quarters, leverage is expected to average in the 4-5 times range over the business cycle. EBITDA to interest coverage is expected to average in the modest 2.0-2.5 times range.

Moody's lowers CPKelco Aps ratings; Negative outlook

Moody's Investors Service lowered CPKelco Aps' ratings. The outlook is negative. Downgraded ratings include its $50 million senior secured guaranteed revolver due 2006, $153.7 million senior secured guaranteed term A (comprised of $28 million, €99.1 million, ¥5 billion) due 2006, $191.6 million senior secured guaranteed term B due 2008 and $63.8 million senior secured guaranteed term C due 2008, all cut to B3 from B1, its €255 million senior subordinated notes due 2010 to (P) Ca from B3, its senior implied rating to B3 from B1 and its issuer rating to Caa1 from B2.

The downgrade, according to Moody's, reflects lower earning expectations, lower credit protection measurements, high leverage, negative tangible book equity, continuing acquisition integration risks and costs, high working capital needs, overcapacity in the low-end carrageenan markets and price competition.

"The negative rating outlook reflects the fact that it is unclear whether adequate levels of earnings and cash flow will be restored in the intermediate term to support the heavy debt burden," Moody's said.

As of Dec. 31, 2001, the company's ratio of debt to sales was 1.6 times and debt to EBITDA was 10.9 times.

According to the rating agency, the company amended its $50 million revolver in March 2002 to change the leverage ratio. The revolver is currently undrawn. "Moody's believes that most, if not all, of the $453 million intangibles may be written off, and a portion of plant, property and equipment may be written off (01 net PP&E totaled $398 million, which is almost equal to sales of $444 million)," Moody's said.

Moody's rates Kazkommerts notes Ba2

Moody's Investors Service assigned a Ba2 rating to the upcoming issue of senior unsecured notes by Kazkommerts International BV. The outlook is positive. The notes are guaranteed by JSC Kazkommertsbank of Kazakhstan.

Moody's said the rating matches the sovereign ceiling for Kazakhstan, reflecting the important role of KKB in Kazakhstan's banking system, particularly in corporate business where it has a very strong market position.

S&P upgrades Doman

Standard & Poor's upgraded Doman Industries Ltd. and put the company on CreditWatch with negative implications. Ratings affected include Doman's $425 million 8.75% notes due 2004 and $125 million 9.25% notes due 2007, both raised to C from D, and its $160 million senior secured notes due 2004, raised to CCC- from D.

S&P said the upgrade follows Doman's payment of its C$26.0 million interest on the 8.75% senior unsecured notes outstanding, originally due March 15, 2002.

"Despite making the payment, the company's liquidity remains unclear, as weak demand for pulp, compounded by duties imposed pursuant to the Canada-U.S. softwood lumber dispute, continues to negatively affect earnings and cash generation," S&P said.

S&P rates new Petroleum Helicopters notes BB-

Standard & Poor's assigned a BB- rating to Petroleum Helicopters Inc.'s new offering of $170 million senior notes due 2009. The outlook is stable.

S&P said the ratings reflect Petroleum Helicopters' leading position as a provider of helicopter transportation services in the Gulf of Mexico serving the cyclical and volatile offshore oil and gas exploration and production industry.

Petroleum Helicopters also has a highly leveraged financial profile, although gradual improvement in cash flow protection measures and debt leverage is expected largely through efficiency gains and earnings retention, the rating agency said.

Compared to other oilfield services, the helicopter industry sees less volatility from oil and natural gas prices because of an oligopolistic industry structure and the generation of demand throughout the exploration/construction/production cycle.

Pro forma for the $170 million senior notes and treating about $27 million of operating leases as debt, total debt as a percentage of total capital as of Dec. 31, 2001 is about 68%, S&P said. Absent acquisitions, debt leverage could be reduced to about 65% over the next year through increased retained earnings.

S&P changes Panavision ratings

Standard & Poor's took various rating actions on Panavision Inc. and kept it on CreditWatch with negative implications.

Ratings affected include Panavision's corporate credit, raised to CCC from CC, its $100 million revolving credit facility, $90 million tranche A term loan and $150 million tranche B term loan, all cut to CCC from B, and PX Escrow Corp.'s $150 million 9.625% senior subordinated discount notes due 2006, raised to CC from C.

S&P rates new PCA notes B-

Standard & Poor's assigned a B- rating to PCA International, Inc.'s upcoming offering of $200 million senior notes due 2009. The outlook is positive.

Moodys cuts Sholodge

Moody's Investors Service downgraded Sholodge, Inc. and assigned a negative outlook. Ratings affected include Sholodge's $20 million 9.55% senior subordinated notes series A due 2006 and $20 million 9.75% senior subordinated notes series B due 2007, both cut to Caa3 from Caa2, and its $25 million 7.5% convertible subordinated debentures due 2004, cut to Ca from Caa3.

Moody's said it cut Sholodge's ratings because of its marginal fixed charge coverage, uncertainty about its financial and business strategy going forward and an expanded share buyback program.

The negative outlook reflects concerns about Sholodge's to service debt over the intermediate term, Moody's said. Although ShoLodge was able to successfully extend the maturity of its $30 million bank credit facility to September 2004 from August 2002, it continues to generate significant operating cash deficits and report marginal profitability. EBITDA/cash interest for the period ended Dec. 31, 2001 was slightly over 1.0 time, Moody's said.

Moody's cuts Corn Products

Moody's Investors Service downgraded the $200 million senior unsecured notes and $340 million senior unsecured bank facilities of Corn Products International, Inc. to Ba1from Baa3 with a stable outlook, affecting $630 million of debt.

Moody's said the downgrade reflects the deterioration in Corn Products' debt protection measures, combined with higher debt levels following investments in international operations.

Corn Products also suffers from continuing weak industry fundamentals in its important US market, as well as challenges in historically more profitable markets such as Mexico and Argentina, Moody's said.

However the rating agency gives the company a stable outlook because it expects Corn Products to reduce its debt, strengthen its debt protection measures and improve its financial flexibilty in the near to medium term.

The stable outlook also anticipates that Corn Products will successfully recast its bank credit facility, lengthen the maturity schedule of its debt and reduce the degree of structural subordination in its capital structure by reducing debt at subsidiaries.

Moody's confirms Jupiters

Moody's Investors Service confirmed the Ba2 rating of Jupiters Ltd's $135 million senior unsecured notes due 2006. The rating outlook is stable.

The confirmation concludes a review begun on Feb. 19 when Jupiters announced the selective share repurchase of 40 million founder shares funded by the issuance of A$190 million reset preference shares (RPS).

Moody's said the confirmation reflects Jupiters' stable and improving performance and its efforts to diversify its sources of revenue into gaming technology, Keno and on-line and sports betting businesses.

Jupiters also benefits from a dominant position in the casino and gaming industry in Queensland, and the relatively low competitive and regulatory risks surrounding its core casino business in the near term.

It also has a high percentage of local gamers, which is relatively stable, and healthy debt protection measures after the share repurchase, Moody's said.

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