S&P downgrades Williams Communications, on negative watch

Standard & Poor's downgraded Williams Communications Group Inc. and put the ratings on CreditWatch with negative implications. Ratings affected include $500 million seven-year secured senior term loan bank loan and $500 million six-yearr senior secured reducing revolving credit facility, both lowered to CCC+ from B; its $1.5 billion 10.875% senior notes due 2009, $575 million 11.7% senior redeemable notes due 2008, $425 million 11.875% senior reedemable notes due 2010 and $575 million 11.7% senior redeemable notes due 2010, all lowered to CCC- from CCC+; and its $250 million redeemable cumulative convertible preferred stock, lowered to CC from CCC-.

S&P said its action is based on increased concerns that Williams Communications may be challenged to adequately fund its business plan beyond 2002.

Williams needs "substantial" revenue and cash flow growth to meet its operating and heavy debt servicing needs, S&P said. However, growth has not met the rating agency's expectations due to the ongoing impact of the weak economy and poor fundamentals of the long-haul data business.

"Estimated cash and bank availability of $1.5 billion at the end of 2001 will have to fund operations and debt service into beyond 2002 because WCG is unlikely to generate free cash flow in the near term," S&P continued. "With debt service and capital expenditures likely to require up to $1 billion in 2002, the company may have to follow through with additional funding, asset sales, or expense reduction to improve its cushion against execution risks and weak industry fundamentals."

S&P is also concerned Williams Communications may be unable to comply with its adjusted EBITDA-to-interest coverage bank covenant in 2002 without an additional amendment.

S&P puts Foster Wheeler on negative watch, downgrades trust preferreds to D

Standard & Poor's downgraded FW Preferred Capital Trust I's $175 million of trust preferred securities to D from B- and put the ratings of parent Foster Wheeler on CreditWatch with negative implications. Foster Wheeler ratings affected include its $200 million of 6.75% notes due 2005, rated BB-, its $270 million revolving credit facility due 2003 at BB- and its $200 million convertible subordinated notes due 2007 rated B.

S&P said the downgrade of FW Preferred Capital Trust I follows the company's announcement it will defer the Jan. 15 dividend payment on the preferred stock for one quarterly period. If the company resumes paying the dividend but remain in arrears with respect to the skipped payments the rating will be raised to C, S&P said.

The rating agency said the CreditWatch listing on Foster Wheeler reflects its "heightened concerns regarding the firm's liquidity position and the potential for near-term bank covenant violations."

Foster Wheeler had $168 million of cash and equivalents and was in compliance with its fixed charge and leverage bank covenants at Sept. 30, 2001 but because the trust preferred interest payment was only about $4 million, "the deferral may imply that liquidity has weakened or that the company could be in violation of its bank covenants at Dec. 31, 2001, and may be preparing for a challenging negotiation with its senior lenders," S&P said.

Moody's downgrades Foster Wheeler, still on review

Moody's Investors Service downgraded Foster Wheeler Ltd., affecting $1.5 billion of debt, and kept the ratings on review for further downgrade. Ratings affected include Foster Wheeler's convertible subordinated bonds, lowered to B3 from B2, its senior unsecured notes and industrial revenue bonds, lowered to B1 from Ba3, its revolving credit facilities, also lowered to B1 from Ba3, and FW Preferred Capital Trust I's preferred securities, lowered to B3 from B2.

Moody's said its action follows Foster Wheeler's announcement it is deferring the $4 million dividend on 9% FW Preferred Capital Trust I Guaranteed Preferred Securities due 2029.

Moody's said it is concerned about Foster Wheeler's operating outlook, financial health and liquidity position in light of the ongoing severe downturn in its end markets, which has resulted in lower revenues, earnings and cash flow generation over the past several quarters.

A recovery in Foster Wheeler's end markets is not expected until late 2002 at the earliest, Moody's said.

The review will look at Foster Wheeler's competitive environment, which is still characterized by low levels of new project opportunities globally, severe price competition, smaller advanced payments and greater working capital requirements. Moody's will also examine the company's ability to generate earnings and cash flow from operations in the near-to-intermediate term and its ability to win new contract awards.

Foster Wheeler's current and future liquidity position will also be a key factor, Moody's said.

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