Moody's cuts NTL ratings on restructuring effort

Moody's Investors Service downgraded the bond and preferred stock ratings of NTL Inc. and its units, including the convertible subordinated notes to C from Caa3, and said the outlook for all ratings remains negative, following the company's announcement that it has hired strategic advisors to assist in a restructuring . Moody's previously downgraded NTL on Nov. 29, 2001, saying the action reflected the increasing unlikelihood that the company would be unable to grow into its highly leveraged capital structure.

While Moody's said it believes that there is considerable value in NTL's core businesses, the likely recovery prospects for subordinated creditors are reduced by the very high debt leverage and additional funding requirements, a significant amount of senior secured debt outstanding and NTL's limited near-term ability to invest in growth. Weak recovery prospects for bond and preferred holders are reflected in the adjusted ratings, Moody's said, as well as structural issues with respect to the company's corporate organization and consolidated capitalization and the relative asset protection that may be afforded to the respective creditors.

Moody's revises Waste Mangement outlook to negative

Moody's Investors Service revised the ratings outlook for Waste Management, Inc. to negative from positive as a result of the company's announcement of a substantial share repurchase program of up to $1 billion annually. Moody's said it is concerned with both the timing and the size of the announced share repurchase, particularly given the impact to earnings of negative economic trends, as well as a history of charge-offs at the company and upcoming debt maturities.

These factors combined with low retained earnings and significant leverage are inconsistent with the achievement of an investment-grade rating, Moody's said. The company has given some indication of lower than expected returns due to weaker than planned internal growth in volume and an unfavorable shift in product mix. In addition, cost savings appear to be less than originally projected.

Moody's cuts NiSource ratings

Moody's Investors Service downgraded the debt ratings of NiSource Inc. and its subsidiaries, including the convertible PIES to Baa3, all with negative outlooks, reflecting higher-than-expected debt levels and weaker-than-expected cash flow from its subsidiaries. The negative outlooks reflect the execution risk entailed in the company's plan to de-leverage itself over the next 12 to 18 months.

With market capital of roughly $4 billion, it will be a challenge to issue enough equity to offset over $8 billion of debt on its balance sheet. Other than the pending sale of the Indianapolis Water Company, NiSource's plan does not include any large asset sales in the near future. NiSource also intends to keep its current dividend, which has been high relative to recent earnings. The high payout mitigates the benefit of deleveraging by requiring additional cash for incremental dividends. Moody's said it may take further rating action if the company is not successful in implementing its plan over the near-term.

Moody's confirms Williams, Williams Communications Note Trust

Moody's Investors Service confirmed the ratings of The Williams Cos. Inc. (Baa2 senior unsecured) and its subsidiaries, and confirmed the Baa3 debt rating of Williams Communications Group Note Trust - a third-party special purpose vehicle to which Williams has a contingent obligation. The rating outlook for both entities are stable.

These actions are in response to Moody's discussions with Williams management about its contingent obligations related to the financially stressed Williams Communications Group (Caa3 senior unsecured, negative outlook), Moody's said. Williams has $2.5 billion of various contingent obligations to support WCG, the largest of which is the $1.4 billion of notes issued by the Note Trust. Moody's siad it believes that Williams has the financial resources and liquidity to perform on its obligations to Williams Communications without impairing its own credit quality. The possibility of Williams assuming the Note Trust debt in some fashion or repaying it was fully factored into the Moody's rating confirmation of Williams debt in December, the agency noted.

Moody's said it continues to monitor the progress of Williams' debt reduction plan announced in December. The plan includes placing mandatorily convertible securities (a $1.1 billion offering was concluded in January), selling assets, curtailing capital spending by about $1 billion and eliminating rating triggers (the most significant of which is included in the Note Trust covenants). Moody's expects that cash raised from these initiatives will be used to maintain debt at levels reasonable for its rating and its business risk as well as for capital expenditures.

The rating agency expects Williams to adjust spending levels in line with its internal cash flows and proceeds received from asset sales. Williams has ample liquidity, particularly now on the heels of its convertible securities issue, Moody's said. It maintain lines that can well accommodate the substantial and volatile working capital needs of its energy trading business. It also draws financial flexibility in its ability to reduce spending when necessary, since its mandatory capital expenditures are relatively low.

Fitch confirms Waste Management

Fitch Ratings confirmed Waste Management Inc.'s senior unsecured notes at BBB and convertible subordinated notes at BBB-. The outlook is stable.

Fitch's action follows Waste Management's announcement of a $1 billion share repurchase program, to be funded by free cash flow.

Fitch said Waste Management has a strong asset base and strong market positions in its core markets, allowing it to produce high levels of free cash flow. The successful execution of its asset divestiture program has resulted in substantial debt reduction.

Fitch downgrades Williams Communications, still on watch

Fitch Ratings downgraded Williams Communication Group, Inc.'s senior unsecured rating to CCC- from CCC+, its convertible preferred stock to CC from CCC- and Williams Communications, Inc.'s senior secured credit facility to CCC+ from B. All ratings remain on rating watch negative.

Fitch said it is concerned about the company's slower than anticipated revenue ramp-up, EBITDA generation and improvement in credit protection metrics, coupled with continued sluggish demand for broadband services and depressed asset values securing the senior secured credit facility.

Resolution of the rating watch is waiting for the outcome of Williams Communications' discussions with its bank group on the company's capital structure and the credit facility's current covenant structure.

Fitch estimates WCG entered 2002 with $1.5 billion of available liquidity and Fitch expects that liquidity should be sufficient to satisfy obligations during 2002.

Fitch said it does not foresee demand for broadband services improving during 2002, which could stress revenue growth, EBITDA generation during this year and WCG's liquidity position entering 2003.

S&P downgrades United Pan-Europe

Standard & Poor's downgraded United Pan-Europe Communications NV and kept the ratings on CreditWatch with negative implications.

Affected ratings include United Pan-Europe Communications' $800 million 10.875% notes due 2009, €300 million 10.875% notes due 2009, $300 million 11.5% senior notes due 2010 and $600 million 11.25% senior notes due 2010, all cut to D from CC; its $252 million 11.25% senior notes due 2009, $200 million 10.875%, senior notes due 2007, $478 million 13.375% senior discount notes due 2009, $512 million 13.75% senior discount notes due 2010 and $401 million 12.5% discount notes due 2009, all cut to C from CC; its €101 million 11.25% senior notes due 2009, €100 million 10.875% senior notes due 2007 and €191 million 13.375% senior discount notes due 2009, cut to C from B; €200 million 11.25% senior notes due 2010, cut D to B; UPC Distribution Holding BV's €750 million reducing revolving credit facility due 2009, €2.75 billion delayed draw term due 2009 and $500 million term loan due 2009, all cut to C from CCC.

S&P puts NTL on negative watch

Standard & Poor's put NTL Inc. and its units on CreditWatch with negative implications.

Affected ratings NTL Inc.'s preferred stock at CCC- and subordinated convertible notes at CCC; NTL Communications Corp.'s notes at CCC; NTL Communications Ltd.'s bank loan at B; Diamond Cable Communications PLC's notes at CCC; Diamond Holdings PLC's notes at CCC; NTL Business Ltd.'s bank loan at B; NTL Triangle Ltd.'s debentures at CCC; and Cablecom (Ostschweiz) AG's bank loan at B-.

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