Moody's cuts United Air Lines

Moody's Investors Service downgraded UAL Corp. and its United Air Lines, Inc. unit, affecting $8.4 billion of debt. Ratings lowered include UAL's preferred stock cut to C from Ca and trust preferreds cut to C from Caa3 and United Air Lines' senior unsecured debt, cut to Ca from Caa1, equipment trust certificates, cut to Caa2 from B1, and enhanced equipment trust certificates series 1997-1 class A confirmed at Baa3, class B confirmed at Ba2, series 2000-1 class A Confirmed at Baa3, class B cut to B3 from Ba2, series 2000-2 class A confirmed at Baa3, class B cut to Ba3 from Ba2 and class C cut to B3 from Ba3 and series 2001-1 class A confirmed at Baa3, class B confirmed at Ba1, class C cut to B3 from Ba3 and class D cut to Caa3 from B3; and Jets Equipment Trusts series 1994-A class A cut to Caa1 from Ba3, class B cut to Caa2 from B2, certificates cut to Caa3 from B2, series 1995-A class A confirmed at Ba2, class B cut to Caa1 from B1, class C cut to Caa2 from B2 and certificates cut to Caa3 from B2 and series 1995-B class A cut to Ba3 from Ba2, class B cut to Caa1 from B1, class C cut to Caa2 from B2 and certificates cut to Caa3 from B2. The outlook is negative.

Moody's said the downgrade reflects United's increased financial stress caused by continuing negative cash flow, limited access to external liquidity, and increasing demands on existing cash compounded by a weakening revenue environment and persistent constraints in the company's efforts to meaningfully reduce costs.

This stress has culminated in the company's announcement that it will prepare to seek bankruptcy protection should it be unable in the next 30 days to negotiate sufficient concessions from stake holders, potentially including debtors, Moody's added.

The ratings on debt secured by aircraft were adjusted to reflect both the increased probability of default by the underlying airline and the continued weakening of collateral values.

S&P cuts United Air Lines

Standard & Poor's downgraded UAL Corp. and its United Air Lines Inc. subsidiary and kept the ratings on CreditWatch with developing implications. Ratings lowered include UAL's preferred stock, cut to CC from CCC and United Air Lines' senior unsecured debt, cut to CC from CCC+, senior secured debt, cut to CCC from B, equipment trust certificates series 1997-1 class A cut to BBB- from A- and class B cut to B+ from BBB-, series 2000-1 class A-1 cut to BBB from A, class A-2 cut to BBB from A+ and class B cut to B+ BBB-, series 2000-2 class A-1 cut to BBB from A+, class A-2 cut to BBB from A+, class B cut to BB from BBB+ and class C cut to B+ from BB+, series 2001-1 class A-1 cut to BBB from A+, class A-2 cut to BBB from A+, class A-3 cut to BBB from A+, class B cut to BB+ from BBB+, class C cut to B+ from BB+ and class D cut to B- from BB-, Jet Equipment Trust Series 1994A class A cut to B from BB, class B-1 cut to CCC+ from B+ and class B-2 cut to CCC from B+, Jet Equipment Trust Series 1995A class A cut to BB- from BBB-, class B cut to B- from B+, class C cut to CCC+ from B and class D cut to CCC from B, Jet Equipment Trust Series 1995B class A cut to BB- from BBB-, class B cut to B- from BB-, class C cut to CCC+ from B+, class D cut to CCC from B and all other equipment trust certificates cut to B- from BB-.

S&P said the action follows management's warning that it will likely file the companies into bankruptcy by mid-November if it does not reach agreement on concessions from United's unions and other major stakeholders within 30 days.

UAL and United face continued heavy operating losses, due to the depressed airline industry revenue environment and United's high costs, with $875 million of debt payments due in the fourth quarter of 2002, S&P noted.

Management has accordingly accelerated an anticipated showdown with organized labor, which thus far represents the greatest obstacle to a financial restructuring, and threatened a bankruptcy filing that would wipe out the employees' majority ownership, S&P said.

This follows the unhappy precedent of US Airways Group Inc., where only the threat of imminent bankruptcy moved unions to agree to significant concessions (US Airways subsequently filed for bankruptcy, but has made substantial progress in reaching new labor contracts).

United's management had earlier reached a tentative agreement with the airline's pilots union on interim pay concessions, but the machinists and flight attendants unions have thus far refused to follow suit, S&P added.

Moody's cuts Revlon unsecured debt

Moody's Investors Service downgraded Revlon Consumer Products Corp.'s unsecured debt and confirmed its secured debt. The outlook is negative. Ratings affected include Revlon's $250 million 9% senior notes due 2006 and $250 million 8.125% senior notes due 2006, cut to Ca from Caa3 and $650 million 8.625% senior subordinated notes due 2008, cut to C from Ca. Its $117.9 million senior secured term loan due 2005 and $132.1 million senior secured revolving credit facility due 2005 were confirmed at B3 and its $363 million 12% senior secured notes due 2005 were confirmed at Caa1.

Moody's said the action follows Revlon's announcement of second quarter results showing continued reductions of revenue, operating margins, and cash flow and materially increased liquidity pressure over expected levels. Revlon is suffering from diminished cash, reduced revolver availability, materially compressed sales, margins and negative free cash flow, the rating agency added.

Also restraining the ratings are limited current sources of supplemental financing to fund both ongoing activities and possible material near-term cash requirements for recently announced brand revitalization efforts.

Absent an unexpected rebound in Revlon's sales, margins, market-share leverage and cash flow from operations, Moody's said it believes present trends and levels of performance will cause a depletion of unrestricted cash by the end of 2002.

Further, limitations to revolver availability are possible by as early as the fourth quarter of 2002, when minimum 12-month trailing EBITDA covenant levels increase from $185 million to $210 million, Moody's said.

S&P cuts Six Flags' outlook to negative

Standard & Poor's revised Six Flags Inc.'s outlook to negative from stable following the release of weak second-quarter operating performance and management's revision of EBITDA guidance for the full year 2002.

Six Flags Inc.'s ratings were confirmed including the BB- corporate credit rating, B senior unsecured debt rating and B- preferred stock rating. Furthermore, Six Flags Theme Parks Inc.'s ratings were confirmed including the BB- corporate credit rating and BB- senior secured debt rating.

The company's liquidity is provided by its expected discretionary cash flow, access to its revolving credit facility, and the absence of public debt maturities until 2007 and bank debt amortizations until 2008, S&P said. S&P added that it will monitor the company's operating performance and debt reduction in the key third quarter, and may consider revising its outlook back to stable if the company hits its targets.

For the 12 months ended June 30, pro forma adjusted EBITDA coverage of total interest and debt-like preferred dividends was 1.7 times.

S&P cuts Windsor Woodmont

Standard & Poor's downgraded Windsor Woodmont Black Hawk Resort Corp. including lowering its $100 million 13% first mortgage notes due 2005 to CC from CCC+. The ratings were placed on CreditWatch with negative implications.

S&P said the action follows Windsor Woodmont's warning in its 10-Q for the period ended June 30, 2002 that the company will likely not be able to pay its debt service obligations, including scheduled interest payments due on its first and second mortgage notes, when they become due in September 2002.

If the company does not meet its scheduled interest payments in September 2002 the ratings would be lowered to D, S&P said.

Fitch raises Peabody outlook

Fitch Ratings raised its outlook on Peabody Energy to positive from stable. Debt affected includes Peabody's senior secured credit facility at BB+, senior unsecured notes at BB and senior subordinated notes at B+.

Fitch said it revised Peabody's outlook in response to the company's debt reduction over the past two years and expectations that it will follow a conservative financial strategy going forward.

In addition, the positive outlook also reflects improving coal industry fundamentals.

During calendar 2001, Peabody repaid $835 million in debt. Since March 31, 1999, Peabody has reduced its total debt by over $1.5 billion, Fitch noted. Going forward, Peabody is expected to have a Debt/EBITDA at the end of fiscal year 2002 of under 2.5 times and an EBITDA/Interest of over 4.0x.

AM Best lowers Conseco insurance units

A.M. Best Co. downgraded the financial strength ratings of Conseco, Inc.'s principal insurance subsidiaries to B (Fair) from B++ (Very Good). The ratings remain under review but the status is changed to developing from negative.

A.M. Best said the ratings downgrade follows Conseco's public announcement of its second quarter financial results and additional disclosures about its revised financial restructuring initiatives.

A.M. Best said its downgrade reflects uncertainty surrounding Conseco's accelerated restructuring initiatives and the potential adverse financial impact on the subsidiaries if negotiations are protracted and execution of the restructuring plan is delayed.

The actions do not indicate immediate concerns about the financial condition of the Conseco insurance subsidiaries, A.M. Best added.

In fact, A.M. Best said it expects that the financial position of the insurance subsidiaries will remain stable over the near-term, as demands for cash dividends from the insurance subsidiaries are eliminated and proceeds from previous cash raising initiatives are retained in the operating units.

A.M. Best expects only minimal cash payments will be made to the holding company until a restructuring plan is agreed upon with Conseco's creditors. Any future disbursements may be subject to regulatory approval.

The financial restructuring of Conseco Inc. must be agreed upon by a number of different classes of creditors. Consequently, the ultimate resolution of an agreed upon restructuring plan is highly complex and could entail an extended period of negotiations. These conditions raise the potential for material operational disruption. A.M. Best said it believes that the timely agreement of a restructuring plan is essential to preserving the financial condition of the operating subsidiaries over the near-term.

S&P takes Winn-Dixie off watch

Standard & Poor's confirmed Winn-Dixie Stores Inc.'s ratings and removed them from CreditWatch with negative implications. The outlook is negative. Ratings affected include Winn-Dixie's $300 million 8.875% senior unsecured notes due 2008 at BB+ and $200 million 364-day revolving credit facility, $200 million revolving credit facility due 2006 and $400 million amortizing term loan due 2007, all at BBB.

S&P said the action is in response to modest operational and financial improvement resulting from better marketing, the benefits of a store retrofit and restructuring program, and debt reduction.

Operating margins grew somewhat in fiscal 2002 (ended June 26, 2002) due to lower procurement costs and retrofits of the store base that eliminated unprofitable service departments, S&P said.

Still, margins remain below those of other investment-grade supermarket operators, and further improvement is incorporated into the rating, S&P added.

Funds from operations to total debt measured a modest 17% for fiscal 2002, a measure that is expected to grow as the company reduces funded debt and grows cash flow, S&P said. The rating is supported by management's willingness to repay bank debt with discretionary cash flow.

The company has prepaid $250 million on its term loan and has $145 million remaining, S&P noted.

Moody's rates Dade Behring's loan B1; notes B3

Moody's Investors Service rated Dade Behring Inc.'s $125 million senior secured revolver due 2007 at B1, $450 million senior secured term loan due 2008 at B1 and $315 million senior subordinated rollover notes at B3. Furthermore, Moody's upgraded the senior implied rating to B1 from Caa3 and senior unsecured issuer rating to B2 from Ca. The ratings on the $350 million 11.125% senior subordinated notes due 2006 will be withdrawn. The outlook is stable.

Ratings reflect moderately high leverage and modest interest coverage, historically weak cash flow, uncertain impact that bankruptcy/reorganization will have on operating results, recent decline in instrument sales and challenges of operating in a highly competitive industry, Moody's said.

Supporting the ratings is anticipated stable operating trends, leading market position, broad product line, wide test menu and recent and expected product introductions, Moody's noted.

"Our stable outlook anticipates relative stability in Dade's operating trends after the company emerges from bankruptcy. The outlook further anticipates that there may be some weakness in performance specifically attributable to the bankruptcy," Moody's said.

Under the company's proposed prepackaged plan of reorganization, for the fiscal year 2002, debt will be at about $800 million, total debt/total capitalization is expected at 55%, debt leverage is expected at 3.8 times and EBITDA/interest is expected at 3.1 times.

S&P puts Gemstar on watch

Standard & Poor's put Gemstar-TV Guide International Inc. on CreditWatch with negative implications. Ratings affected include Gemstar-TV Guide's $400 million 8.125% senior subordinated notes due 2009 at BB- and its $300 million revolving credit facility due 2005 and $300 million 364-day revolving credit/term loan facility due 2005, both at BB+.

S&P said the action follows Gemstar-TV Guide's announcement that it is delaying the release of its 2002 second quarter earnings and the filing of its Form 10-Q with the SEC, and that the company is reviewing how it recognizes revenue.

Gemstar also reported it is restating its 2001 financial results to reverse a nominal amount of revenue recognized at its TV Guide subsidiary.

S&P said it believes the disclosure heightens concerns about the company's reported financial results and escalating investor uncertainty.

The ratings are already vulnerable to mounting business risk, S&P added.

Recent announcements of an ongoing review of how advertising was recorded and allocated, and the potential for management instability, exert further downward pressure on ratings despite adequate cash resources, S&P said.

Moody's cuts Lumbermens' surplus notes

Moody's Investors Service downgraded the insurance financial strength ratings of members of The Kemper Insurance Cos. inter-company pool to Baa1 from A2 and cut the surplus notes of Lumbermens Mutual Casualty Co., the lead company of the pool, to Ba1 from Baa2 affecting $700 million of debt.

Moody's said the downgrade reflects the company's weakened capital position as a result of adverse reserve development and negative operating cash flows over the past several years.

The level of capitalization has exacerbated both the company's financial and operating leverage, Moody's added.

Further, reinsurance recoverables relative to surplus are substantial, which is in part driven by the company's heavy utilization of reinsurance to reduce its net exposure while rapidly increasing its gross written premiums, Moody's said.

While Moody's added that it believes that the sale of the personal lines business and a $125 million investment by Berkshire Hathaway into a downstream holding company of Lumbermens Mutual Casualty Co. provides some surplus relief; the company's financial flexibility is strained.

Moody's puts Atlantic Coast Airlines on review

Moody's Investors Service put Atlantic Coast Airlines, Inc. on review for possible downgrade including its $57.7 million series 1997-A, class A passthrough certificates at A2, $24.7 million class B passthrough certificates at Baa2 and $23.3 million class C passthrough certificates at Ba1.

Moody's said the action was prompted by the rapidly deteriorating financial condition of United Airlines, Inc., Atlantic Coast's primary business partner, and the potential risks for Atlantic Coast from decisions that United could make as part of its restructuring program.

Moody's cuts Banco Comercial, Banco de Montevideo

Moody's Investors Service downgraded to Ca from Caa1 the long term foreign currency ratings of Banco Comercial SA and Banco de Montevideo SA, Uruguay's two largest domestically owned private sector banks.

Moody's said the action follows indications by the Central Bank of Uruguay that it would only cover the demand deposit and savings account obligations of those privately owned banks whose operations have been suspended.

The implication is that the long-term fixed-rate deposits in US dollars held at those banks as well as their debt obligations would therefore be subject to the banks' own ability to meet those obligations, Moody's said.

Moody's said the Ca ratings reflect its expectation of a high severity of loss to investors in light of both banks' fragile financial condition, as well as the low level of support assumed to be forthcoming from their private shareholders as well as from the Uruguayan authorities.

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