Moody's cuts Hilton Hotels to junk

Moody's Investors Service downgraded Hilton Hotels Corp., including its senior unsecured notes and medium-term note program to Ba1 from Baa3 and its convertible subordinated debentures to Ba2 from Ba1. Altogether $9 billion of debt is affected. The outlook is negative.

Moody's said the downgrade reflects "the significant negative impact on the lodging industry following the events of Sept. 11, 2001, and the resulting deterioration of the company's debt protection measures, the increased risk that earnings could be more volatile in the near to intermediate term due to unfolding political events, and the likelihood that it will take time for the company's earnings to rebound, resulting in a slower pace of debt reduction."

The negative outlook reflects the risks posed by "the uncertain economic and political environment" and the leverage which is high for the rating category.

Moody's noted that a number of Hilton's top 10 hotels are located in gateway cities on the east and west coast that have been most impacted by the decline in business travel.

However Hilton's franchise mid-scale brands, such as Hampton Inns and Homewood, provide "some stability" to earnings since they have been less impacted, have rebounded more quickly and are less dependent on business travelers.

S&P puts Jazztel on negative watch

Standard & Poor's put Jazztel PLC on CreditWatch with negative implications.

Ratings affected include its €342.4 million 13.25% notes due 2009, its €103.5 million 14% notes due 2009, its $86.5 million 14% notes due 2009 and its €189.7 million 14% notes due 2010, all rated CCC.

Moody's downgrades Interface, Inc., negative outlook

Moody's Investors Service downgraded Interface, Inc., including lowering its $150 million of 7.3% guaranteed senior unsecured notes due 2008 and its $125 million of 9.5% guaranteed senior subordinated notes due 2005 to B3 from Ba3. The outlook is negative.

Moody's said the downgrade reflects "the negative impact to margins of lower sales, the related under-absorption of fixed manufacturing costs and an unfavorable product mix; increased working capital needs, substantial debt levels inclusive of receivables financing and leases; depressed return on assets; as well as weakening debt protection measurements and decreased financial flexibility."

The negative outlook reflects "Moody's concern about the impact of poor industry fundamentals on sales, margins and cash generation as well as any impact on debt levels as a result of weakened liquidity position. Further erosion in cash generation and/or debt protection measurements could lead to a rating action."

Moody's cuts Starwood outlook to negative

Moody's Investors Service lowered its outlook on Starwood Hotel & Resorts Worldwide, Inc. to negative and confirmed the company's ratings, affecting $5 billion of debt. Ratings affected include Starwood's bank credit facilities, increasing rate notes and convertible zero coupon senior notes, all at Ba1, and ITT Corp.'s senior unsecured notes and debentures, also at Ba1.

Moody's said it lowered the outlook in response to "the increased risk of earnings volatility due to the weak economy, unfolding political events and lingering safety concerns regarding air travel, as well as the likelihood that it will take time for the company's earnings to rebound, resulting in weak debt protection measures for the rating category."

The confirmation reflects Starwood's "brand equity, scale and geographically diversified hotel portfolio."

Moody's said it also expects the company to cut capital spending in order to reduce debt and preserve financial flexibility during the current period of "substantial weakness" in the hotel industry.

S&P downgrades Lone Star

Standard & Poor's downgraded Lone Star Technologies Inc. and removed it from CreditWatch where it was placed on Oct. 9, 2001. Ratings affected include Lone Star's subordinated debt, cut to B from B+. The outlook is stable.

S&P said it put the ratings on CreditWatch in response to Lone Star's plan to acquire the assets of North Star Steel Co.'s tubular steel division for $430 million.

"Although Lone Star has not completed the North Star acquisition, the downgrade reflects the recognition of a more aggressive financial policy than had been initially incorporated into the ratings on Lone Star," S&P said.

While the original ratings took into account the volatility of oil and gas markets, S&P said it had anticipated the favorable fundamentals at the time of the original rating would continue for longer, giving Lone Star more time to improve its capital structure.

Moody's downgrades Samsonite

Moody's Investors Service downgraded Samsonite Corp. Ratings affected include the company's $70 million guaranteed senior secured revolving credit facility and $79.2 million guaranteed senior secured term loans due 2003-2005, all lowered to B2 from B1; its $322.9 million 10.75% senior subordinated notes due 2008, lowered to Caa2 from Caa1; and its $276.5 million senior redeemable preferred stock, lowered to C from Ca. The outlook is negative.

Moody's said the downgrade follows Samsonite's release of third quarter operating results showing "continued challenges to sales growth and reduced cash flow generation" for the three month and LTM period ending October 31, 2001.

Moody's said expects Samsonite's cash flow and financial flexibility will be "further pressured in the intermediate term as the company manages reduced demand for both business and personal travel-related purchases, due to a weak economy and reduced confidence in air travel."

The economy may not recover until the second half of 2002 and air traffic may stay depressed longer.

At the same time, Moody's said, Samsonite needs to address its global cost structure and supply chain, as well as its highly leveraged capital structure.

S&P puts Caraustar on negative watch

Standard & Poor's put Caraustar Industries Inc. on CreditWatch with negative implications.

Affected ratings include Caraustar Industries Inc.'s $200 million of 7.375% senior notes due 2009, its $285 million of 9.875% senior subordinated notes due 2011, its $29 million of 7.25% senior notes due 2010 and its $75 million revolving credit facility due 2004, all rated BB+.

Moody's downgrades ACT Manufacturing

Moody's Investors Service downgraded ACT Manufacturing, Inc., including cuttings its $100 million 7% convertible subordinated notes due 2007 to C from Caa3 and its $87 million guaranteed senior secured term loan facility due 2005 and its $150 million guaranteed senior secured revolving credit facility due 2005 to Caa1 from B2.The outlook remains negative.

Moody's said it downgraded the ratings because of ACT Manufacturing's "severe liquidity problems and acknowledgement that a bankruptcy filing could be forthcoming."

"The company is currently in default under its secured credit agreement and the lenders have refused to agree to any additional waivers," Moody's noted.

Moody's cuts ProSiebenSat.1 to junk

Moody's Investors Service downgraded ProSiebenSat.1 Media AG's senior debt to Ba1 from Baa2 and kept the ratings on review for possible further downgrade, affecting €400 million of debt.

Moody's said its action is part of the review begun in September after the announcement of an agreement in principle to merge ProSiebenSat.1 Media AG and KirchMedia GmbH & Co. KGaA (not rated by Moody's), ProSiebenSat.1's major shareholder.

The ratings were lowered based on the combination of the weaker operational outlook for ProSiebenSat.1's core television business, as well as concern about the level of indebtedness and contingent financial obligation of KirchMedia and within the wider Kirch group, Moody's said.

Moody's said it acknowledged KirchMedia's "continuing intention to structure the new group so as to attain an investment grade credit profile."

Moody's rates Banco Itau new bond Ba2

Moody's Investors Service rated Banco Itaú SA (Cayman Islands)'s $100 million 6.75% eurobond due October 2002 at Ba2. The outlook is stable.

Moody's noted the rating is higher than the B1 rating of its home country, Brazil, thanks to a policy introduced in June allowing some issuers to pierce their country ceilings.

S&P puts Associated Materials on developing watch

Standard & Poor's put the ratings of Associated Materials Inc. on CreditWatch with developing implications. Ratings affected include Associated Materials' senior secured bank loan at BB+ and subordinated debt at B+.

S&P said its action follows the company's announcement that it has hired Salomon Smith Barney Inc. to assist in evaluating strategic alternatives, including a possible sale of the company.

The rating agency noted: "The company has performed well over the past few years, producing credit measures above current rating category medians. However, the company's below-average business profile has limited upside rating potential."

S&P downgrades Pen Holdings

Standard & Poor's downgraded Pen Holdings Inc. and revised the CreditWatch implications to developing from negative. Ratings affected include the senior unsecured debt, lowered to CC from CCC.

S&P said it cut the ratings after Pen Holdings failed to make the $5 million interest payment due Dec. 17 on its 9 7/8% senior notes maturing in 2008. There is a 45-day grace period.

"There is a possibility that Pen Holdings could make the payment, as it is negotiations to sell a one-third interest of its International Marine Terminals (IMT) for approximately $9 million," S&P said. "However, the timing and proceeds of this sale are uncertain."

If the payment is not made within the grace period the ratings will be cut to D, S&P said.

S&P puts IWO on positive watch

Standard & Poor's put IWO Holdings Inc. on CreditWatch with positive implications.

Affected ratings include IWO's $160 million senior unsecured notes due 2010 rated CCC and Independent Wireless One Corp.'s bank debt, rated B-.

S&P downgrades International Utility Structures

Standard & Poor's downgraded International Utility Structures Inc., including cutting its $75 million of senior subordinated notes due 2008 to CCC- from B-.

Fitch cuts Providian senior rating to B+, trust preferred to CCC+

Fitch lowered the senior rating of Providian Financial Corp. to B+ from BB- and trust preferred rating to CCC+ from B. The ratings for Providian National Bank are unchanged, Fitch said, and the ratings for both entities have been placed on watch, negative. Fitch said the downgrade reflects that unsecured creditors have less asset protection as liquidity at the holding company has diminished greater than anticipated. Fitch does recognize that near-term obligations of Providian will likely be met, but longer-term prospects will depend on the financial strength of the overall enterprise. There is about $851 million of senior debt issued out of the holding company, through two convertible notes.

The watch designation signifies Fitch's concern surrounding the completion of certain restructuring objectives, namely asset sales, to improve the company's financial profile. Providian continues its efforts to sell international operations in the U.K. and Argentina and is working to structure a possible sale of around $3 billion of high risk receivables and while the sale of the portfolio would likely limit future exposure, Fitch believes that a sale of these receivables would require a significant discount and result in a sizable loss for the company. The watch also reflects continued challenges facing the company's liquidity profile as access to its traditional funding sources remains constrained, Fitch said.

Fitch said it would expect that resolution of the watch would follow the progress of certain strategic objectives during first quarter 2002. Failure to implement the necessary restructuring initiatives could further impair the ratings of Providian and the bank unit.

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