S&P lowers Williams Cos. to junk, on watch

Standard & Poor's downgraded The Williams Cos. Inc. two notches to junk and put it on CreditWatch with negative implications. Ratings lowered include Williams' senior unsecured debt, cut to BB from BBB-, and preferred stock, lowered to BB- from BB+. The senior unsecured debt of Northwest Pipeline Corp., Texas Gas Transmission Corp., Transcontinental Gas Pipe Line Corp. and Williams Gas Pipelines Central Inc. was cut to BB+ from BBB and Transco Energy Co.'s senior unsecured debt and WCG Note Trust's senior secured debt was cut to BB from BBB-.

S&P said the action is in response to the deteriorating liquidity position of the company, especially in the near term.

The fall in the company's stock price after announcing a severe dividend cut makes the possibility of issuing equity in the near term unlikely, S&P noted.

Additionally, Williams' inability to renew the $2.2 billion 364-day revolver, which expired Tuesday, on an unsecured basis is not commensurate with an investment grade rating, S&P said.

S&P added that it had expected the line to be renewed on an unsecured basis within the $1.5 billion to $1.0 billion range, which would have mitigated the current "liquidity crunch."

In addition, current market conditions have added substantial execution risk to Williams planned $3 billion debt reduction over the next year, S&P continued.

The inability to issue equity means that the debt reduction must be accomplished through assets sales alone, which increases execution risk, S&P said.

S&P said the Creditwatch will focus on the events of the next two months, "where liquidity is tight."

About $800 million of debt at Williams and Transco mature in late July and early August 2002 and about $180 million could come due from existing ratings triggers, S&P said. Additionally, margin calls ranging from $175,000 to $600,000 may come due because of the sub-investment grade rating of the company.

S&P raises Lear outlook

Standard & Poor's raised its outlook on Lear Corp. to positive from stable and confirmed its ratings including its senior secured and senior unsecured debt at BB+.

S&P said Lear could be upgraded in the next one to two years if it continues to generate solid free cash flow and reduce debt levels.

Lear has reduced debt by about $1.3 billion since its $2.3 billion acquisition of UT Automotive in 1999, S&P noted.

The company made 14 acquisitions for $4.6 billion from 1994 to 1999, but has not made any significant purchases since 1999.

Lear is expected to refrain from making significant debt-financed acquisitions for the next few years in order to improve its credit profile to a level consistent with an investment-grade rating, S&P said.

Lear could be upgraded if the company continues to report solid operating results and improves its credit statistics such that total debt to EBITDA will average below 2.5 times and funds from operations to total debt averages 25%-30%, S&P said.

Potential impediments to a higher rating would be deterioration in the operating environment, difficulties in executing the company's current restructuring program, or large acquisitions.

S&P rates Manitowoc notes B+, off watch

Standard & Poor's rated The Manitowoc Co. Inc.'s planned $175 million senior subordinated notes due 2012 at B+, removed the company's existing ratings from CreditWatch with negative implications and confirmed them. Ratings confirmed include Manitowoc's $125 million revolver, $200 million term A loan due 2005 and $150 million term B loan due 2006 at BB and its €175 million senior notes due 2011 at B+. The outlook is negative.

Manitowoc's proposed acquisition of Grove Investors, a leading manufacturer of mobile hydraulic and truck mounted cranes, for $270 million, ($200 million debt and $70 million equity) broadens its position in the crane business, S&P said. The transaction will enlarge Manitowoc's crane product lines and provide some synergy opportunities, but it also will increase debt leverage initially, and increase exposure to the highly cyclical and challenging crane business.

The acquisition will be funded with $200 million in cash and 2 million shares of Manitowoc's common stock currently valued at about $70 million, S&P added.

Grove, which emerged from Chapter 11 reorganization in September 2001, had sales of $675 million.

Pro forma for the acquisition, which is expected to close by August 31, 2002, Manitowoc's total debt to EBITDA would be 3.6 times and total debt to capital would be about 69%, S&P said.

Following integration and cost savings, the rating agency expects total debt to EBITDA to fluctuate around 3.0x and EBITDA interest coverage should range between 4.0x-4.5x. In addition, funds from operations to total debt is expected to average around 20%.

S&P says no change to AMC

Standard & Poor's said AMC Entertainment Inc.'s ratings and outlook are unchanged on the$19.3 million first quarter charge related to the forgiveness of loans to executive officers. S&P rates AMC's corporate credit at B with a positive outlook.

But S&P said that the transaction is not consistent with the spirit of the company's stated goals of maximizing its cash flow and improving its credit profile.

The transaction will also preclude the company from potentially applying the related monies in a more productive manner, S&P added.

Nonetheless, the size of the transaction is not significant enough to materially change the company's liquidity position,S&P said. The potential for an upgrade will continue to depend on the company's ability to improve its key credit ratios and discretionary cash flow, as well as the absence of any further transactions of this nature.

Fitch lowers MJ Maillis outlook

Fitch Ratings lowered its outlook on M.J. Maillis Group to negative from stable and confirmed its senior unsecured rating at BB+.

Fitch said it revised Maillis' outlook after management said it will continue its acquisition strategy and that future acquisitions are likely to be debt financed.

Additional equity issuance may be unlikely in view of current unfavorable market conditions, Fitch noted.

Fitch also said it has concern about the execution risk for acquisitions in markets in which Maillis has a limited presence, specifically in North America.

Fitch described the developments as contrary to its expectations that Maillis was hoping to reduce its leverage.

Moody's confirms Petrobras, Pecom, Marlim

Moody's Investors Service confirmed of Petroleo Brasileiro (Petrobras) foreign currency rating at Ba1 and for Pecom Energia SA's global bonds at Ca. Petrobras' outlook is negative, reflecting Brazil's negative outlook.

Moody's announcement follows Petrobras's agreement to acquire a controlling 58.6% interest in Perez Companc SA. Pecom is 98% owned by Perez Companc.

The total cost of the transaction will be approximately US$ 1.17 billion, including $755 million in cash, $371 million of seven year bonds issued by Petrobras, plus Perez Companc's existing debt of about $2,285 million.

Moody's said it confirmed Petrobras because of its strong liquidity and financing of the transaction from its cash resources, which total approximately $6.4 billion (as of02); coupled with strategic benefit and relatively economic purchase price of hydrocarbon reserves.

Moody's also confirmed Companhia Petrolifera Marlim's medium-term notes at B1.

Moody's puts Bay View Bank on review

Moody's Investors Service put Bay View Bank, NA and its parent Bay View Capital Corp. on review with direction uncertain. Ratings affected include Bay View Bank's subordinated debt at B1, Bay View Capital Corp.'s subordinated debt at B3 and Bay View Capital I's trust preferred stock at Caa1.

Moody's said its action follows Bay View's announcement it has entered into an agreement to sell its branch network, related deposits and certain of its loans to U.S. Bank, NA.

Moody's said its review will focus on how the pending transaction will impact Bay View's various creditors and bondholders, including any future deposit obligations of Bay View Bank after the branch sale.

S&P rates Agrilink's loan B+

Standard & Poor's rated Agrilink Foods Inc.'s $470 million senior secured credit facility at B+. Furthermore, the company's B+ corporate credit rating and B- subordinated debt rating were confirmed and removed from CreditWatch. The outlook is positive.

The loan consists of a $200 million secured revolver due in 2007 and a $270 million term loan B due in 2008. Security is a first perfected lien on virtually all assets. Proceeds from the loan and a $175 million equity investment from Vestar Capital Partners IV LP will be used to repay the existing bank facility and complete the company's recapitalization.

Agrilink's ratings reflect the company's highly leveraged financial profile following its recapitalization by Vestar and its participation in the very competitive packaged foods industry, S&P said.

Partially offsetting the negatives are the firm's leading position as the largest marketer of branded frozen vegetables in the U.S. with a strong national brand, Birds-Eye, and a portfolio of regional and private label brands. In addition, the firm has solid niche market positions in pie fillings, canned meats, and snacks. The ratings also reflect Agrilink Foods' position as an innovator in the frozen meal replacement category, which is dominated by larger companies, S&P added

Pro forma for the recapitalization, EBIDTA to interest coverage is expected in the 2.5 times, total debt to EBIDTA is expected at about 4.5 times and operating margins is expected at about 12%.

S&P puts Hornbeck on positive watch

Standard & Poor's put Hornbeck Offshore Services, Inc. on CreditWatch with positive implications including its $175 million 10.625% senior unsecured notes due 2008 at B+.

S&P said it made the change after Hornbeck announced plans for a $126.5 million IPO of common stock. Proceeds are to be used for its current new vessel program, upgrade of the existing fleet, potential acquisitions and new construction.

Projected proceeds from the IPO should provide adequate funding for the first four vessels of its announced new vessel program should projected earnings fall short and help fund the remaining four vessels planned, S&P said. In addition, the IPO will improve Hornbeck's high debt leverage and open up the equity markets for a more balanced funding of future growth.

S&P upgrades Romacorp

Standard & Poor's upgraded Romacorp Inc. including its $75 million 12% senior unsecured notes due 2006, raised to CCC- from D and its $18 million senior secured revolving credit facility due 2003, raised to CCC from D. The outlook is negative.

S&P said the action follows Romacorp's delayed payment of interest to holders of its $57 million 12% senior unsecured notes due in 2006.

S&P added that Romacorp's ratings reflects its very limited liquidity, highly leveraged capital structure, weak operating performance, and participation in the highly competitive restaurant industry.

Romacorp has been experiencing poor operating performance. Same-store sales decreased 5.7% in fiscal 2002 while EBITDA margins fell to 9.2%, from 10.6% in fiscal 2001 and 16.2% in fiscal 2000, S&P said.

EBITDA margins were negatively affected by higher labor, rent, and utility costs and an increase in baby-back ribs prices, which represent about 25% of the company's cost of sales. As a result, EBITDA in fiscal 2002 declined by 18% to $11.7 million from $14.3 million in fiscal 2001 and $19.2 million in fiscal 2000.

Liquidity is constrained; the company had only $2.6 million available under its $18 million revolving credit facility and about $1 million of cash and cash equivalents on the balance sheet as of March 24, 2002, S&P said. Moreover, the availability on Romacorp's revolving credit facility will reduce by $0.25 million per month from September 2002 until June 2003, when the credit facility reduces to $5.5 million. Management will also be challenged to comply with the amended covenants for EBITDA performance.

Moody's upgrades ConMed, rates loan Ba3

Moody's Investors Service upgraded ConMed Corp.'s ratings and assigned a Ba3 rating to its $75 million senior secured revolving credit facility due 2007 and $100 million senior secured term loan due 2009. Ratings raised include ConMed's $130 million 9% senior subordinated notes due 2008, upgraded to B2 from B3. The B1 rating on its $490 million senior secured credit facilities will be withdrawn. The outlook is stable.

Moody's said it raised ConMed in response to its recent equity offering, the proceeds of which were use to repay debt, and to the continued modest improvement in its performance in recent periods.

Combined, these factors have led to a considerable improvement to ConMed's credit profile, Moody's said.

The ratings also reflect the company's position as one of the leading players in its markets and the favorable growth trends expected for the industry, Moody's said. Additional positive factors include the diversity of ConMed's product lines as well as the recurring nature of a significant portion of its revenues, both of which leads to stability in revenues and cash flow.

Negatives include ConMed's moderately high leverage, the high level of competition in the industry, which includes major companies with significantly greater financial and other resources, weakness in certain of ConMed's segments (particularly for patient care and recently for powered instruments) and the decline in the company's margins in recent years, Moody's added.

Moody's lowers Manitowoc outlook, rates notes B2

Moody's Investors Service lowered its outlook on The Manitowoc Co., Inc. to stable from positive, confirmed its existing ratings and assigned a B2 rating to its proposed $175 million senior subordinated notes due 2012. Ratings confirmed include Manitowoc's $125 million senior secured revolving credit facility due 2006, $200 million senior secured term loan A due 2006 and $150 million senior secured term loan B due 2007 at Ba2 and its €175 million senior subordinated notes due 2011 at B2.

Moody's said it lowered Manitowoc's outlook because of the increase in leverage as a result of its recently announced acquisition of Grove Investors, Inc., significant integration risks, as well as continued weakness in the crane end-markets.

Factors that could cause a negative rating action include protracted weak demand for the company's crane products and difficulties in generating anticipated cost savings from integrating Grove, Moody's said. Factors that could lead to a positive rating action include a strong recovery in the company's end-markets and lower leverage through improvement in operating performance and/or equity capital issuance.

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