Moody's downgrades Lucent

Moody's Investors Service downgraded Lucent Technologies Inc., affecting $7.8 billion of debt. Ratings lowered include Lucent's senior unsecured debt to B2 from Ba3 and its preferred stock to Caa2 from B3. Moody's also assigned a Caa1 rating to its recent issue of convertible trust preferreds. The outlook is negative.

Moody's said it lowered Lucent because of continuing cutbacks in capital spending plans by Lucent's core customer base and the expectation that the downturn in demand will be more protracted and deeper than the rating agency had previously anticipated.

As a result, the company's return to profitable operations, even at the EBITDA level, will be delayed and cash outflows will continue for an extended period, Moody's said.

Moody's said it acknowledged that the recent trust preferred issue and pending asset sales will provide the company with significant liquidity to fund its cash burn rate.

However, breakeven cash flow from operations is not likely to be attained in the near future, Moody's warned.

Moody's downgrades AT&T Canada, still on review

Moody's Investors Service downgraded AT&T Canada Inc.'s senior unsecured notes to B3 from Ba3 and continued its review for possible further downgrade, affecting $2.96 billion of debt.

Moody's said it remains concerned that without some form of support from AT&T Corp. AT&T Canada's debt will need to be restructured.

While AT&T Corp. has not at this point offered any support and Moody's "seriously questions" whether any will be forthcoming, the rating agency said it cannot definitively rule out the possibility of AT&T Corp. providing some form of liquidity.

Moody's said its review will focus on the potential of a bank debt default within the next 60 days. This could happen if a going concern footnote is included in AT&T Canada's 2001 audited financial statements due by the end of April. If this were to occur without waiver or amendment, AT&T Canada could pay off the banks with cash on hand, leaving the company with about one year of liquidity.

Moody's rates Veridian's credit facility Ba3

Moody's Investors Service assigned a Ba3 rating with a stable outlook to Veridian Corp.'s proposed $200 million secured credit facility. The company also received a senior implied rating of Ba3 and a senior unsecured issuer rating of B1.

The ratings are dependent upon the completion of the company's proposed initial public offering, which is planned for May 2002. Veridian expects to receive about $161 million in net proceeds from the IPO. "In the event the IPO is not executed as previously described or is materially delayed and/or shelved, Moody's will place these ratings on review for possible downgrade," the Moody's release said.

Veridian's rating is based on "moderate financial leverage, acceptable cash flow after capital expenditures relative to total debt, and solid coverage of interest expenses." There are, however, some concerns due to the company's "relatively small funded backlog" and the "prevailing trend towards shorter tenor contracts."

Moody's puts KPNQwest on downgrade review

Moody's Investors Service put KPNQwest NV on review for possible downgrade. Ratings affected include the company's €525 million senior secured credit facility at Ba3 and its €340 million 7.125% eurobonds due 2009, €500 million 8.875% eurobonds due 2008 and $450 million 8.125% global bonds due 2009 at B3.

Moody's said it started the review after KPNQwest revised guidance downwards.

The difficult operating environment in the retail and wholesale telecom markets may adversely impact KPNQwest's ability to grow operating cash flows in line with Moody's previous expectations and to a level that provides adequate bank facility covenant headroom, the rating agency said, adding that the bank facility will be KPNQwest's primary source of future liquidity.

Moody's review will also look at the potential need to re-evaluate the implicit shareholder support from Qwest currently incorporated in the company's ratings.

S&P downgrades KPNQwest

Standard & Poor's downgraded KPNQwest NV and removed it from CreditWatch with negative implications. The outlook is negative. Ratings lowered include KPNQwest's $450 million 8.125% notes due 2009, €340 million 7.125% notes due 2009, €500 million 8.875% notes due 2008 and €211.4 million 10% convertible bonds due 2012, all lowered to CCC from BB.

S&P downgrades Weigh-Tronix

Standard & Poor's downgraded Weigh-Tronix LLC and kept the company on CreditWatch with negative implications. Ratings affected include SWT Finance BV's $30 million tranche A bank loan due 2005, $40 million tranche B bank loan due 2007 and $50 million revolving credit facility due 2005, all guaranteed by Weigh-Tronix LLC and lowered to CC from CCC-.

Moody's rates Isle of Capri notes B2

Moody's Investors Service assigned a B2 rating to Isle of Capri Casino, Inc.'s new offering of $200 million senior subordinated notes due 2012. The outlook remains negative.

Moody's said Isle of Capri's ratings reflect its high financial leverage, which remains weakly positioned for the rating category, and the highly competitive nature of many of the markets in which the company operates.

On the positive side, the ratings are supported by management's stated intention to reduce leverage to more appropriate levels over the near to intermediate term, and the expected improvements to the company's overall credit profile resulting from the announced sale of the Tunica and Las Vegas properties, Moody's said.

S&P rates new Icon notes B-

Standard & Poor's assigned a B- rating to the upcoming offering of $200 million notes due 2012 by ICON Health & Fitness Inc. The outlook is negative.

S&P cuts Eagle-Picher outlook

Standard & Poor's lowered its outlook on Eagle-Picher Industries, Inc. to negative from stable. The company's corporate credit rating is B+.

Moody's rates new Icon notes B3

Moody's Investors Service assigned a B3 rating to Icon Health & Fitness, Inc.'s upcoming offering of $200 million senior subordinated notes due 2012. The outlook is stable.

Moody's said its assessment reflects Icon's "significant indebtedness and high financial leverage, weak balance sheet, sensitivity to retail industry trends and shifting consumer interest, the challenges of continuing to produce new products that have market-leading features, heavy reliance on a concentrated group of retail customers, and uneven financial performance in recent years."

Positives include Icon's leading market position in the fitness equipment market, broad product offerings with strong brand recognition, well-established presence in multiple distribution channels, favorable industry and demographic trends, and improvement in its financial performance and capital structure, Moody's said.

Moody's confirms Tekni-Plex

Moody's Investors Service confirmed its ratings on Tekni-Plex, Inc. and assigned a stable outlook, concluding a review begun in October 2001. Ratings confirmed include Tekni-Plex's $275 million 12.75% senior subordinated notes due 2010 at B3 and $440 million secured credit facility at B1.

Moody's said the confirmation acknowledges "some improvement" in Tekni-Plex's consolidated financial condition during the first half of fiscal 2002 driven primarily by rebounding demand in the consumer segment, which includes the contributions of the Swan garden hose division of Mark IV Industries, Inc. acquired in October 2001 for approximately $65 million.

However Moody's said it remains concerned about the relative softness in revenues and EBIT profitability, albeit improving, throughout the industrial segment, which accounts for 67% of total net sales.

Tekni-Plex continues to have a weak balance sheet with significant amounts of intangibles at 30% of total assets.

S&P downgrades Marconi

Standard & Poor's downgraded Marconi plc and put the company on CreditWatch with negative implications. Ratings lowered include Marconi Corp.'s €1 billion 6.375% notes due 2010, €500 million 5.625% notes due 2005 and $1.8 billion bonds due 2030, all cut to CCC from B-.

S&P said its action reflects Marconi's "extremely weak funding position and the group's unsuccessful negotiations of a new bank facility to replace its current facility maturing in March 2003."

S&P said it believes there is "a high probability" Marconi's balance sheet will be restructured on terms that are detrimental to bondholders.

The rating agency also noted that further deterioration of market conditions is expected and they are likely to stay bad for longer than previously expected, beyond the fiscal year to March 2003.

S&P downgrades Solectron

Standard & Poor's downgraded Solectron Corp. and maintained its negative outlook on the company.

Ratings lowered include Solectron's $150 million 7.375% senior notes due 2006, $100 million revolving credit agreement due 2002, $1.15 billion LYONs due 2019, $4.025 billion LYONs notes due 2020, $2.9 billion LYONs notes due 2020, $500 million senior secured credit facility and $500 million 9.625% senior notes due 2009, all lowered to BB from BB+, and its $1 billion adjustable conversion-rate equity security units (ACES), lowered to B+ from BB-.

S&P downgrades Budget

Standard & Poor's downgraded Budget Group Inc. and put the company on CreditWatch with negative implications. Ratings lowered include Budget's $400 million 9.125% senior notes due 2006, cut to CC from CCC+.

S&P puts Berry Plastics on developing watch

Standard & Poor's put Berry Plastics Corp. on CreditWatch with developing implications.

Ratings affected include BPC Holding Corp.'s $105 million 12.5% senior secured notes due 2006 rated B- and Berry Plastics Corp.'s $75 million 11% senior notes due 2007, $25 million 12.25% senior subordinated notes due 2004 and $100 million 12.25% senior subordinated notes due 2004, all rated B-.

Moody's upgrades Orion Power

Moody's Investors Service upgraded Orion Power Holdings' senior unsecured debt to Ba1 from Ba3 and kept it on review for further upgrade. Moody's also confirmed the Baa3 issuer rating and Prime-3 commercial paper rating of Reliant Resources, Inc., which is acquiring Orion.

During 2002, $1.5 billion of bank debt and bonds issued by Orion will be refinanced by Reliant or retired, Moody's said.

Orion's securities are on review for further upgrade until the refinancing is completed, Moody's added.

Moody's raises Flowserve outlook

Moody's Investors Service confirmed Flowserve Corp.'s ratings and raised the outlook to positive from stable. Ratings affected include Flowserve's $244 million of senior subordinated notes due 2010 at B3 and its $1 billion senior secured credit facilities at B1.

Moody's said its action follows Flowserve's announcement of an agreement to acquire the Flow Control Division of Invensys plc for $535 million.

The acquisition has a "sound strategic rationale," Moody's said, with potential to enhance the combined company's market position in the global flow control market through expanded product offerings, geographic diversification and end-market exposure.

Moody's also noted Flowserve's financial performance and credit profile has improved since its IDP acquisition in August 2000.

In addition, Flowserve has a demonstrated ability to execute large-scale integration and to deliver financial gains from turning around under-performing businesses, the rating agency said.

However Moody's cautioned of the substantial execution challenges of integrating IFC, the high financial leverage of the combined company, IFC's weakening financial performance in recent years and Flowserve's exposure to cyclical end-markets.

Moody's expects Flowserve will finance the acquisition with a mix of debt and equity that will not increase its debt leverage.

Moody's downgrades Park-Ohio

Moody's Investors Service downgraded Park-Ohio Industries, Inc. including lowering its $200 million 9.25% senior subordinated notes due 2007 to Caa1 from B2. The outlook is stable.

Moody's said its action reflects Park-Ohio's weak cash flow, increasing leverage, insufficient interest coverage, uncertain fiscal 2002 prospects and near-term liquidity pressures.

Park-Ohio has little cushion under the financial covenants in its senior secured bank credit facility, the rating agency said.

Maximum revolver availability is restricted to $160 million instead of the $180 million commitment pending the results of a collateral field exam and the bank facility matures in December 2003, Moody's added.

In addition, Park-Ohio's sales volume and profitability have declined substantially, the rating agency said.

Moody's raises DaVita outlook, rates bank loan

Moody's Investors Service raised the outlook on DaVita, Inc. to positive from stable and assigned a Ba3 rating to its proposed $1.15 billion senior secured credit facilities made up of a $150 million senior secured revolving credit facility $200 million senior secured term loan A and $800 million senior secured term loan B. Moody's also confirmed the existing ratings of DaVita and Renal Treatment Centers, Inc. including DaVita's $345 million 7% convertible subordinated notes due 2009 and Renal Treatment Centers, Inc.'s $125 million 5.625% convertible subordinated notes due 2006. Moody's will withdraw the Ba2 rating on DaVita's $425 million senior secured credit facilities and the B2 rating on its $200 million 9¼% senior subordinated notes on completion of the recapitalization.

Moody's said it raised DaVita's outlook because the rating agency anticipates revenue and EBITDA trends will remain positive.

In addition, Moody's expects that after modest capital expenditures and limited spending on new facilities and small acquisitions excess cash flow will be adequate to reduce leverage considerably over the next few years.

"If the company successfully adheres to its plan and brings down leverage quickly, a positive rating action could be warranted," Moody's commented.

Positive factors supporting the ratings include the anticipated stability in the company's cash flow generation, a favorable reimbursement environment, the company's position as one of the leading national providers in an industry with good growth prospects and a strong management team, Moody's added.

However the ratings also reflect the weakened leverage and coverage measures that will result from the proposed recapitalization, the continuing concentration issue related to revenues from EPO administration, the ongoing investigation by the US Attorney's Office and rising costs for labor and supplies, Moody's said.

S&P downgrades Outsourcing Solutions, on watch

Standard & Poor's downgraded Outsourcing Solutions, Inc. and put it on CreditWatch with negative implications. Ratings lowered include Outsourcing Solutions' $100 million 11% senior subordinated notes due 2006, cut to CCC+ from B-.

S&P cuts Flowserve outlook

Standard & Poor's lowered its outlook on Flowserve Corp. to stable from positive. Its corporate credit rating is BB-.

Moody's puts Interep on downgrade review

Moody's Investors Service put Interep National Radio Sales, Inc. on review for possible downgrade including its $100 million 10% guaranteed senior subordinated notes due 2008 rated B3.

Moody's said it began the review because of Interep's "tenuous liquidity position" relative to its 2002 funding needs.

In addition, Interep's financial performance has been materially weaker than Moody's original expectations with leverage measured by debt-to-operating EBITDA in excess of 17 times, the rating agency said.

Inclusion of net contract buyout liabilities to Interep's debt burden demonstrates an additional strain on the company's balance sheet, Moody's added.

Including Interep's most recent interest payment, the company's cash position is substantially depleted and it has no bank availability, Moody's said.

S&P downgrades Readers Digest to junk

Standard & Poor's downgraded Reader's Digest Association Inc. to junk, lowering its corporate credit rating to BB+ from BBB- and affecting $216 million of debt. The outlook is stable.

S&P said the action follows Reader's Digest's agreement to acquire Reiman Publications LLC for $760 million in cash.

"The purchase provides a good strategic fit and complements Reader's Digest's position in the highly competitive magazine publishing and direct marketing industries," S&P said.

"Potential operating synergies and cost saving opportunities have the potential to increase profitability and cash flow generation over the near term.

However there are longer term questions about Reiman's growth prospects, S&P said.

In addition, the rating agency noted buying Reiman's assets is the biggest purchase in Reader's Digest's history, reflecting a shift from more moderate financial policies.

"The deal increases financial risk at a time when the profitability of the core U.S. magazine and books and home entertainment businesses are weak," S&P added.

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