S&P cuts Charter two notches

Standard & Poor's downgraded Charter Communications Inc. two notches and put the company on CreditWatch with developing implications. Ratings lowered include Charter's senior unsecured debt, cut to B- from B+.

S&P said it lowered Charter because of concerns that potentially slower cash flow growth may make it difficult for the company to achieve the financial profile improvement S&P is expecting.

Also contributing to the downgrade are the recently launched federal criminal investigation into Charter's accounting practices and any resulting adverse effect on the company's access to the capital markets, S&P said.

S&P added that the developing CreditWatch reflects uncertainty surrounding the criminal probe.

Based on current indications, the investigation is focused on subscriber accounting policies involving a small number of customers that would not, in and of itself, meaningfully affect Charter's financial profile, S&P said. However, in the event of a wider investigation that produces additional negative developments or tightens access to external funding, the rating could be lowered further.

If no material change results from the investigation, the company's inherent business strength could merit an upgrade, although unlikely to a BB corporate credit rating over the intermediate term, S&P added. The latest action lowered the corporate credit rating to B+ from BB.

Moody's cuts Charter outlook

Moody's Investors Service lowered its outlook on Charter Communications Inc. to negative from stable, affecting $21.7 billion of debt. Ratings covered by the action include Charter Communications' senior debt at B3, Charter Communications Holdings, LLC's senior debt at B2, Charter Communications Operating, LLC's senior secured bank debt at Ba3, CC VIII Operating, LLC's senior secured bank debt at Ba3, Falcon Cable Communications, LLC's senior secured bank debt at Ba3, CC VI Operating, LLC's senior secured bank debt at Ba3, CC V Holdings, LLC (formerly Avalon Cable LLC)'s senior unsecured debt at B2 and Renaissance Media Group LLC's senior unsecured debt at B2.

Moody's said the outlook change reflects the growing likelihood that Charter's ratings may come under some downward pressure, particularly if the current federal grand jury investigation reveals accounting irregularities of either a magnitude or nature of which Moody's is presently unaware.

Moody's said the announced investigation centers mainly on the company's subscriber count and capitalized labor procedures.

Moody's added that it believes both of these "remain within the bounds of acceptability and reasonableness from both an accounting and a business practice perspective, and which are also seemingly consistent (albeit somewhat more aggressive in certain respects) with those employed by other industry sector participants."

Moreover, Moody's said it believes that the magnitude of any requisite restatement of historical financial results following completion of the investigation will be relatively immaterial and is not likely to have much (if any) impact on the company's ability to continue performing in accordance with expectations.

However, the rating agency said it remains concerned about Charter's very high consolidated financial leverage and comparatively low interest coverage, particularly given its still high capital spending needs to complete system upgrades/rebuilds and roll out new products and services.

Moody's upgrades Radio One

Moody's Investors Service upgraded Radio One including raising its $300 million 8.875% senior subordinated notes due 2011 rating to B2 from B3 and its $310 million 6.5% Remarketable Term Income Deferrable Equity Securities (HIGH TIDES) to B3 from Caa1. The outlook is stable.

Moody's said the upgrade reflects Radio One's successful acquisition track record, continued organic growth in cash flow, and willingness to use equity as well as debt to fund expansion.

Radio One has diversified geographically while, for the most part, maintaining its format focus on urban markets, Moody's noted. The company has distinguished itself through its successful re-formatting of stations and delivering an under-served but growing market to advertisers.

Moody's also noted Radio One's experienced management team and adequate liquidity, including an unutilized $250 million revolving credit facility as well as $50 million in cash. The company has also demonstrated access to the capital markets following its acquisitions.

Negatives include Radio One's acquisition appetite, including the appeal of owning radio stations in large urban markets as well as the challenges associated with integrating new stations, particularly where format changes are implemented, Moody's said. In addition, Radio One has expanded extremely rapidly, potentially straining management depth.

While the company has supplemented its debt offerings with equity, Radio One remains highly leveraged, particularly through the preferred at 7.4 times and cash flow coverage of interest and dividends after capital expenditures is thin at 1.4 times, as of the last 12 months ended June 30, 2002, Moody's said.

S&P cuts Leap Wireless

Standard & Poor's downgraded Leap Wireless International Inc. and kept the company on CreditWatch with negative implications. Ratings lowered include Leap's $225 million 12.5% notes due 2010 and $325.1 million senior discount notes, both cut to C from CCC.

S&P said it lowered Leap Wireless because of the company's extremely limited liquidity, given ongoing operating cash losses, continued capital expenditure requirements and upcoming debt amortization under its vendor financing with Lucent.

If the company is not able to substantially improve the level of operating cash losses it incurs in the second half of 2002, it will run out of cash in the next two quarters despite access to about $236 million of additional borrowings under its vendor facilities and cash and short-term investment balances of $207 million as of June 30, 2002, S&P said.

The company has also had to amend its vendor financing arrangements on several occasions to loosen financial covenants, and has minimum operating cash flow requirements for the third and fourth quarters of 2002 for operating subsidiary Cricket Communications Inc. that it may be unable to meet if operations do not materially improve, the rating agency added.

Moreover, Leap indicated in its second quarter 2002 10-Q that it will need to amend or refinance its vendor indebtedness, or raise about $225 million of additional cash in 2003 and use about $200 million of such cash to pay down vendor indebtedness to meet the total indebtedness to total capitalization financial covenant of 50% at Jan. 1, 2004, S&P said.

S&P says LodgeNet unchanged

Standard & Poor's said LodgeNet Entertainment Corp.'s ratings and outlook remain unchanged following the company's amendment of its credit facility. S&P rates LodgeNet's corporate credit at B+ with a stable outlook.

The amendment defers the scheduled tightening of leverage and coverage tests at the end of 2002, S&P noted. LodgeNet said that it still expects to comply with the original terms, but amended the facility to provide additional flexibility.

The amendment suggests that the company's key credit ratios may improve more gradually than originally anticipated, S&P said.

But it added that LodgeNet's operating performance has been favorable since the completion of the credit facility in August 2001, despite the downturn in travel following Sept. 11, S&P said.

Fitch confirms Frontier Oil, rates loan BB-

Fitch Ratings confirmed Frontier Oil Corp.'s senior unsecured debt at B+ and assigned a BB- rating to its $175 million secured revolving credit facility. The outlook is positive.

Fitch said the positive outlook reflects the continued benefits of the two-refinery system and the company's position as a niche refiner in the Rocky Mountains and Plains states.

Frontier's ratings are supported by the company's position as an independent refiner with a solid market position within its core geographic niche markets, Fitch said. Due to the company's position as a small refiner, management plans to delay implementation of the ultra low sulfur gasoline standards, giving the company an advantage over its larger peers.

Negatives include Frontier's high percentage of debt in its capital structure as a result of the acquisition of the El Dorado refinery in late 1999 as well as the company's vulnerability to volatile refining margins, Fitch added. The recent down cycle in the refining sector has weakened Frontier's credit metrics as EBITDA-to-interest dropped to 3.3 times for the 12 months to June 30, 2002. The company has, however, performed better than many of its peers over this period as US refining margins remain volatile.

S&P withdraws B+H rating

Standard & Poor's withdrew its ratings on B+H Ocean Carriers Ltd. at the company's request.

Ratings affected include B+H's corporate credit rating, previously at CCC, and Equimar Shipholdings Ltd.'s senior secured debt, also previously at CCC.

S&P cuts AES Drax

Standard & Poor's downgraded AES Drax Energy Ltd. and put the ratings on CreditWatch with negative implications.

Ratings lowered include AES Drax's £135 million 11.25% bonds due 2010 and $200 million 11.5% bonds due 2010, both cut to CCC from B+.

Fitch rates Ferrellgas BB+

Fitch Ratings assigned a BB+ rating to Ferrellgas Partners, LP's outstanding $160 million 9.375% senior secured notes due 2006, confirmed Ferrellgas, LP's outstanding $534 million senior notes at BBB and assigned a BBB rating to Ferrellgas, LP's $157 million senior unsecured bank credit facility. The outlook is stable.

Fitch said the BB+ rating on Ferrellgas Partners' notes recognizes the subordination of its debt obligations to approximately $547 million unsecured debt of the operating limited partnership.

Fitch also noted the underlying strength of Ferrellgas' retail propane distribution network.

Positive factors include Ferrellgas' extensive geographic reach, track record of customer retention, a proven ability to maintain consistent gross profit margins even during past run-ups in spot propane prices and strong internal operating, pricing, and financial controls, Fitch added.

Fitch said it believes that Ferrellgas' geographic diversity and high percentage of residential customers mitigates exposure to regional weather patterns and/or economic cycles.

Although Ferrellgas' recent financial performance was impacted by significantly warmer than normal weather conditions during the 2001-2002 heating season, credit measures have generally remained consistent with its rating category, Fitch added.

Consolidated lease-adjusted ratios for EBITDA coverage of interest and total debt to EBITDA for the 12 month period ended April 30, 2002 were 2.5 times and 5.1x, respectively, Fitch noted.

S&P lowers Britax outlook to negative

Standard & Poor's lowered its outlook on Britax Group plc to negative from stable. Britax's corporate credit rating is B+.

Fitch downgrades AES Drax

Fitch Ratings downgraded AES Drax Holdings Ltd.'s senior secured bonds to BB from BB+ and Inpower Ltd.'s senior secured bank loan to BB from BB+. Fitch also downgraded AES Drax Energy Ltd.'s senior notes to C from B+. All ratings remain on Negative Watch where they were placed in November 2001.

Fitch said it lowered AES Drax's ratings because financial projections determined according to the finance documents indicate that the company will breach its minimum forward-looking senior debt service cover ratio in 2004.

Under existing bond and loan covenants, the company cannot pay interest on the Drax Energy notes if it breaches this floor, Fitch said.

The debt service reserve account for the Drax Energy Notes has been partially depleted to meet the last interest payment in February. Consequently, funds in the reserve account are currently insufficient to fully service the £15 million interest due on Drax Energy's notes.

Fitch said it lowered Drax Holdings' bonds and Inpower's bank debt because of persistent weakness in the UK power market which has resulted in lower coverage ratios for the senior debt.

Moody's cuts Caiua

Moody's Investors Service downgraded Caiua Servicos de Eletricidade foreign currency ratings to B2 from B1 and kept it on review for possible downgrade.

Moody's said the action follows the downgrade of Brazil's foreign currency debt to B2 from B1.

The review for possible downgrade reflects concerns about Caiua's continuing net losses, difficulties at subsidiaries and investment interests, and ongoing market and regulatory pressures affecting the electric sector in Brazil, Moody's said.

Fitch rates Telefonica de Argentina, Cointel CC

Fitch Ratings assigned CC foreign currency ratings to the senior unsecured debt of Telefonica de Argentina SA and to the holding company, Compania Internacional de Telecomunicaciones (Cointel). Both companies are on Negative Rating Watch. The ratings apply to Telefonica de Argentina's outstanding $71.4 million notes due July 2006 that were recently exchanged.

Fitch said the companies are being severely affected by Argentina's deepening recession, the impact of devaluation on its debt, the suspension of tariff adjustments and the tariff pesofication.

The foregoing items have dramatically impacted the financial condition of Telefonica de Argentina, due to the imbalance between its peso revenues and its debt, which is largely denominated in foreign currencies, Fitch said.

Meanwhile Cointel, which controls 64.8% of Telefonica de Argentina and whose only revenue source are dividends received from Telefonica de Argentina, is exposed to the same risks faced by the operating company, Fitch added.

The ratings also reflect the operational and financial support historically provided by parent, Telefonica SA, Fitch said. Telefonica de Argentina and Cointel have approximately $898 million and $70 million of short-term inter-company debt with Telefonica Internacional, an affiliate of Telefonica SA, respectively.

Despite the short-term inter-company loans, maturities are expected to roll over indefinitely as it is highly unlikely that Telefonica de Argentina and Cointel would be able to find alternatives to take out the inter-company loans and upstream cash to Telefonica, Fitch said.

S&P lowers Wesco outlook

Standard & Poor's revised its outlook on Wesco Distribution Inc. to negative from stable and confirmed its ratings including its subordinated debt at B.

S&P said the rating revision was made in response to uncertainties regarding the timing and magnitude of recovery of its key industrial and construction markets. Weak markets have caused significant declines in sales and earnings, notwithstanding cost-reduction actions.

For 2001, sales from core operations declined 8.6% and EBITDA declined by 21% from 2000, reflecting soft industrial, building construction, and electric utility markets, S&P noted. For the first half of 2002, sales were down by 11%, and EBITDA was down by 25% from the first half of 2001, and the timing of a rebound could be delayed until early- to mid-2003.

Operating performance should improve gradually as the economy recovers, and Wesco benefits from its restructuring program to reduce costs and improve productivity, S&P said.

Debt usage is expected to diminish during the next one to two years, as free cash flows are used primarily for debt reduction, the rating agency added. Adjusted debt to EBITDA, currently about 6.2 times, should diminish during the next 12 months - 18 months to between 5.0x and 5.5x, and funds from operations to total debt should range between 10%-15%, levels consistent with the ratings.

Moody's cuts CSN Iron

Moody's Investors Service downgraded CSN Iron SA including cutting its 9.125% eurobonds guaranteed by Companhia Siderurgica Nacional to B2 from B1.

Moody's said the action follows its downgrade of Brazil's long-term foreign currency ceiling to B2 from B1.

S&P raises BGF

Standard & Poor's said it upgraded BGF Industries Inc. after the company paid interest on its bonds. Ratings affected include BGF's $50 million revolving credit facility, raised to CCC- from D, and its $100 million 10.25% senior subordinated notes due 2009, raised to CC from D.

S&P noted that BGF's interest payment followed a forbearance agreement with its bank lenders until March 31, 2003 allowing the company to make the July 15 interest payment within the 30-day grace period.

S&P keeps Advanced Glassfiber on watch

Standard & Poor's said Advanced Glassfiber Yarns LLC remains on CreditWatch with negative implications including its senior secured debt at CC. The subordinated debt remains at D.

S&P noted Advanced Glassfiber entered into an additional amendment and forbearance agreement with its senior secured lenders through Sept. 27.

The company also announced it will not be making the interest payment due July 15 on its $150 million senior subordinated notes due 2009 for which it had a 30-day grace period. The company and its bondholders have begun restructuring negotiations.

S&P cuts Cherokee

Standard & Poor's downgraded Cherokee International LLC and kept the company on CreditWatch with negative implications. Ratings lowered include Cherokee International's $75 million credit facility due 2005, cut to CCC- from CCC+, and its $100 million 10.5% senior subordinated notes due 2009, cut to CC from CCC-.

S&P said the downgrade follows Cherokee's announcement that in exchange for waivers to financial covenants made by its lenders the company had agreed to restructure its senior unsecured subordinated notes by Oct. 15, 2002.

According to the company, the restructuring could involve exchanging current outstanding notes for equity securities in the company and/or debt securities with reduced principal amounts and reduced interest rates, S&P noted. Additional possible actions could include tendering for the notes at prices below par value.

According to S&P's criteria, exchange offers at a substantial discount to par value or for equity securities are treated as a failure to meet obligations as originally promised. The rating treatment is identical to a default on the specific debt issues involved.

Moody's rates El Paso's loan Ba1

Moody's Investors Service rated El Paso Energy Partners L.P.'s $850 million senior secured revolver and $250 million term loan B at Ba1. Moody's also confirmed the company's Ba2 long-term senior implied and B1 senior subordinated ratings. The outlook is stable.

Security for the loan is almost all of the company's consolidated assets.

Ratings reflect a business mix that is becoming more diversified in a variety of fee-based businesses, a suite of solid assets and leading positions in the markets they serve, and debt coverage measures that are strengthening from rising cash flow and a series of equity issuances, Moody's said.

Ratings are suppressed by "current high debt levels, acquisition event risk which could cause its debt levels to spike up from time to time and high distribution rates that increase its dependence on external financing and limit its flexibility to reduce debt and to meet any shortfalls in operating cash flow," Moody's added.

S&P revises Shop At Home watch to developing

Standard & Poor's revised its CreditWatch on Shop At Home Inc. to developing from negative. Ratings affected include Shop At Home's senior secured debt at CCC+.

S&P says its action follows the announcement that The E. W. Scripps Co. will acquire a 70% interest in the company's television and Internet shopping network for $49.5 million in cash. Scripps also will lend $47.5 million to the company for three years and will purchase $3 million in series D senior redeemable preferred. The proceeds from the transaction will be used by Shop At Home to pay down existing debt.

After the sale, Shop At Home will continue as an independent company with five UHF stations in addition to its 30 percent stake in the new entity, S&P said. Its stations will continue to broadcast home shopping programming under a three-year agreement with the right to terminate after 15 months. The transaction will help the company exit the unprofitable shopping network business and alleviate the pressure on discretionary cash flow.

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