Moody's cuts PG&E National Energy

Moody's Investors Service downgraded PG&E National Energy Group, Inc. and put its rating and the ratings of some of its subsidiaries on review for possible downgrade, affecting $4.2 billion of debt. Ratings lowered include PG&E National Energy's senior unsecured debt and syndicated bank credit facilities, cut to B1 from Ba2. Subsidiary ratings on review include PG&E Gas Transmission Northwest's senior unsecured debt at Baa2, USGen New England, Inc.'s pass-thru certificates and syndicated bank credit facilities at Baa3, Attala Generating Co., LLC's senior secured debt at Baa3, Indiantown Cogeneration, LP's senior secured debt at Baa3 and Selkirk Cogen Funding Corp.'s senior secured debt at Baa3.

Moody's said the action reflects National Energy Group's weak operating performance, low operating cash flow relative to its debt and tight liquidity.

Moody's said it has particular concerns about the ability of National Energy Group to extend its revolving credit facility that expires on Oct. 21, 2002.

National Energy Group's parent, PG&E Corp. has disclosed that it continues to explore options for National Energy Group including sales of assets and businesses, debt restructuring, and reorganization of existing operations, Moody's noted. While specific details about the status and terms of such activity remain unknown, Moody's said it views the outcome as being likely to play an integral role in National Energy Group's ability to extend the expiring bank facility.

Moody's said the issues facing National Energy Group in completing these transactions are challenging in light of the current environment for domestic energy assets.

Moody's puts Buhrmann on review

Moody's Investors Service put Buhrmann NV on review for possible downgrade including its $1.75 billion senior secured credit facilities at Ba3 and $350 million 12.25% senior subordinated notes due 2009 at B2.

Moody's said the review is in response to Buhrmann's new profit warning, reflecting continued weakness in the company's end-markets and significant uncertainty as to the timing and extent of a potential recovery over the short- to medium-term.

Buhrmann also said it expects to generate at least €92.0 million in EBITDA in the third quarter of 2002 compared to €113.0 million in the third quarter of 2001.

While Buhrmann has continued to make encouraging progress in further rationalizing and de-leveraging the business (with interest-bearing debt at approximately €1.9 billion as of June 30, 2002), the review for downgrade reflects the added pressure on the company to grow cash flows and reduce indebtedness, in particular as existing restructuring programs have already substantially reduced the company's cost base, Moody's said.

Moody's raises Michael's Stores

Moody's Investors Service upgraded Michaels' Stores, Inc., completing a review begun in July. Ratings raised include Michaels' Stores' $200 million 9.25% senior notes due 2009, raised to Ba1 from Ba2. The outlook is stable.

Moody's said the upgrade reflects Michaels' low outstanding debt, moderate effective leverage (after adjusting for rents) and good debt protection measures for its rating category; a low level of business volatility compared to many other specialty concepts; prudent financial management, which has resulted in the company financing the major part of its growth and other expenditures from internally generated cash flow; and continuing productivity of new and existing stores.

Also incorporated in the ratings is an expectation that Michaels' retained cash flow will remain modest in the medium term as a result of growth plans and upcoming systems improvements; the expectation that share repurchases will continue at historical levels; and the potential for acquisition or diversification activity within the medium term as craft and decorative arts superstores from Michaels and its competitors approach saturation levels in major markets, Moody's said.

Moody's does not anticipate Michaels' financial position will not change materially over the near term. The rating agency expects the company to re-invest most of its generated cash flow into new stores and logistics, but does not expect Michaels to increase borrowings to finance growth or share buybacks.

Michaels' debt protection measures are good within its rating category, Moody's said. Absolute debt levels are low, but effective leverage rises significantly after adjusting for rent obligations. EBITDAR to fixed charges is expected to remain in the range of 2.2 times.

S&P cuts Advanced Glassfiber bank debt to D

Standard & Poor's downgraded Advanced Glassfiber Yarns LLC's senior secured debt to D from CC including its $65 million revolving credit facility, $115 million term A loan due 2004 and $125 million term B loan due 2005.

S&P noted the corporate credit and subordinated debt ratings on the company were lowered to D on July 15.

The latest downgrade follows Advanced Glassfiber's announcement that it would not make a $5.9 million principal payment due Sept. 30, under its term loan facility, S&P said.

Fitch cuts Allegheny Energy

Fitch Ratings downgraded Allegheny Energy, Inc. and its subsidiaries Allegheny Energy Supply Co. LLC, Monongahela Power Co., Potomac Edison Co., West Penn Power Co., Allegheny Generating Co. and AE Supply's special purpose entity Allegheny Energy Supply Statutory Trust 2001 and put the ratings on Rating Watch Negative. Ratings affected include Allegheny Energy's senior unsecured debt, lowered to BB from BBB, West Penn Power's medium-term notes, lowered to BBB- from A-, Potomac Edison's first mortgage bonds, lowered to BBB from A-, and senior unsecured notes, lowered to BBB- from BBB+, Monongahela Power's first mortgage bonds, lowered to BBB from A-, medium-term notes and pollution control revenue bonds (unsecured), lowered to BBB from BBB+ and preferred stock, lowered to BB+ from BBB, Allegheny Energy Supply's senior unsecured notes, lowered to BB- from BBB-, Allegheny Generating's senior unsecured debentures, lowered to BB- from BBB-, and Allegheny Energy Statutory Trust 2001's senior secured notes, lowered to BB- from BBB-. West Penn Funding LLC's transition bonds and Allegheny Energy Supply's MBIA-insured pollution control bonds are unaffected at AAA.

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