Moody's cuts OM Group, on review

Moody's Investors Service downgraded OM Group, Inc. and kept it on review for possible further downgrade. Ratings affected include OM Group's $325 million senior secured revolving credit facility maturing 2006 and $600 million senior secured term loan C maturing 2007, cut to B2 from Ba3, and $400 million 9.25% guaranteed senior subordinated notes due 2011, cut to Caa2 from B3.

Moody's said the action is in response to OM Group's announcement of actual and expected operating losses from cobalt metal products, a major component of its business portfolio.

This deterioration has resulted in uncertainty regarding OM Group's near-term financial flexibility, which depends in part on obtaining needed covenant relief from its banks regarding its revolving credit facility, Moody's said.

The operating losses and negative prospects for the company arise because of the continued weak economy and no foreseeable improvement in demand for super alloys used by the aerospace industry, Moody's added. Historically aerospace applications have consumed about one-third of worldwide cobalt and the company said that aerospace cobalt sales are down about 50% in 2002, thereby resulting in lower cobalt prices. During the third quarter of 2002, low cobalt prices and higher-than-anticipated raw material costs resulted in sharply lower operating margins.

In addition, the company incurred losses related to its decision to sell cobalt commodity metals below cost, a practice the company has since discontinued.

S&P cuts Wickes

Standard & Poor's downgraded Wickes Inc. including cutting its 11.625% notes due 2003 to CC from CCC-. The outlook remains negative.

S&P said it lowered Wickes because of the company's weak liquidity and S&P's concern that Wickes will be challenged to improve operations and liquidity significantly after it completes the sale of its Wisconsin and Northern Michigan operations.

On Oct. 30, 2002, Wickes announced it had signed a definitive agreement for the sale of all its assets in these operations to Lanoga Corp.'s United Building Centers division. Terms of the sale were not disclosed by the company. These operations comprised about 30% of Wickes' 2001 total sales and would represent a significant divesture of the company's existing operations.

Although proceeds from the sale could help improve liquidity in the short term, Wickes' ability to repay its $64 million of subordinated notes in December 2003 could be reduced as a result of a lower sales and earnings base, S&P said. Wickes had about $5 million of availability under its revolving credit facility (net of the $25 million minimum availability requirement) as of June 29, 2002, and current debt maturities of $10 million, in addition to the $64 million of senior subordinated notes that mature in December 2003.

The company has faced a challenging operating environment as lumber price declines have impacted sales and earnings, S&P added. Although Wickes has improved its cost structure in recent quarters, S&P said it believes the company will need to obtain additional sources of liquidity to meet its debt maturities through 2003.

Moody's cuts Transportation Technology

Moody's Investors Service downgraded Transportation Technologies Industries, Inc. including cutting its $35 million guaranteed senior secured revolving credit facility due 2005, $68 million guaranteed senior secured term loan A due 2006 and $136 million guaranteed senior secured term loan B due 2007 to B2 from B1 and $152 million current balance 15% senior subordinated notes due 2008 to Caa1 from B3. The outlook is stable.

Moody's said the downgrade reflects the prolonged decline (approximately two years to date) of Transportation Technology's revenue base due to the extreme cyclicality of the company's Class 8 heavy duty truck original equipment end markets.

Current leading economic indicators present the threat of a "double dip" recession, which would be expected to further delay any anticipated rebound in truck demand, Moody's added. The heavy duty truck industry furthermore anticipates a backlash with regard to order rates resulting from Class 8 vehicle pre-buying activity which occurred during the second and third quarters of 2002 in advance of stiffer and more costly emission regulations that went into effect on Oct. 1, 2002.

Moody's said it is concerned that continued weak demand will prevent Transportation Technology from meeting its existing covenant requirements beginning with the quarter ending March 31, 2003, when the requirements are scheduled to adjust to considerably more stringent levels.

Cash interest coverage remains thin and will worsen in the event that Transportation Technology is unable to extend its PIK provision for half of the 15% interest on the subordinated notes beyond the current Sept. 30, 2002 termination date, the rating agency added.

Moody's cuts Petrozuata, Cerro Negro, Sincor, Hamaca to junk

Moody's Investors Service downgraded four Venezuelan heavy oil projects to junk, affecting $3.4 billion of debt. Ratings lowered to Ba1 from Baa3 are $1.0 billion senior secured bonds of Petrozuata Finance Inc., $600 million senior secured bonds of Cerro Negro Finance, Ltd., $1.2 billion senior secured loans of Sincor Finance Inc. and $600 million senior secured loans of Hamaca Holding LLC. The outlook is negative.

Moody's said it cut the projects because of increasing volatility and political uncertainties in Venezuela and the potential impact this could have on the operation of the projects.

Risks that have moderately increased in magnitude include possible disruptions in oil production and export flows, shifts in exchange rates and other economic factors, and that any of various agreements could be modified.

The potential for disruption has increased with the deterioration of the social and political infrastructure of the country, Moody's added. Due to the increasing significance of political and country risk factors as components of the ratings, the differences in the fundamental economic characteristics of the projects do not currently justify a rating differentiation between the four projects.

The Petrozuata project is the only project to have reached final completion, as defined, and its several, not joint, sponsor guarantees for the full repayment of all rated debt for non-completion have fallen away.

The other three projects are in different stages in reaching final completion and the resultant removal of sponsor guarantees. Cerro Negro and Sincor, are physically complete and operating, and are expected to achieve completion in the fourth quarter 2002 and the first half 2003 respectively. Hamaca is only 75% complete, having achieved that milestone as of Sept. 30, 2002.

PDVSA, the state oil company (Ba1 foreign currency rating), is responsible for its share of the guarantees under each of the projects, raising concerns over the Venezuelan government's cash transfers from PDVSA to support a faltering economy and other actions regarding the governance and independence of PDVSA, Moody's added.

S&P cuts DDi

Standard & Poor's downgraded DDi Corp. and maintained a negative outlook. Ratings lowered include DDi's $100 million 5.25% convertible subordinated notes due 2008 and $100 million 6.25% convertible subordinated notes due 2007, cut to CCC- from CCC+, and $300 million credit facility due 2003, cut to CCC+ from B, and Details Capital Corp.'s $60.054 million 12.5% senior discount notes due 2007, cut to CCC- from CCC+.

S&P said it lowered DDi because of its vulnerable credit measures and weak operating performance.

A severe downturn in the printed circuit board (PCB) fabrication industry caused DDi's sales to fall nearly 40% in the first nine months of 2002 from the like period in the prior year, S&P noted. Management's rationalization and restructuring actions have not been enough to offset the severe sales decline as the PCB fabrication industry copes with overcapacity and aggressive price competition.

The company generated less than $6 million of EBITDA in the first nine months of 2002, S&P added. Deteriorating cash flow protection measures are a concern as EBITDA coverage of interest is likely to be well below 1 times for 2002, from more than 4x in 2001.

Operating margins, which were in the 20%-25% range during the past three years, are likely to remain pressured and below 5% in the near term because of low sales and capacity utilization, S&P said.

Moody's cuts CenterPoint Energy to junk, rates loan Ba1

Moody's Investors Service downgraded CenterPoint Energy, Inc. to junk, affecting $12 billion of debt, and assigned a Ba1 rating to its new $3.85 billion bank facility. Ratings lowered include CenterPoint's senior unsecured debt, cut to Ba1 from Baa2. Moody's also lowered CenterPoint Energy Resources Corp.'s senior unsecured debt to Ba1 from Baa2 and CenterPoint Energy Houston Electric to Baa2 from A3 and assigned a Baa2 secured rating to its new $850 million secured bank facility.

Moody's said the downgrades reflect the limited financial flexibility experienced by the holding company given delays in spinning-off its 80% owned subsidiary, Reliant Resources, Inc. (RRI, Ba3) which it finally accomplished Sept. 30.

Reliant Resources-related challenges have constrained CenterPoint Energy's access to capital markets and as a result, the company implemented new credit facilities on Oct. 10 which Moody's believes contain onerous terms.

New facilities available to CenterPoint total $4.7 billion in 364 day bank financing, due in October 2003. However, the facilities ($3.850 million available to the parent and $850 million available to the Houston Electric) mature on Nov. 15 unless $420 million is arranged at Houston Electric to replace a maturing bond. Both facilities contain mandatory commitment reductions next year ($600 million in each of February and June of 2003 for the parent, and $450 million in April for the Houston Electric.) The company is in discussions with third parties to arrange the financing and plans to access the capital markets to replace bank funding next year.

The negative outlook at CenterPoint Energy reflects near term liquidity challenges in the mandatory commitment reductions required in the bank financing, Moody's added. The negative outlook at CenterPoint Energy Resources reflects its dependence upon CenterPoint Energy for interim liquidity needs.

S&P cuts Globopar to D

Standard & Poor's downgraded Globopar SA to D including its $250 million 10.5% notes series B due 2006 and $500 million 10.625% notes due 2008, both previously at CC. The ratings were removed from CreditWatch with negative implications.

S&P said the action follows confirmation that Globopar did not make an interest payment of approximately $3 million, which was due Nov. 1 under the syndicated credit facility of Globopar.

While a legal default will only be effective on Nov. 6, after a five-day grace period on the payment, S&P said it considers this missed payment a default as Globopar is not expected to pay within the grace period.

Once the legal default occurs, it will trigger a cross-default under most of Globopar's debt,

forcing the company into a general default, S&P added.

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