Moody's upgrades SoCalEd, Edison International

Moody's Investors Service upgraded the long-term debt securities of Southern California Edison Co. and Edison International.

Ratings affected include Southern California Edison's first mortgage bonds, upgraded to Ba2 from B3; its senior unsecured rating and issuer rating, upgraded to Ba3 from Caa2; its junior subordinated debt, upgraded to B2 from Caa3; and its preferred stock, upgraded to B3 from Ca. The ratings are removed from review for further upgrade and the outlook is stable.

Also raised are Edison International's senior debt, upgraded to B3 from Caa3 and trust preferreds, upgraded to Caa2 from Ca. The ratings are removed from review for further upgrade and the outlook is stable.

Moody's said it upgraded Southern California Edison after the company closed on $1.6 billion in senior secured credit facilities. Proceeds along with cash on hand have been used to repay creditors and power suppliers past-due amounts owed.

The rating agency said Southern California Edison's financial metrics are "quite strong" for the Ba2 senior secured rating adding that strong predictable cash flows are expected to reduce debt by more than $2.6 billion over the next two years.

Moody's expects Southern California Edison's operating cash flow to cover both interest expense and lease expense on average by 5.3 times annually through 2006 and expects annual operating cash flow to represent at least 35% of Southern California Edison's total debt.

However the ratings also incorporate "the challenging and highly volatile regulatory environment and uncertain marketplace that exists within California," Moody's said. The rating agency noted: "Deregulation has effectively halted in the state and no clear road map exists as to what the California market place will become."

For Edison International, Moody's said the holding company will have sufficient internal cash flow to service its debt over the remaining life of the securities.

Edison's trust preferreds are at Caa2 because Moody's expects the company to continue to defer interest payments until 2004.

Moody's downgrades Covanta

Moody's Investors Service downgraded Covanta Energy Corp. including cutting its senior secured debt to Caa2 from Caa1 and subordinated debt to Ca from Caa2.

Moody's said it lowered the ratings after Covanta failed to make a $4.6 million interest payment due March 1 on its 9.25% senior debentures, resulting in a default.

The company has a 30 day grace period in which to cure this default, the rating agency said.

Although Covanta has enough cash on hand to meet this obligation, the banks providing its revolving credit will not extend existing covenant violation waivers if the company makes this interest payment, Moody's added.

Moody's puts Premcor and Port Arthur on review

Moody's Investors Service put Premcor USA, Premcor Refining Group and Port Arthur Finance on review for possible downgrade, affecting $1.6 billion of bonds, bank debt and preferred securities. Ratings affected include Premcor USA's senior unsecured debt at B3 and pay-in-kind preferred stock at Caa3, Premcor Refining's senior unsecured notes at Ba3 and subordinated notes at B2 and Port Arthur's senior secured debt at Ba3.

Moody's said it was beginning the review "as a precaution" after the parent company Premcor, Inc. announced it will close Premcor Refining's 70,000 barrels per day Hartford, Ill. refinery on Oct. 1, 2002.

Moody's said it will look at how the refinery closure affects cash flow, debt coverage, liquidity, operating risk diversification, refinery turnaround flexibility in a two-refinery mode while highly leveraged, refinancing plans for near-term maturities, acquisition and funding strategies, and other material matters.

The rating agency noted the future of the small Hartford refinery has been on the table since the EPA announced costly ultra low sulfur gasoline and diesel specifications to commence 2004 and 2006, respectively.

"The new executive team brings to Premcor a well-earned reputation for taking tough commercial views on capital outlays," Moody's commented, adding that management decided Hartford's potential returns in the Midwest did not justify $215 million in capital spending to add desulfurization capacity.

"The Hartford decision may be the first in a sequence of important moves by new management," Moody's added.

Moody's rates B&G new notes B3

Moody's Investors Service assigned a B3 rating to B&G Foods, Inc.'s planned $100 million add-on to its 9 5/8% senior subordinated notes due 2007 and confirmed the company's existing ratings including its bank debt at B1 and senior subordinated notes at B3. The outlook is stable.

Moody's said B&G's ratings are held down by high leverage and a weak balance sheet; the challenge of sustaining its product lines, which are primarily mature, many with declining sales; its relatively small size and limited resources in comparison with many direct and indirect competitors vying for shelf space and sales through a consolidating retail customer base that is demanding lower pricing and working capital efficiency; and high reliance on debt-funded acquisitions for growth.

However the company also has long-established brands in niche and specialty product categories and on a regional and local basis; diverse products, which mitigates seasonality and competitive pressures on any one product; relatively stable and reasonably healthy product margins; and the potential for growth from the company's new Emeril Lagasse line of products, Moody's said.

B&G also benefits from the absence of customer concentrations; its growing channel diversity, with expanded exposure to outlets with higher growth than its historically core supermarket focus; and the regional reach and control provided by the company's direct store door distribution system in the New York metropolitan area, Moody's added.

Moody's said its stable outlook incorporates a further reduction in debt. The outlook could benefit from faster deleveraging if the Emeril line of products continues to be developed.

Leveraged acquisitions, either a series of small tack-ons or a large strategic package, could pressure the outlook if pursued before building a cushion of financial flexibility, the rating agency added.

Moody's puts AES Drax on downgrade review

Moody's Investors Service put AES Drax Energy Ltd.'s £135 million and $200 million high yield notes rated B1 on review for possible downgrade.

Moody's began the review after AES Drax withdrew its request to senior secured bank lenders to waive defaults relating to the breach of certain insurance requirements. The waiver also requested distribution to AES Drax Energy Ltd of sufficient funds to allow payment of interest on the notes, plus a dividend to AES Corp.

Failure to obtain the waiver by Feb. 28 led to the interest payment being made by drawing on the debt service reserve account, Moody's said.

The account no longer contains sufficient funds to fully pay the next scheduled interest payment at the end of August.

AES Drax expects to resubmit a substantially similar waiver request within approximately one month after discussions with the banks, Moody's added.

Failure to cure the defaults or obtain the waiver by the end of August is likely to lead to a payment default on the notes, the rating agency said.

S&P downgrades Airgas

Standard & Poor's downgraded Airgas, Inc. and removed the company from CreditWatch with negative implications. The outlook is stable.

Ratings affected include Airgas' medium-term note program, cut to BB from BB+, its $200 million 9.125% senior subordinated notes due 2011, cut to B+ from BB-, and its $367 million revolving credit facility due 2006 and C$50 million revolving credit facility due 2006, both cut to BB from BB+.

S&P cuts Callahan

Standard & Poor's downgraded Callahan Nordrhein-Westfalen GmbH and put the company on CreditWatch with negative implications.

Ratings affected include Callahan's $400 million 14% notes due 2010, €225 million 14% notes due 2010, $325 million discount notes due 2010 and €300 million 14.125% bonds due 2011, all lowered to CCC+ from B-, and Kabel NRW GmbH's €2.9 billion bank loan due 2009, lowered to B from B+.

S&P rates new Shop at Home notes CCC+

Standard & Poor's assigned a CCC+ rating to Shop At Home Inc.'s upcoming offering of $135 million notes due 2009 and confirmed the existing $75 million 11% senior secured notes due 2005 at CCC+ and removed them from CreditWatch with negative implications. The outlook is negative.

S&P cuts Covanta

Standard & Poor's downgraded Covanta Energy Corp. Ratings affected include the company's $100 million 9.25% debentures due 2022, cut to D from B and its $75 million 5.75% convertible subordinated debentures due 2002 and $85 million 6% convertible subordinated debentures due 2002, both cut to D from B-.

Moody's downgrades Titan International

Moody's Investors Service downgraded Titan International, Inc., including its $136.75 million 8.75% senior subordinated notes due April 2007, lowered to Caa1 from B2. The outlook is stable.

Moody's said it cut Titan because of the company's "extremely poor financial performance" during 2001, even after adjusting for charges related to final negotiations that ended a 31/2-year United Steelworkers Union strike, operating costs and inefficiencies related to bringing many of the union workers back into Titan's Des Moines tire plant during the fourth quarter of 2001 and continued challenges in some of the company's end markets.

Year-end 2001 debt protection measures included "extraordinarily" high leverage, negative EBITA interest coverage and a failure to earn any return on assets for the year, Moody's said.

Titan's plants have a very considerable level of excess capacity and the company remains vulnerable to weakness within many of its cyclical key end markets, but is encouraged by recent signs that the agricultural segment outlook has recently looked much stronger, Moody's said.

S&P cuts Adelphia Business

Standard & Poor's downgraded Adelphia Business Solutions Inc.

Ratings lowered include its $250 million 12.25% senior notes due 2004, cut to D from CCC+, its $329 million senior discount notes due 2003, cut to C from CCC- and remaining on CreditWatch with negative implications, its $200 million 12.875% senior exchangeable redeemable preferred stock due 2007, cut to D from CC, and its $300 million 12% senior subordinated notes due 2007, cut to C from CCC- and remaining on CreditWatch with negative implications.

S&P cuts Gaylord Container

Standard & Poor's downgraded Gaylord Container Corp. and kept the company on CreditWatch with negative implications.

Ratings lowered include Gaylord's $225 million 9.75% senior subordinated notes due 2007, $200 million 9.375% senior notes due 2007 and $250 million 9.875% senior subordinated notes due 2008, all lowered to CC from CCC.

S&P lowers Asarco

Standard & Poor's downgraded Asarco Inc. and kept the company on CreditWatch with negative implications.

Ratings lowered include Asarco's $100 million 7.375% notes due 2003, $100 million 7.875% debs due 2013 and $150 million 8.5% debentures due 2025, all lowered to CCC from B+, and its $450 million revolving credit facility, lowered to CCC+ from BB-.

Moody's downgrades Luxfer

Moody's Investors Service downgraded Luxfer Holdings plc including lowering its £160 million 10.125% senior notes due 2009 to Caa1 from B2. The outlook is negative.

Moody's said it cut Luxfer because of continued pressure on the company's operating performance following a sharp weakening in market trends in the second half of 2001.

Fourth quarter results are expected to be weak, characterized by depressed market conditions in certain key customer segments, including the medical and automotive industries, Moody's said. However the rating agency expects trends are likely to improve in the first quarter of 2002.

Nonetheless, Moody's said it cut the rating because of "the significant lack of forward demand visibility in key segments" due in part to the company's position as an intermediate producer in the supply chain and to Luxfer's significant exposure to US manufacturing demand.

Moody's lowers outlook on Vantico

Moody's Investors Service lowered its outlook on Vantico Group SA to negative from stable and confirmed its ratings, including its €250 million 12% senior notes at Caa1 and Vantico International SA's bank facility at B2.

Moody's said it lowered its outlook on Vantico because of concerns about the company's weak financial performance, the uncertain market outlook for its products and worries the company's renegotiated bank covenants could become tight again if the operating progress in the company's projections is not achieved.

Vantico has suffered from weak demand for its products in the last two quarters of 2001, mainly as a result of the downturn in the electronics industry and the lower demand from its automotive, aerospace and construction customers, Moody's said.

The company also announced that Morgan Grenfell Private Equity agreed to underwrite a rights issue of CHF50 million to replace a CHF25 million bridge loan from Morgan Grenfell. Vantico also said it has re-negotiated its bank covenants.

S&P takes Vantico off watch

Standard & Poor's removed Vantico Group SA from CreditWatch with negative implications, confirmed its ratings and assigned a negative outlook.

Ratings affected include Vantico's €250 million 12% bonds due 2010 at B-.

Fitch downgrades Grupo Minero Mexico

Fitch Ratings downgraded Grupo Minero Mexico's $550 million of secured export notes to B+ from BB and $450 million of unsecured bonds to B from BB-. All ratings are on Rating Watch Negative.

Fitch said it cut Minero Mexico because of its continued tight liquidity position and protracted negotiations with creditors.

The company is continuing to work with its lenders on renewing its credit facilities and extending a portion of upcoming debt maturities, Fitch noted, but said the time taken has increased the uncertainty and risk of satisfactorily resolving liquidity and debt amortization issues in a timely fashion.

S&P cuts Leiner Health

Standard & Poor's downgraded Leiner Health Products Inc., including cuttings its $125 million secured revolving credit facility due 2003, $68 million secured term loan B due 2004, $65 million secured term loan C due 2005 and $30 million secured term loan D due 2005 to D from CC.

S&P cuts Polymer notes

Standard & Poor's downgraded Polymer Group Inc.'s $200 million 8.75% senior subordinated notes series B due 2008 to D from C.

S&P puts Gateway on watch

Standard & Poor's put Gateway Inc. on CreditWatch with negative implications including its $300 million revolving credit facility due 2004 at BB.

S&P cuts SF notes

Standard & Poor's downgraded SF Holdings Group Inc.'s $77.5 million 12.75% notes due 2008 to D from B-.

S&P puts Doman on watch

Standard & Poor's put Doman Industries Ltd. on CreditWatch with negative implications.

Ratings affected include Doman's $425 million 8.75% notes due 2004 and $125 million 9.25% notes due 2007, both at CCC+, and its $160 million senior secured notes due 2004, rated B.

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