S&P cuts NRG four notches

Standard & Poor's downgraded NRG Energy Inc. four notches and kept the company on CreditWatch with negative implications. Ratings lowered include the corporate credit ratings of NRG Energy Inc., NRG Northeast Generating LLC and NRG South Central Generating LLC, all cut to CCC from B+. The company's various series of notes were all cut to CCC from either B- or B+.

S&P said the downgrade of NRG reflects its view that NRG's liquidity position is severely constrained and even if the banks continue to waive the collateral requirements under the $2 billion construction revolver NRG would be challenged to meet debt service requirements without significant asset sales.

While the company has made some progress with asset sales, the amounts have been minimal relative to what is needed to either collateralize the banks or improve overall credit quality, S&P said. The bulk of the proceeds are not expected to be realized until the fourth quarter.

In addition, decreasing wholesale prices have hampered NRG's operating cash flow, S&P added.

The company's survival relies on significant asset sales, the amount and timing of which is uncertain, S&P said.

Moody's cuts Mrs. Fields

Moody's Investors Service downgraded Mrs. Fields' Original Cookies, Inc. including cutting its $140 million 10 1/8% senior notes due 2004 to Caa1 from B2 and Mrs. Fields' Holding Co., Inc.'s $28 million 14.0% senior discount notes due 2005 to Ca from Caa2. The outlook is negative.

Moody's said it lowered Mrs. Fields because of the immediate liquidity issues confronting the company and the medium-term concerns regarding the company's ability to accommodate cash interest payments and maintenance capital expenditures during 2003, particularly if fourth quarter 2002 results are weak.

Moody's said it is concerned about whether Mrs. Fields will be able to replace its revolving credit facility due March 2003 although the rating agency said it now believes the company likely will have enough cash to make the Dec. 1 senior note interest payment.

S&P says SPX unchanged

Standard & Poor's said its rating on SPX Corp. are unchanged after the company announced a new $250 million stock repurchase program. S&P rates SPX's corporate credit at BB+ with a stable outlook.

S&P said SPX has an aggressive growth appetite but also generates strong free cash flow and has ample liquidity. Uses of free cash are expected to be balanced among acquisitions, share repurchases, and debt reduction.

Credit measures are expected to remain appropriate for the ratings, with total debt to EBITDA ranging between 2.5 times and 3.0x, and funds from operations to total debt averaging between 20% and 25%, S&P said.

Moody's cuts Eagle Foods

Moody's Investors Service downgraded Eagle Food Centers, Inc. including cutting its $64.1 million 11.0% senior notes due 2005 to B3 from B2. The outlook is revised to negative from stable.

Moody's said the downgrade of the unsecured notes reflects the increased relative subordination of the notes to secured debt. Eagle Foods has upsized its revolving credit facility to $50 million from $40 million and repurchased $21 million of the unsecured notes at less than face value over the past two years, causing the relative proportion of secured debt to materially increase.

The outlook revision is in response to the increasingly competitive grocery retailing environment in the company's trade areas, Moody's said, adding that it the competition is the primary factor that has caused operating results to fall below its August 2000 expectations when the company emerged from bankruptcy.

Moody's cuts Primus

Moody's Investors Service downgraded Primus Telecommunications Group, Inc. concluding a review begun in October 2001. Ratings lowered include Primus' $69 million 9.875% senior notes due 2008, $118 million 11.25% global senior notes due 2009, $87 million 11.75% senior notes due 2004 and $115 million 12.75% global senior notes due 2009, all cut to Caa3 from Caa2, and its $71 million 5.75% convertible subordinated global debentures due 2007, cut to Ca from Caa3. The outlook is negative.

Moody's said it lowered Primus because it is concerned that despite recently improved operating metrics and lowered debt service carrying costs the company is unlikely to build up sufficient liquidity to service its heavy debt burden in the intermediate term.

In particular, there can be no assurance of Primus's ability to retire approximately $87 million in senior notes maturing in August 2004, Moody's said.

Largely through the grooming of its less profitable wholesale voice accounts and significant cuts in scalable costs, Primus has progressively increased its positive EBITDA generation over the past four quarters, the rating agency noted.

During the second quarter 2002, management revised and increased its full-year 2002 cash flow guidance to $95-$100 million, which would imply an interest coverage of approximately 1.4 times for 2002. Interest coverage has also been assisted by a substantial lowering of Primus's interest expense, resulting from a successful debt reduction program that has lowered total debt from $1.3 billion at the end of December 2000 to $615 million at the end of June 2002, Moody's added.

S&P puts Broadwing on watch

Standard & Poor's put Broadwing Inc. on CreditWatch with negative implications. Ratings affected include Broadwing's senior secured bank loan at BB, subordinated debt at B+, preferred stock at B and commercial paper at B and Cincinnati Bell Telephone Co.'s senior unsecured debt at BB.

S&P said it put Broadwing on watch because it is concerned that the company may find it challenging to meet scheduled bank debt amortization in 2003 and 2004 in the absence of significant new capital and an amendment to its bank credit agreement.

With projected liquidity of about $150 million at the end of 2002 and a forecast of moderate free cash flow in 2003, Broadwing is currently not well positioned to pay down about $230 million of bank debt in 2003, S&P said.

In addition, with continued weakness at Broadwing Communications, low growth at its ILEC, and a limit to the extent to which expenses could be cut without affecting service quality, S&P said it does not anticipate that Broadwing will generate sufficient free cash flow to meet about another $1 billion of bank debt repayment in 2004.

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