S&P revises WorldCom outlook to negative

Standard & Poor's revised its outlook on WorldCom Inc. to negative from stable, but affirmed its ratings on the company (BBB+) and its subsidiaries. The outlook revision reflects the current economic and competitive telecommunications environment, which could challenge the company's ability to deleverage its balance sheet near term, S&P said.

Although WorldCom turned free cash flow positive in fourth quarter, which was six months earlier than anticipated, total revenues for the quarter declined by 2.8% compared with fourth quarter 2000 and by 5% compared with third quarter, S&P noted. In addition, S&P noted that EBITDA declined 6% in fourth quarter compared with fourth quarter 2000 and declined 9% compared with third quarter.

The company's ability to deleverage its balance sheet during 2002 could be challenged by economic and competitive conditions, S&P said. However, teh rating agency said that if the company shows operating and cash flow improvement by the latter half of the year, with debt to EBITDA closer to the low- to mid-2 times range, the outlook could be revised to stable.

Moody's puts Hilton Group on review for possible downgrade

Moody's Investors Service on Monday placed on review for possible downgrade the Baa1 long-term senior unsecured debt ratings of Hilton Group plc. Any rating action should not exceed a one notch downgrade, Moody's said. The review will focus on assessing the extent of recovery in occupancy rates and revenue per available room (Revpar) since Sept. 11, the progress in the integration of Scandic, and the progress on the strategy being executed by Hilton Group's management to continue to improve lease adjusted debt protection measurements which are currently weak for the Baa1 rating category. Moody's is concerned that recovery in business may take longer than originally expected.

While Hilton has recorded strong results for the first half of 2001, Moody's said the challenging outlook for the hotel sector in the U.K. and Continental Europe this year make the rating agency expect Hilton Group to need to ensure that debt protection measures improve strongly over the medium-term in order to maintain its current rating level. Ratings placed under review for possible downgrade at Baa1 are Hilton Group Plc and Hilton Group Finance Plc's MTN program and all drawdowns under it.

Moody's confirms Quest Diagnostics convertible at Ba1

Moody's Investors Service confirmed its ratings for Quest Diagnostics Inc., including the Ba1 rated 1.75% convertible notes due 2021, following Quest's announcement last week that it has signed a definitive agreement to acquire the stock of American Medical Laboratories Inc. for $500 million, including the assumption of $160 million in debt. To finance the acquisition, Quest is proposing to use $25 million of cash on hand and $475 million under its revolver and receivables financing vehicle.

Moody's raises Petsmart outlook to stable

Moody's Investors Service raised the outlook on Petsmart, Inc. to stable from negative and confirmed the company's ratings, including its $188.75 million subordinated convertible notes due 2004 at B3.

Moody's said its action follows Petsmart's announcement that it intends to redeem $75 million of its convertible subordinated notes.

"This is a meaningful reduction in debt," Moody's said although it noted Petsmart's effective leverage will remain high as result of modest profitability and relatively high rents that run around 8% of sales.

Moody's expects the company to generate more than $50 million in net free cash flow for the year ended January 2002, which will provide a substantial financial cushion above its $250 million revolving credit facility.

S&P downgrades Superior Telecom

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

Ratings affected include Superior's $500 million term loan A due 2004, $425 million term loan B due 2005 and $225 million revolving credit facility due 2004, all cut to B- from B+, and its $200 million 8.5% convertible subordinated notes due 2014, lowered to CCC from B-.

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