Moody's raises BSkyB outlook

Moody's Investors Service raised its outlook on British Sky Broadcasting plc to positive from stable including its long-term debt at Ba1.

Moody's said the outlook change follows BSkyB's recently published interim results, and reflects the group's strengthened competitive position in UK Pay-TV, its steadily growing DTH subscriber base and improving operational performance.

The positive outlook also takes account of management's strategic focus on growing and maximizing the profitability of its subscriber base, rather than on growth through acquisition, Moody's noted.

Finally, the prospect of rising free cash flow generation, and the company's stated commitment to apply this to debt reduction are also important factors in the outlook change, Moody's added.

Moody's said BSkyB's DTH subscribers have risen to 6.56 million and that its target of 7 million DTH subscribers by December 2003 looks achievable, even if competitive challenges could re-emerge in the medium term.

In the first six months of the current financial year, free cash-flow of £142 million was reflected in a reduction in net debt to £1,386 million at December 2002, Moody's said.

Moody's cuts Ericsson

Moody's Investors Service downgraded Telefonaktiebolaget LM Ericsson's long-term debt to B1 from Ba2, affecting €5 billion of securities. The outlook is negative. The downgrade concludes a review begun on Feb. 6.

Moody's said it lowered Ericsson because of the severe contraction in the company's revenue flow during the fourth quarter with no material indications of a near-term stabilization, the resulting large cash burn during 2002, which Moody's said it believes will increase once cash releases from working capital are exhausted, and the need for additional downsizing should the current rate of business decline of above 30% extend well into 2003.

The negative outlook for the ratings reflects the low visibility of telecom operator spending and the potential for a persistent high rate of decline for Ericsson's revenues that could cause erosion of the company's high cash reserves, Moody's said.

Moody's said the action was based primarily on its review of Ericsson's public fourth quarter earnings release and various presentations to analysts and reflects Moody's expectations for market and company development.

Moody's said it is concerned that Ericsson's revenues may continue declining by more than 30% through the most part of 2003. A stabilization may not set in before next year.

This scenario would result in a need for additional restructuring measures for Ericsson, which because of their severity, carry material execution risk, the rating agency said. It would also cause a high net cash burn from operations, restructuring, and repayment of maturing debt since the potential for further cuts in working capital is limited.

S&P confirms Alpharma, off watch

Standard & Poor's confirmed Alpharma Inc.'s ratings and removed it from CreditWatch with negative implications. The outlook is negative. Ratings affected include Alpharma's $125 million 5.75% convertible subordinated notes due 2005 and $170 million 3% convertible notes due 2006 at B and Alpharma Operating Corp.'s $175 million senior secured term A loan due 2007, $425 million senior secured term B loan due 2008 and $300 million senior secured revolving credit facility due 2007 at BB- and $200 million senior subordinated notes due 2009 at B.

S&P said it put Alpharma on watch on July 30, 2002 in response to a downward revision of earnings, a result of both increased competition in the animal health sector and a production slowdown at Alpharma's Baltimore manufacturing facility.

But since then the company's financial performance has been steadily improving and funds from operations has been increasing quarter-to-quarter, S&P said. Furthermore, Alpharma faces no near-term debt maturities and was in compliance with its debt covenants as of Sept. 30, 2002.

Fitch cuts Nash Finch

Fitch Ratings downgraded Nash Finch including cutting its bank facility to B+ from BB and its subordinated notes to B- from B+. The ratings remain on Rating Watch Negative.

Fitch said the downgrade is due to general weakness in the company's operating environment and in particular competitive pressures on its independent and company-owned retail stores.

The ratings were initially placed on Rating Watch Negative following the company's announcement that it was under an informal inquiry by the SEC for practices related to Count-Recount (an industry practice related to vendor allowances) and was postponing the release of its third quarter earnings, Fitch noted. Since that time, the company has not filed third quarter financial statements and the SEC has changed its inquiry to formal from informal. Further, on Feb. 13, Nash Finch was notified by the trustee for the $165 million 8.5% senior subordinated notes due 2008 that a technical default had occurred under the Indenture as a result of the company's failure to file certain financial statements with the SEC.

The company is planning to meet with the SEC's Office of the Chief Accountant in order for the company's accounting of its Count-Recount practices to be confirmed. Once the Office of the Chief Accountant makes a ruling, Nash Finch will likely be able to file financial statements.

Nash Finch will remain on Rating Watch Negative while it is in technical default with its bondholders of its 8.5% senior subordinated notes due 2008, Fitch said. No interest payments have been missed.

S&P says Foster Wheeler unchanged

Standard & Poor's said Foster Wheeler Ltd.'s ratings are unchanged including its B corporate credit rating with a negative outlook on new the company has agreed to sell its environmental management services business to Tetra Tech Inc. for approximately $80 million in cash.

The transaction will modestly improve Foster Wheeler's liquidity profile, albeit at the expense of losing a relatively stable stream of earnings, and a likely increase in leverage on a debt to EBITDA basis, S&P said.

The negative outlook reflects near-term concerns that continued weakness in Foster Wheeler's backlog could lead to working capital usage as advanced payments on power projects are utilized, further deteriorating the company's poor liquidity profile, and potentially leading to declines in earnings, which could affect bank financial covenants, S&P said.

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