S&P rates Calpine's bank loan BBB-

Standard & Poor's assigned a BBB- rating to Calpine Corp.'s new $1 billion senior secured term B and new $1 billion senior secured revolver. The default risk of the new loans are BB, the same as Calpine's corporate credit rating, however, the loan is rated two notches higher due to strong prospects for recovery in a default scenario.

The loans, according to S&P, are secured by basically all assets. More specifically, the credit facilities are secured by a first-perfected security interest on Calpine's equity in its gas reserves through a pledge of 100% of the stock of subsidiaries holding the reserves; Calpine's equity in its gas reserves in Canada through a pledge of 65% of the stock of Calpine Canada Energy Ltd.; Calpine's equity investment in 81 power plants in the U.S. through a pledge of 100% of the stock of the subsidiaries holding the plants; Calpine's equity interest in three power plants in Canada through a pledge of 65% of the stock of Calpine Canada Energy Ltd; note receivables from PG&E Corp. associated with Calpine's Gilroy plant; Calpine's interest in the Saltend Energy Centre in the U.S., through a pledge of 65% of the stock of Calpine Canada Energy Ltd.; and Calpine's pledge of 100% of the stock of the various holding companies, under which the U.S. and Canadian gas reserves sit, and the pledged power plants.

In a default scenario, the value of the recovery is $4.1 billion, 200% over-collateralization of the loans.

"Calpine's capital structure, which relies heavily upon debt, is a principal determinant of Standard & Poor's non-investment grade rating on Calpine," S&P said. "That revenue is derived from highly volatile commodities of electricity and natural gas exacerbates the risk. Its new reliance upon bank facilities for liquidity, instead of the capital markets, is potentially risky. Banks could exert increasing control over Calpine's financing and operations in a stressed scenario that would favor them over the unsecured lender base, which provides the bulk of Calpine's capitalization."

Moody's confirms Plains Resources

Moody's Investors Service confirmed its ratings on Plains Resources Inc. including the company's $225 million senior secured credit facility due July 2003 at Ba2 and its $275 million 10.25% senior subordinated notes due 2006 at B2. The outlook is stable.

Moody's said Plains Resources' ratings are limited by a reserve base of modest size with significant economic risk due to its concentration in high cost, heavy oil that sells at a $4 to $6/bbl discount to NYMEX.

Although Plains Resources benefits over the near term from a high level of price hedges, unit realizations could be vulnerable during periods of low commodity prices if market conditions are not favorable for economic hedging at sufficiently high price levels, the rating agency added.

Also incorporated in Moody's assessment is potential event risk from Plains Resources' strategies to accelerate growth and enhance returns through acquisitions, share repurchases and/or additional investment in Plains All American Pipeline, LP, which is itself pursuing an aggressive acquisition growth strategy.

Plains Resources's reserve base also has a large proved undeveloped component. Significant capital investment would be required to bring the PUD reserves to production and they are concentrated in an area that has had practical limitations on the pace of development, Moody's said.

S&P lowers Advanstar

Standard & Poor's downgraded Advanstar Communications Inc. and removed it from CreditWatch with negative implications. The outlook is negative. Ratings affected include Advanstar's $80 million revolving credit facility due 2007, $100 million term loan A due 2007 and $315 million term loan B due 2007, all cut to B from B+, and its $160 million 12% notes due 2011, cut to CCC+ from B-.

S&P said it cut Advanstar because it expects the difficult operating environment and weakness in certain end markets will impair the company's profitability and credit measures.

However S&P said the ratings continue to reflect Advanstar's good competitive positions in its trade show and publishing businesses, decent sector diversity and the relative stability of important parts of its portfolio.

Offsetting negatives are the poor industry operating environment and the company's high financial risk.

Advanstar has been hurt by sector specific problems in certain end markets, the weak advertising environment, the decline in business travel and the exacerbation of these conditions as a result of Sept. 11, S&P said. Still, Advanstar has been less affected by these issues than some of its peers because of its fairly good revenue diversity and its limited reliance on profits in the fourth quarter, when industry results were severely damaged in 2001 following Sept. 11.

The company also benefits from the relatively stable performance of certain businesses. The relative strength of the company's MAGIC fashion events is critical to earnings stability because these semiannual shows represent about 20% of its revenue and nearly 40% of EBITDA before corporate expenses, S&P noted. In addition, consolidated earnings and cash flow in 2002 should benefit from Advanstar's decision to substantially curtail its money-losing Internet initiatives in early 2001 and from other cost-cutting measures.

S&P cuts ITC DeltaCom

Standard & Poor's downgraded ITC DeltaCom, Inc. Ratings lowered include its $100 million 4.5% convertible subordinated notes due 2006 and $125 million 9.75% senior notes due 2008, both cut to D from C, and Interstate FiberNet Inc.'s $160 million revolving credit facility, cut to C from CC.

The C ratings on the company's 11% senior unsecured notes due 2007 and 8.875% senior unsecured notes due 2008 remain on CreditWatch negative.

S&P said its action follows ITC DeltaCom's failure to make interest payments due May 15 on its 9.75% senior unsecured notes due 2008 and 4.50% convertible subordinated notes due 2006.

S&P rates Asbury notes B

Standard & Poor's assigned a B rating to Asbury Automotive Group Inc.'s upcoming $200 million senior subordinated notes due 2012. The outlook is stable.

S&P said the ratings reflect Asbury's below-average business profile as a leading supplier in the highly fragmented, cyclical and competitive automotive retail industry, combined with its aggressive growth strategy and weak financial profile.

Asbury is one of the five largest U.S. retailers of automobiles with more than $4 billion in annual revenues, S&P noted. The company provides new vehicles (59% of 2001 sales), used vehicles (27%), parts and services (11%) and finance and insurance products (3%).

With 127 franchises at 91 dealership locations in 17 market areas, Asbury has achieved a moderate degree of geographic and brand diversity, S&P said. Operations have some concentration in the southern U.S. where population growth is higher and the density of auto dealerships is somewhat less than in other regions.

Asbury's industry is large, fragmented, and highly competitive. Despite extensive consolidation and Asbury's leading market position, it accounts for less than 1% of industry sales, S&P said.

Financial risk arises from thin profit margins and an aggressive acquisition strategy. Although profit margins are comparable to industry averages, they are weaker than those of some other large, publicly held dealerships, S&P added.

Debt leverage is high, with total debt (including operating leases and sold accounts receivable) to EBITDA of about 5.8 times, and cash flow protection is thin, with EBITDA to interest of about 2.5x, S&P said.

Fitch rates Port Arthur Finance BB, raises Premcor outlook

Fitch Ratings assigned a rating of BB to Port Arthur Finance Corp.'s $255 million of 12½% senior notes. The outlook is positive. Fitch said the ratings anticipate a successful restructuring of Premcor Inc.

Fitch also confirmed Premcor Refining Group's $650 million revolving credit facility at BB, senior term loan and senior notes at BB- and senior subordinated notes at B and Premcor USA's senior notes at B. The outlook on these companies was raised to positive from stable.

Fitch noted the restructuring follows closely behind the successful initial public offering of Premcor Inc., which raised $482 million.

The restructuring plans significantly clean up Premcor's corporate structure and allow Premcor Refining greater access to Port Arthur Coker's earnings and lower financial leverage, Fitch said

To complete the restructuring, management has commenced a consent solicitation to amend the Port Arthur Finance 12½% notes. The amendments will also permit the prepayment of Port Arthur Finance's $221.4 million of existing bank debt.

With the consent, Port Arthur Finance noteholders will continue to benefit from favorable structural protections such as the Debt Service Recovery and Principal & Interest accounts, Fitch said. The noteholders will also continue to benefit from a first lien on the physical assets of the Port Arthur Coker and gain an unsecured guarantee by Premcor Refining. The unsecured guarantee by Premcor Refining will rank pari passu with Premcor Refining's existing senior unsecured debt.

The benefits to the Port Arthur Finance noteholders, however, will be offset by Premcor Refining's liberal access to the EBITDA generated by the coker facility and the cash held on Port Arthur Finance's balance sheet.

Moody's cuts ONO

Moody's Investors Service downgraded the ratings of the ONO group, ONO, Cableuropa SA and its subsidiaries, affecting €1.7 billion of debt. The outlook is negative. Affected ratings include ONO Finance plc's senior unsecured bonds, cut to Caa2 from Caa1, and Cableuropa SA's senior secured bank facility rating, cut to B3 from B1.

Moody's said it cut the ratings because of heightened concerns about ONO's considerable debt leverage and the ability of the company to increase penetration and average revenue per user (ARPU) rates to the extent necessary to allow it to adequately service its debt burden.

While the continued growth of homes marketed (and a degree of ARPU and penetration growth) has allowed for ONO's revenue growth to continue at a rapid pace, the company's residential and business penetration and ARPU growth rates will likely need to increase significantly as the company approaches the completion of its network build and no longer benefits from the revenue growth currently afforded by the continued increase of homes marketed, Moody's said.

In addition to ONO's considerable debt burden and associated debt service costs, the ratings continue to reflect the company's substantial on-going capital expenditure requirements, and structural considerations with respect to the company's debt obligations, the rating agency added.

Positives include ONO's strong management team, which has continued to demonstrate solid operating progress, grow revenues, significantly increase gross margins (60% in Q1 2002 versus 38% in Q1 2001), maintain strong SG&A cost control, and decrease EBITDA losses.

In addition ONO's shareholders have shown support and injected €300 million in junior capital in the first half of 2002, bringing total shareholder contributions to over €850 million, and ONO has adequate near-term liquidity.

S&P cuts US Timberlands

Standard & Poor's downgraded U.S. Timberlands Finance Corp.'s $225 million 9.625% senior notes due 2007 and U.S. Timberlands Klamath Falls, LLC's $225 million 9.625% senior notes due 2007 to CCC- from B. The ratings are now on CreditWatch with developing implications, changed from CreditWatch with negative implications previously.

S&P cuts Contour Energy

Standard & Poor's downgraded Contour Energy Corp. and put the company on CreditWatch with negative implications. Ratings affected include Contour's $155 million 10.375% senior subordinated notes due 2006, cut to C from CC, and its $135 million 14% notes due 2003, cut to CCC from B-.

S&P said its action reflects concerns Contour Energy will not make a rescheduled interest payment currently due June 30 on its 10 3/8% senior subordinated notes. The approximately $6.5 million payment was originally due April 15 but the company has an agreement with holders of more than 75% of the notes to forbear from enforcing certain default rights under the indenture while restructuring discussions are ongoing. The forbearance agreement will expire on June 30 and does not waive the default under the indenture that has occurred as a result of the failure to pay interest within the grace period.

"Contour has struggled mightily over the past several years as a result of its rapidly declining reserve base, staggering debt leverage, and limited capital available for reinvestment due to weak cash flow from operations and lack of access to external capital," S&P commented.

Low natural gas prices during the fourth quarter of 2001 and the first quarter of 2002 squeezed Contour considerably due to its extremely high cash cost structure ($2.60 per mcfe including interest expense of $1.56 per mcfe), S&P added.

Further exacerbating Contour's liquidity crunch was the bankruptcy filing of Enron Corp., with whom Contour had sold more than 40% of its expected natural gas production for 2002 at an average price above $4.50 per mcf.

S&P cuts Metromedia

Standard & Poor's downgraded Metromedia Fiber Network Inc., lowering its $650 million 10% senior unsecured notes due 2008, $750 million 10% senior notes due 2009 and €250 million 10% senior notes due 2009 to D from C.

S&P said its action follows Metromedia's Chapter 11 bankruptcy filing.

S&P lowers CB Richard Ellis outlook

Standard & Poor's lowered its outlook on CB Richard Ellis Services Inc. to negative from stable. The company's corporate credit rating is BB-.

S&P says no impact on Stewart ratings

Standard & Poor's said Stewart Enterprises Inc.'s announcement that it will sell its Canadian operations will have no impact on the company's ratings or outlook. Its corporate credit rating is BB with a stable outlook.

S&P said the sale was expected as part of the company's ongoing strategy to sell all its international operations and use the proceeds to reduce debt.

Although Stewart has been successful to date in its efforts to sell these assets, the company remains challenged to continue improving its operating performance in a relatively weak death care market, which has limited revenue growth, S&P said.

S&P rates Big Food

Standard & Poor's assigned a BB+ corporate credit rating to The Big Food Group plc. The outlook is stable.

"The ratings reflect Big Food's leading market position in the cash-generative U.K. food wholesale market, as well as its participation in the competitive U.K. food retail market," S&P said.

The ratings also reflect the success of Big Food's new management team in integrating the group and addressing recent underperformance, S&P said.

The ratings are constrained, however, by the group's aggressive financial profile and overall weaker operating profitability compared with its peers, the rating agency added.

S&P said it views Big Food's financial profile as aggressive. Lease-adjusted EBITDA (post-exceptionals) to net fixed-charge coverage between 3.5 times and 4.0 times, and funds from operations to net debt (capitalized for operating leases) of 15%-20% are in line for the current ratings.

Moody's puts Golden State on upgrade review

Moody's Investors Service put Golden State Bancorp on review for possible upgrade. Ratings affected include California Federal Bank, FSB's subordinated debt at Baa3, California Federal Preferred Capital Corp.'s preferred stock at Ba1 and GS Escrow Corp.'s senior rating at Ba1. Moody's also confirmed Citigroup, Inc. including its long-term debt at Aa1.

Moody's said its action follows the announcement that Citigroup will acquire Golden State Bancorp, the parent of California Federal Bank, for cash and stock.

Fitch puts Golden State on positive watch

Fitch Ratings put to Golden State Bancorp and its subsidiaries on Rating Watch Positive including its senior debt at BB+, California Federal Bank, FSB's senior debt at BBB and subordinated debt and preferred stock at BBB-, California Federal Preferred Capital's preferred stock at BBB- and First Nationwide Savings Bank 's subordinated debt at BBB-. Fitch also confirmed Citigroup including its senior debt at AA.

Fitch said the actions were in response to the announcement that Citigroup will acquire Golden State.

S&P rates TriMas' notes B-

Standard & Poor's assigned a BB- rating to TriMas Corp.'s proposed $500 million senior secured credit facility due 2009. In addition, a corporate credit rating of BB- was assigned and a B- subordinated debt rating was assigned to the proposed $250 million senior subordinated notes due in 2012.

The bank loan is secured by substantially all assets.

"The speculative grade ratings on TriMas reflect its leading positions in niche markets, offset by the highly competitive and cyclical nature of certain of its businesses, high debt leverage, and thin cash flow protection," S&P said.

Metaldyne Corp. is selling 66% of its common equity interest in TriMas to Heartland Industrial Partners LP. TriMas will operate as a privately held independent company.

At the outset, TriMas will have total debt to EBIDTA of 4.5 times on a pro forma basis. EBIDTA to interest coverage is expected to be in the 3 times area, S&P said. Capital expenditure requirements are 5% of sales. Liquidity will be provided through the new credit facility with availability of $100 million and the undrawn receivables securitization with availability of $60 million.

"The rating may be raised over the intermediate term as TriMas' businesses grow and its cyclically dependent businesses benefit from a recovering economy," S&P said. "During this period, the company is expected to reduce its leverage and any acquisitions would be expected to be funded in a credit neutral manner."

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