Moody's raises Boyd Gaming outlook

Moody's Investors Service raised its outlook on Boyd Gaming Corp. to stable from negative and confirmed its ratings including its $400 million secured revolving credit facility due 2007 and $100 million secured term loan due 2008 at Ba1, $122.2 million 9.25% senior notes due 2003 and $200 million 9.25% senior notes due 2009 at Ba3 and $250 million 8.75% senior subordinated notes due 2012 and $250 million 9.5% senior subordinated notes due 2007 at B1.

Moody's said it revised Boyd's outlook in response to consistent EBITDA improvements combined with modest levels of absolute debt reduction which have improved Boyd's free cash flow profile and resulted in a debt/EBITDA level that Moody's believes is more consistent with a Ba2 senior implied rating.

Debt/EBITDA for the 12-month period ended Sept. 30, 2002 (excluding Borgata related debt) was 4.1x compared to 5.1x at Dec. 31, 2001 and 5.0x at Dec. 31, 2000, Moody's noted.

Moody's said it anticipates Boyd will use its free cash flow to maintain its current credit profile, and that continued EBITDA improvement and lower capital expenditure requirements will further strengthen Boyd's ability to deal with near and long-term challenges.

These challenges include the completion and success of the Borgata project, the threat of Native American gaming in N.Y. State, and moderating growth rates across the gaming sector, Moody's added.

Boyd is responsible for all cost overruns related to the Borgata project that is still under construction and expected to open in the summer of 2003. Currently, construction of the Borgata is on time and on budget.

S&P puts Westar on watch

Standard & Poor's put Westar Energy Inc. on CreditWatch with negative implications. Ratings affected include Westar's first mortgage bonds at BBB-, senior notes and convertible senior notes at BB- and preferred stock and quarterly income preferred securities at B+ and Kansas Gas & Electric Co.'s first mortgage bonds at BB+ and secured facility bonds and secured lease obligation bonds at BB-.

S&P said the action reflects Westar's announcement that it will restate its first- and second-quarter 2002 financial statements to reflect an additional goodwill impairment at 88%-owned Protection One Alarm Monitoring Inc.

While the charge of $93 million, net of tax, is non-cash, is relatively small compared with the $657 million impairment charge already taken this year, and will not affect Westar's liquidity or violate any covenants, Westar's liberally leveraged capital structure cannot withstand additional decimation at the current ratings level, S&P said. Independent of the impairment restatement, Westar's 2001 and 2000 financials are required to be reaudited.

Westar's financial condition remains quite depressed. Funds from operations to total debt stands at just 10%, cash flow coverage at about 2.4 times and pretax interest coverage below 2.0x, S&P said. Due to aggressive use of debt financing and a series of write-offs, the company's common equity cushion is a lean 25% and debt to capital is about 73%.

Westar's plan to sell its ONEOK Inc. investment and use available proceeds to repay debt demonstrates an attempt by management to begin shoring up its balance sheet. S&P said it considers this a critical near-term goal in supporting the company's creditworthiness, despite reduction or elimination of the steady ONEOK dividends. However, uncertainty regarding the timing of, and exact proceeds from, the ONEOK sale, together with continued deterioration of Westar's already-frail capital structure, in addition to regulatory difficulties and investigations and subpoenas, are significant credit concerns especially in light of the company's tenuous bondholder protection measurements.

S&P cuts Iusacell

Standard & Poor's downgraded Grupo Iusacell Celular SA de CV and put it on CreditWatch with negative implications. Ratings affected include Iusacell's $150 million 10% notes due 2004 and Grupo Iusacell SA de CV's $350 million 14.25% senior unsecured notes due 2006, cut to CCC- from B-, and $265.621 million bank loan bank loan due 2002, cut to CCC+ from B+.

Moody's confirms Providian

Moody's Investors Service confirmed Providian Financial Corp., affecting $1.5 billion of debt. The outlook is stable. Ratings affected include Providian Financial's senior debt at B2 and Providian National Bank's senior debt at Ba3. The action concludes a review for possible downgrade begun on Dec. 19, 2001.

Moody's said the confirmation reflects the numerous actions Providian has taken to strengthen its financial position. These include a number of portfolio sales and facility closings, the addition of a substantial number of new senior executives with extensive experience in the credit card industry, and the adoption of more conservative underwriting and marketing strategies.

In addition, the company's bank subsidiaries remain in compliance with the regulatory agreements entered into a year ago, and have maintained a solid liquidity and regulatory capital position despite significant challenges, Moody's said.

Core earnings remain positive, albeit modestly so, as a combination of repricing and expense cuts have helped to offset rising credit costs.

While Moody's said it expects that Providian's earnings could come under greater pressure in the next two quarters as seasoning-related credit costs increase further, overall the rating agency believes that the actions Providian has taken over the past year make it far more likely that it will be able to survive the near-term challenges it still faces.

However Moody's said Providian continues to face significant longer-term challenges. The company's current ratings reflect these challenges.

Providian's access to funding remains limited, Moody's noted, and while the probability of an early amortization of all of its securitizations is remote, such a development would quickly absorb the company's excess liquidity and its excess regulatory capital.

Furthermore, the company faces major competitive challenges as it moves into the more traditional prime credit card market. This market is dominated by larger competitors and, according to Moody's, Providian has historically not had a substantial competitive advantage in prime credit cards.

S&P confirms CNH, off positive watch

Standard & Poor's confirmed CNH Global NV and removed it from CreditWatch with positive implications. The outlook is stable. Ratings affected include Case Corp.'s $300 million 6.25% notes due 2003, $300 million 7.25% notes due 2016 and $300 million 7.25% notes due 2005 at BB, Case Credit Corp.'s $150 million 6.75% notes due 2007 and $200 million 6.125% notes due 2003 at BB and CNH Capital Australia Pty Ltd.'s senior unsecured debt at BB.

S&P noted that since spring 2002 CNH has been evaluating potential transactions for its financing receivables portfolio to reduce its funding requirements and balance sheet debt, but thus far no deals have emerged, and the potential for transactions is uncertain.

A transaction for the firm's North American financing receivables, similar to the joint venture it recently formed with BNP Paribas Lease Group regarding its European retail financing portfolio, could result in a modest upgrade.

Ratings factor in strong liquidity support, in the form of intracompany loans and loan guarantees, from parent company Italy-based Fiat SpA an 85.3% equity owner. The June 2002 $1.3 billion exchange of debt owed to Fiat into new common CNH shares provides further evidence of Fiat's commitment to CNH, S&P said. Moreover, exercise of the 2004 Fiat Auto put option would increase the importance of CNH to Fiat. Ratings on CNH Global as a stand-alone entity would likely be lower.

Ratings also reflect CNH's average business profile as one of the world's two leading agricultural equipment producers and third largest manufacturer of construction equipment, offset by weak credit measures that are expected to improve only gradually over the intermediate term, S&P added.

Although CNH has made significant progress on its multiyear cost-reduction program, operating performance remains weak, reflecting very challenging industry conditions, S&P said. For the nine months ending Sept. 30, 2002, CNH had a net loss of $76 million, an improvement from the $111 million net loss it experienced for the same prior-year period. Agricultural equipment operations were profitable, with still sub-par segment income of $150 million, up from $117 million year-over-year. However, construction equipment operations continue to weaken, reflecting in part the dramatic drop in demand from the equipment rental industry, as this segment lost $115 million for the first three quarters of 2002, versus a $24 million profit for the first three quarters of 2001.

Fitch cuts Goodyear

Fitch Ratings downgraded The Goodyear Tire & Rubber Co. including cutting its senior unsecured debt to BB from BB+. The outlook is negative.

Fitch said it lowered Goodyear because of the steady deterioration in its core North American tire operations, where the company's margins and competitive position have eroded.

While liquidity is currently ample, substantial contractual cash requirements loom over the forthcoming periods, including pension funding requirements of $350-$550 million over the next 18 months and debt maturities of $378 million and $809 million over the next 12 and 24 months, respectively, Fitch said.

Goodyear is currently in compliance with the interest coverage ratio covenant contained in its undrawn committed bank and its bank term loan but remains vulnerable to non-compliance should profitability erode in the forthcoming quarters, Fitch added.

Looking forward, meaningful increases in raw material and structural costs are likely to pressure margins further unless aggressive offsetting measures are implemented.

Moody's keeps Cablevision on review

Moody's Investors Service said its review for downgrade continues on CSC Holdings, a subsidiary of Cablevision Systems Corp. Ratings affected include CSC's $3.7 billion senior unsecured notes at B1, $600 million senior subordinated notes at B2, $1.5 billion preferred stock at B3 and SGL-4 liquidity rating.

Moody's said its continuation of the review follows Cablevision's announcement that it will be selling its stake in the Bravo network to NBC and netting approximately $1 billion in value (in the form of Cablevision and GE shares, split roughly 65%-35%, respectively, as estimated based on the current Cablevision share price) through the combined redemption of NBC's holdings in both Cablevision and its indirect subsidiary Rainbow Media Holdings.

Although the proposed transaction confirms the high underlying value of the company's assets, and potentially suggests more of a willingness to divest non-core assets (at least at high cash flow multiples and corresponding valuation levels) on the part of management, Moody's said these issues were never the focus of its concerns about the company.

Effectively, the transaction mostly constitutes a large stock buy-back by the company, which will not likely benefit bondholders that much, if at all, even though it seems quite favorable from an equity-holder's perspective given the large amount of shares being retired at historically low prices, Moody's said.

The primary concern for the company at the moment continues to be its weak liquidity profile, which in Moody's opinion will not get that much of a boost from the sale of Bravo and remains dependent on many uncertainties with respect to share price movement, the ability to monetize the GE shares (and the terms of any monetization) that will be received as partial payment, the permanent repayment requirement for existing Rainbow Media debt, the willingness of the financial markets to replace existing credit facilities, and management's intentions with respect to any remaining cash proceeds thereafter.

The anticipated deleveraging impact of the Bravo transaction, which on a cash basis may only translate into $200 million or less and reflects a more modest 6x multiple of cash flow being sold after debt reduction (versus the estimated 23x multiple based on the full value of the transaction), will therefore be fairly immaterial to the consolidated entity, which remains leveraged at more than 8x and growing inclusive of both debt and preferred securities, Moody's said.

S&P puts Canadian Satellite, Star Choice on positive watch

Standard & Poor's put Canadian Satellite Communications Inc. and its subsidiary Star Choice Communications Inc. on CreditWatch with positive implications. Ratings affected include Star Choice's $150 million 13% notes due 2005 at B+.

S&P said the action reflect the expectation that in the future ratings approach on Canadian Satellite Communications and its 100% parent, Shaw Communications Inc., will be either on a partially or fully consolidated basis rather than on a stand-alone basis.

As a result, the ratings on Canadian Satellite Communications are expected to benefit from Shaw's significant liquidity and lower refinancing risk, S&P said. The ratings on Shaw are expected to be negatively affected by the higher perceived business and financial risk profiles of Cancom.

S&P said its review will focus on the extent of linkage between Canadian Satellite Communications and Shaw from a ratings perspective, including factors such as strategic importance, required regulatory separation, and funding support.

S&P puts Shaw Communications on watch

Standard & Poor's put Shaw Communications Inc. on CreditWatch with negative implications including its $142.5 million 8.45% Canadian originated preferred securities due 2046, $172.5 million 8.5% Canadian originated preferred securities due 2097, C$100 million 8.54% due 2027 and C$150 million 8.875% COPRS due 2049 at BB+ and its $225 million 7.25% notes due 2011, $300 million 7.2% senior notes due 2011, $440 million 8.25% senior unsecured notes due 2010, C$275 million 7.05% senior unsecured notes due 2005 and C$300 million 7.4% notes due 2007 at BBB.

S&P said the action reflect the expectation that in the future ratings approach on Shaw Communications Inc. and its 100% subsidiary Canadian Satellite Communications will be either on a partially or fully consolidated basis rather than on a stand-alone basis.

As a result, the ratings on Shaw are expected to be negatively affected by the higher perceived business and financial risk profiles of Canadian Satellite Communications, S&P said. The ratings on Canadian Satellite Communications are expected to benefit from Shaw's significant liquidity and lower refinancing risk.

S&P said its review will focus on the extent of linkage between Canadian Satellite Communications and Shaw from a ratings perspective, including factors such as strategic importance, required regulatory separation, and funding support.

S&P raises Home Interiors

Standard & Poor's upgraded Home Interiors & Gifts Inc. The outlook is stable. Ratings affected include Home Interiors' $149 million 10.125% senior subordinated notes due 2008 to B- from CCC+ and $172.3 million term loan B due 2008, $19 million term loan A due 2004 and revolving credit facility due 2004 to B+ from B.

S&P said the upgrade reflects Home Interiors' improvements in marketing and infrastructure, with solid recruitment and retention of strong management and sales personnel. These positive steps have resulted in stronger profitability and credit ratios.

The rating is based on the high level of business risk associated with Home Interiors' direct sales business model and the company's aggressive debt leverage, S&P added.

With better sales training, product development, professional marketing, and improved logistics, Home Interiors has enhanced its profitability, S&P noted. The EBITDA margin has improved to 20% and higher in recent quarters from a low of 7.1% in December 2000.

Key elements in this improvement include displayer productivity resulting from better sales training and the retention of experienced people. Metrics such as sales per displayer and average order size have all risen since 2000, S&P said. In addition, the company has improved profitability by emphasizing sales of its internally manufactured products and by directly purchasing third-party manufactured goods rather than sourcing them through brokers.

Fitch cuts U.S. Industries' 7.125% notes

Fitch Ratings downgrade U.S. Industries, Inc.'s 7.125% senior secured notes to D from C and kept its 7.25% senior secured notes due 2006 at B- and on Rating Watch Negative.

Fitch said the downgrade follows U.S. Industries' announcement that it has accepted for payment approximately 96% of the $250 million of originally outstanding 2003 notes that were validly tendered for exchange.

The exchange offer on the 7.125% notes was considered a distressed debt exchange given the need to complete this exchange to prevent a potential default if U.S. Industries was not able to refinance the notes prior to October 2003, the high 90% level of participation necessary for the exchange to be made effective and the lengthened maturity of the new securities, Fitch said. Therefore, while not a contractual default, by definition Fitch considers the exchange to be an in substance default.

As a result of the exchange, U.S. Industries' debt will be reduced by about $106 million from cash in the collateral accounts. In addition, U.S. Industries has a tender offer outstanding for a portion of the 7.25% notes due in 2006 to be paid for with cash collateral. Therefore leverage, measured by total debt to EBITDA, is expected to improve considerably, Fitch said.

Fitch added that it expects to assign a rating to the new 11 ¼% notes and review the rating on the remaining 7.25% notes in the near term following a meeting with management and review of financial data.

Fitch lowers Durango outlook

Fitch Ratings revised its outlook on Corporacion Durango to stable from positive and confirmed its B+ rating on the company's senior unsecured notes due 2003, 2006, 2008 and 2009.

Fitch said the outlook change reflects a poor third quarter performance by Durango.

As a result, planned assets sales will not have as large of an impact upon the company's capital structure as originally indicated, Fitch said.

Also prompting the outlook change is a significant downward revision by the company in its midpoint EBITDA from $240 million to $175 million. While the businesses that will be sold account for some of the difference in this figure, they do not represent the entire figure, Fitch said.

During the third quarter, Durango generated only $21 million of EBITDA, a decline from $39 million in the same quarter of 2001, Fitch noted. The company's performance was hindered by a spike in the price for old corrugated containers during the quarter. In addition, during September, one of the recovery boilers exploded at the company's plant in Georgia. As a result of this explosion, plus the company's inability to lower production costs at this facility, Durango shuttered its operations in Georgia. This closure represents a significant setback for the company, as it had spent more than $150 million on the facility, including purchase price and capita expenditures, since 1999.

S&P lowers GEO outlook

Standard & Poor's lowered its outlook on GEO Specialty Chemicals Inc. to negative from stable. Ratings affected include GEO's senior secured bank loan at B+ and senior subordinated debt at B-.

S&P said the outlook revision is in response to concerns about substantially reduced volumes and profitability in the gallium market, which has not recovered since its falloff in early 2001, and a decline in GEO's liquidity during the first nine months of 2002.

End markets for gallium products, primarily telecommunications and electronics, are not expected to rebound materially in the near-term, thus maintaining downward pressure on the firms operating profits, S&P said.

In addition, liquidity has deteriorated markedly as a result of lower operating cash flows and the reduction of the revolving credit facility to $20 million from $40 million as a result of an amendment to the bank credit agreement in May 2002, the rating agency added. However, the firm does not face meaningful term loan amortization until mid-2004 and is expected to fund working capital, debt service, and capital expenditures from operating cash flow.

GEO is highly leveraged, with a debt to EBITDA ratio of more than 7 times, and cash flow protection, as measured by the ratio of EBITDA to interest, is expected to remain thin at almost 1.5x, S&P said. Accordingly, S&P expects the company to improve EBITDA interest coverage and the ratio of funds from operations to total debt (adjusted to capitalize operating leases), to the 2.0x to 2.5x and low-teens percentage areas, respectively, over the intermediate term from their current subpar levels, prior to the resumption of material acquisition activity. Because of oversupply conditions in key end markets, capital spending over the next one to two years should be held at maintenance levels.

S&P says Entercom unchanged

Standard & Poor's said Entercom Communications Corp.'s ratings remain unchanged at a corporate credit rating of BB with a stable outlook.

S&P's comments follow Entercom's release of "good" 2002 third quarter net revenue and broadcast cash flow growth.

Net revenue and broadcast cash flow grew 25% and 38%, respectively, in the third quarter ended Sept. 30, 2002, compared with the comparable year ago period, due to recovering ad demand and market revenue share gains, S&P noted. Operating performance is bolstered by a broad base of advertising categories and double-digit increases in national and local revenues. The company also benefited from easier comparisons versus 2001 due to last year's depressed advertising levels and the absence of political ad dollars, though political advertising constitutes a nominal amount of total revenue.

Despite radio advertising's positive momentum, the economic outlook remains soft and the near-term advertising climate remains uncertain, S&P added.

Rating stability is enhanced by steady debt reduction from discretionary cash flow.

At the most recent quarter end, pro forma leverage, net of cash, would have been 2.9 times (x) assuming the company's remaining Denver transaction were closed.

"Although credit metrics may appear relatively strong for the rating level, the ratings incorporate some cushion in the event that the advertising environment again weakens or the company escalates acquisition activity," S&P commented.

S&P says Cablevision unchanged

Standard & Poor's said Cablevision Systems Corp. ratings remain unchanged at BB for the corporate credit rating with a stable outlook.

S&P's comments follows Cablevision's announced agreement to sell its 80% share of the Bravo channel to NBC for $1 billion. Cablevision will receive a combination of GE and Cablevision stock, with the GE-related portion ranging from 45% to 67%, depending on Cablevision's stock price.

S&P said it expects Cablevision to monetize the roughly $450 million to $670 million of GE stock to reduce bank debt, including borrowings on its $2.4 billion revolving credit facility.

However, the company will lose roughly $55 million in annual operating cash flows from Bravo. Therefore, the overall deleveraging impact is minimal, S&P said.

Given the magnitude of capital and operating needs anticipated for 2003, Cablevision may not have sufficient funding beyond 2003 under its current financial plans, especially if it is not able to materially increase operating cash flows from its cable businesses in the 2002 to 2003 time frame, including cable modem, digital cable, and telephony services, as well as stem additional subscriber losses, S&P said.

Moody's rates Tyumen notes Ba3

Moody's Investors Service assigned a Ba3 rating to the $400 million 11% loan participation notes due 2007 issued by Salomon Brothers AG to finance a loan to JSC Tyumen Oil Co. The rating is based solely on the creditworthiness of Tyumen Oil Co.'s guarantor, TNK International Ltd. The outlook is stable.

Moody's said its assessment of TNK reflects the maturity of the group's upstream reserves, its higher cost base relative to some of its peers, the need for it to continue undertaking substantial investment to rehabilitate existing oil fields and develop new reserves to raise hydrocarbon production, the low utilization of its refineries and the need to upgrade its product slate, the company's short and unstable operating history and its growth plans.

Additionally taken into account in the rating are the evolving and unpredictable Russian business and legal environment, the increasing fiscal burden being placed on the oil sector, potential export constraints due to Russia's ageing transmission infrastructure, and the need to repatriate a large proportion of its foreign currency earnings, Moody's added.

Positives include TNK's very substantial reserves and production which rank it respectively #3 and #4 in Russia, its recent record of production growth which is expected to continue over the medium term, its considerable crude and refined product exports, and the company's solid anticipated cash flow coverages and other debt protection measurements which are expected to remain adequate in a lower oil-price environment, the rating agency added.

Also taken into account are TNK's ongoing cost-cutting measures, and its efforts to put in place a more transparent and simplified corporate structure and governance, Moody's said.

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