Moody's downgrades Eldorado Resorts

Moody's Investors Service downgraded Eldorado Resorts, LLC, including cutting its $100 million of 10.5% senior subordinated debt due 2006 to B3 from B1. The outlook is stable.

Moody's said the downgrade results from the negative effect that the Sept. 11 terrorist attacks had on the Reno, Nev. gaming market, which relies heavily on tourist travel and was already experiencing weakening visitation trends, increased competition from Native American casinos, and a decline in air service.

The impact on Eldorado's credit profile has been "significant," Moody's said, adding that for the 12 months to Sept. 30, 2001, debt to EBITDA rose to more than 4.5 times compared to 3.0 times at the end of the two most recent fiscal year-ends.

This higher leverage resulted in a bank covenant violation and the suspension of the bank's obligation to make further advances, Moody's added. Subsequently Eldorado amended its bank agreement and is now in compliance.

Fitch rates new Coventry Health notes BB

Fitch, Inc. assigned a BB rating to Coventry Health Care Inc.'s proposed offering of $175 million 10-year senior unsecured notes. The outlook is stable.

Fitch said its rating reflects Coventry's "high quality balance sheet, good operating performance, and established competitive position in the health insurance business."

But Fitch also noted Coventry's "aggressive acquisition strategy and the moderate level of risk-based capitalization of its operating subsidiaries."

Fitch downgrades Saks

Fitch downgraded Saks Inc.'s $1.2 billion of senior notes to BB- from BB and assigned a BB+ rating to Saks' secured bank credit facility. The ratings were removed from Rating Watch Negative. The outlook is negative.

Fitch said the downgrade reflects the decline in Saks' operations and credit measures, and the structural subordination of the notes to Saks' $700 million, five-year secured bank facility.

"The company has been pressured by the difficult retail environment, and its Saks Fifth Avenue business has been further weakened by the decline in tourism and reduced demand by consumers for discretionary luxury items," Fitch said.

Moody's downgrades Callahan NRW

Moody's Investors Service downgraded Callahan Nordrhein-Westfalen GmbH's senior unsecured notes to Caa1 from B3 and affirmed the €2.9 billion guaranteed senior secured credit facility of the company's subsidiary at B1. The outlook is stable.

Moody's said its downgrade reflects Moody's expectation that CNW's operating and financial progress for 2001 will be "materially behind Moody's original expectations."

"While it was already apparent that the company would be behind in their upgrade schedule (and consequently, in revenue and EBITDA growth), it now appears that 2001 CAPEX will be meaningfully above Moody's initial expectations (at the time CNW first came to market - albeit, in line with the company's recent market guidance) despite a material reduction in upgraded homes for the period," Moody's said.

Although some of the higher-than-anticipated capex is attributable to greater front-loaded costs, part of which should be offset by decreased spending in future years, the setbacks have nonetheless reduced Callahan's financial flexibility and resulted in debt levels above Moody's expectations, the rating agency added.

Moody's puts Energis on review for downgrade

Moody's Investors Service put Energis plc and Energis Holdings Ltd. on review for possible downgrade. Ratings affected include Energis' £725 million senior secured revolving and term credit facilities due 2008 at Ba2, its £125 million senior unsecured notes due 2009 at B2, its $200 million senior unsecured notes due 2009 at B2 and its £300 million global bonds due 2010 at B2.

Moody's said the review follows Energis' announcement it is unlikely to meet revenue and EBITDA expectations for the year ending March 2002 due to an unfavorable revenue mix, slower conversion of orders and increased margin pressure.

As a result, Energis may be at risk of breaching certain financial covenants under its bank facility, Moody's added.

S&P takes Hanger Orthopedic off watch

Standard & Poor's confirmed its ratings for Hanger Orthopedic Group Inc. and removed them from CreditWatch with negative implications where they were placed on Dec. 15, 2000. The outlook is now positive. Ratings affected include Hanger Orthopedic's $150 million 11.25% senior subordinated notes due 2009 rated CCC+ and its $100 million revolving credit facility due 2005, $100 million senior secured term loan A due 2005 and its $100 million senior secured term loan B due 2007, all rated B.

Standard & Poor's said the positive outlook reflects improvements in Hanger's earnings prospects and ability to meet its current obligations. The rating agency had put Hanger on CreditWatch because it ws concerned about Hanger's weaker-than-expected operating earnings and its ability to meet its bank-financing commitments.

Lackluster 2000 operating results reflected integration issues and practitioner defections following the large acquisition, S&P said. "However, it now appears that the implementation of a strategic plan by a new management team has tightened working capital management and reduced operating costs."

Nonetheless, Hanger still has a "debt-heavy capital structure," S&P said, noting funds from operations were a low double-digit percentage of adjusted debt including preferred stock.

S&P said an upgrade is possible within the next couple of years if Hanger continues to demonstrate improved operating performance and financial flexibility.

S&P puts The Pantry on negative watch

Standard & Poor's put The Pantry Inc. on CreditWatch with negative implications. Affected ratings include The Pantry's $200 million 10.25% senior subordinated notes due 2007, rated B, and its $385 million secured revolving credit facility and $50 million acquisition facility, both rated BB-.

S&P said it put The Pantry on watch after the company's reduced first quarter 2002 earnings. EBITDA (earnings before interest, taxation, depreciation and amortization) for the period was $26.5 million compared with $31.8 million in the first quarter of 2001.

"Gasoline price volatility and the impact of the weakening economy in key southeastern U.S. markets contributed to these reduced results," S&P noted. For fiscal 2001, lease-adjusted EBITDA coverage of interest declined to 2.0 times from 2.5 times in 2000.

S&P takes LodgeNet off watch

Standard & Poor's confirmed LodgeNet Entertainment Corp.'s ratings and removed them from CreditWatch with negative implications. The outlook is stable. Ratings affected include LodgeNet's senior secured bank loan at B+ and senior unsecured debt at B.

S&P said the action reflects its view that "LodgeNet's profitability and credit profile will hold up better than initially expected following the material decline in business and leisure travel that followed Sept. 11, 2001."

LodgeNet has a growing market share and room base, solid margins and relative stability provided by long-term contracts, S&P continued. But at the same time, it has negative discretionary cash flow, relies on debt to finance its expansion and its market niche has limited growth potential.

While the operating environment remains challenging with occupancy rates in the lodging industry well below levels of a year ago, occupancy has improved steadily since the sharp fall-off that followed Sept. 11, S&P said.

"LodgeNet's operating results have shown more resilience because approximately two-thirds of its room base is in suburban and highway locations that have been among the least affected categories in the industry," the rating agency added.

In addition, the company has cut expenses and capital expenditures.

S&P confirms Actuant

Standard & Poor's confirmed Actuant Corp. including its senior secured debt at BB- and its subordinated debt at B. The outlook is stable.

S&P said its action follow Actuant's announcement that it plans to sell three million shares of class A common stock. Proceeds of about $90 million based on the closing share price on Jan. 23 will be used to reduce debt, including up to $70 million of the company's 13% senior subordinated notes due 2009.

On a pro forma basis, the transaction will help Actuant's financial profile, with total debt to EBITDA declining to about 3.0 times from 4.0 times and EBITDA interest coverage increasing to about 3 times from 2 times, S&P said.

However S&P expects Actuant to make acquisitions that could result in increased debt levels and higher financial risk. Over time, total debt to EBITDA is expected to average about 3.5 times and EBITDA interest coverage is expected to average 2.5 times.

S&P cuts Nationwide Health preferreds to junk

Standard & Poor's downgraded Nationwide Health Properties Inc.'s $100 million 7.667% preferred stock series A to BB+ from BBB-.

S&P rates TuranAlem notes B

Standard & Poor's assigned a B rating to the $100 million of 11.5% notes due 2004 issued by Bank TuranAlem unit TuranAlem Finance BV.

S&P puts Energis on negative watch

Standard & Poor's put Energis PLC on CreditWatch with negative implications.

Ratings affected include Energis' $200 million 9.75% notes due 2009, £125 million 9.5% notes due 2009 and £300 million 9.125% notes due 2010, all rated B.

S&P puts Companhia Energetica de Sao Paulo on positive watch

Standard & Poor's put Companhia Energetica de Sao Paulo on CreditWatch with positive implications. Ratings affected include the company's $300 million 10.5% notes due 2004 and €200 million 9.75% notes due 2004, both rated B+.

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