Fitch Ratings favorably views the agreement between PacifiCare Health Systems and its lenders to extend the maturity date of its senior credit facility by two years, as the company attempts to explore a more permanent and favorable capital structure. The agency has given PacifiCare an evolving outlook and if the company is successful in extending the maturity of its senior credit facility, Fitch expects PacifiCare's existing senior debt ratings will likely be upgraded one notch to BB.
To be granted the extension PacifiCare has to reduce borrowings by $250 million before Jan. 2, 2003, the prior maturity date before the extension. Banc of America Securities, J.P. Morgan and Citigroup are the joint-book running managers on the agreement, which sets the new interest rate at LIBOR plus 5%, up from LIBOR plus 41/ 2%. In a statement, PacifiCare said, "this amendment should address concerns raised by the rating agencies about the size of the principal payment previously due on Jan. 2 next year."
* Key3Media's ratings have been lowered by Moody's Investors Service, including the $120 million of bank credit lines to B3 from B1 and the $290 million of senior subordinated notes to Caa3 from B3. Moody's cites the continuing softness in the technology sector and its impact on the company's ability to improve or even stabilize trade show participation. Key3Media focuses almost exclusively on this sector and to date has not meaningfully diversified. Exacerbating the company's performance issues is the deterioration in business travel following the events of Sept. 11. As a result of the declining prospects for Key3Media, the company appears over-leveraged with limited opportunity for near to intermediate term improvement. Calls to spokesman Eric Grodziski were not returned.
* Standard & Poor's placed its ratings on Xerox on credit watch with negative implications due to concerns about delays in renegotiation of its $7 billion revolving credit agreement due October 2002. Although Xerox believes it has made "significant progress" in discussions with its bank group, led by J.P. Morgan, Citibank and BANK ONE, if the negotiations are not completed a default or bankruptcy filing by Xerox is possible, S&P comments. The current BB ratings reflect Xerox's good position in its core document-processing business, a sizable recurring revenue base, and a broad product lineup, offset by highly competitive industry conditions and a declining revenue base.
The troubled company has made progress in executing its turnaround program, including asset sales totaling more than $2 billion, significant cost-reduction and cash-conservation actions, and agreements to transition the majority of Xerox's equipment-financing business to third parties. A Xerox statement said, the terms of the redux have been distributed to the 57 lenders and the refinancing should be completed in June.