Fitch Ratings has downgraded Williams Communications Group senior secured credit facility to CCC+ from B, with the rating on negative watch, spurred by sluggish demand for broadband services and depressed asset values securing the credit facility. The action also reflects concerns over the company's slower than anticipated revenue ramp-up, EBITDA generation and improvement in credit protection metrics. The rating watch is likely to be resolved pending the outcome of a bank group discussion over capital and covenant structure. A Williams' statement notes the downgrade is driven by current uncertainty surrounding the telecom industry.
Fitch believes Williams' key assets in 2002 will be cash and management's ability to manage the liquidity position. Fitch does not see the demand for broadband improving in 2002, which could affect revenue and the liquidity position entering 2003. Overbuild of broadband capacity combined with business failures within the broadband transport space have driven down the value of telecom assets.
*McLeod USA's senior secured bank loan has been removed from credit watch and downgraded to D, from a less than healthy C, following the company's filing of bankruptcy protection, according to Standard & Poor's. McLeod has $3.9 billion in bank loans, with J.P. Morgan, Citigroup and Goldman Sachs among the key lenders.
* S&P has raised the corporate credit rating and senior secured bank loan ratings of CKE Restaurants to B from B- with a stable outlook. The upgrade is based on CKE's restored financial flexibility after closing on its amended $100 million senior secured revolver (LMW, 1/6). This facility replaces a $120 million line that matured on Feb. 1. The ratings reflect CKE's participation in the highly competitive quick service sector of the restaurant industry, its highly leveraged capital structure, and weak credit protection measures. The ratings also reflect the poor operating performance at the Hardee's restaurant chain. The risks are mitigated somewhat by the strength of Carl's Jr. though, another CKE concept. BNP Paribas, First Bank and Trust, Wells Fargo Bank, Fleet National Bank and U.S. Bank are the lead lenders on the new credit.
* S&P has also lowered the ratings on Viasystems Group's senior secured bank loan from B- to CCC, based on deteriorating operating performance, largely driven by the severe downturn in demand for telecommunications and networking end markets. The company is unlikely to remain in compliance with covenants associated with its credit facility in the near term, limiting financial flexibility.
Sales declined through 2001 and profitability fell by nearly 80% in the fourth quarter of last year from the comparable 2000 period. This has led to marginal credit measures for the St. Louis-based contract manufacturer of printed circuit boards (PCBs), backpanel assemblies used to connect PCBs, wire harnesses, custom enclosures, and cable assemblies. Sales and profitability are likely to remain depressed over the near term because conditions in the printed circuit board markets and communications end markets are severely depressed. Officials at Viasystems did not return calls.