pgrade B3 Stable
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The review will conside the proposed debt offering and if it will be structured in a manner that alleviates our concerns regarding Isle's ability to maintain compliance with its financial covenants over the longer-term; and provides the company with a more relaxed debt maturity profile. The review also acknowledges Isle's fiscal third quarter earnings results that benefited from a more stable operating environment than in previous quarters, along with a lower cost structure. As a result, we expect Isle will achieve and sustain debt/EBITDA of six times in the next 18 months, the target leverage Isle needs to obtain a B2 corporate family rating. Jebel Ali Free Zone FZE 8 Dec 09 Corporate Family Rating Outlook B1 Review for Downgrade
Downgrade 3 March 11 B2 Negative
The downgrade was driven by the high uncertainties over the near- to medium-term evolution of the company's capital structure that we consider highly leveraged, with adjusted debt to EBITDA at 8.6 times (as per the 12-month period ending June 2010), and as unsustainable given the company's cash flow profile. Moreover, it is likely that the company's capital structure will remain constrained. These factors have prompted us to reposition the company's baseline credit assessment to 16 (equivalent to B3 on our global scale) from 14 (B1 equivalent), hence the downgrade. MGM Resorts International 26 Oct 10 Corporate Family Rating Outlook Caa1 Positive
Upgrade 2 March 11 B3 Stable
The upgrade reflects signs of modest improvement in demand trends in Las Vegas, improvement in debt repayment during 2010 from the proceeds of equity issuances, and completion of a new multiyear financing package for CityCenter (MGM's 50% owned project on the Las Vegas Strip.) We believe MGM's credit metrics will begin to improve modestly due to the improved operating outlook. Additionally, we estimate that MGM has sufficient revolver capacity and cash on hand to support its debt maturities through mid-year 2013. Nevertheless, MGM's Caa1 probability of default rating reflects the company's high leverage -- debt/EBITDA is over 11 times -- and significant refinancing risk over the medium-term.
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MOODY¡¯S WEEKLY CREDIT OUTLOOK
7 MARCH 2011
RATING CHANGES Vulcan Materials Company
Significant rating actions taken the week ending 4 March 2011
Downgrade 17 Dec 10 4 March 11 Ba1 Stable Baa3 Review for Downgrade
Corporate Family Rating Outlook
The downgrade was driven by our expectation that Vulcan's operating earnings, cash flow, and EBITDA will remain weak over the intermediate term as it grapples with soft pricing in several key markets, low demand from private construction, and, ultimately, a conclusion to federal stimulus spending. In our view, Vulcan will be unable to restore investment-grade credit metrics over the next two years. At December 31, adjusted debt-to-EBITDA leverage exceeded 7x. Leverage metrics will likely remain elevated and coverage metrics will remain weak until more robust private construction demand takes hold. In the meantime, the company's overall margins will likely remain pressured by weak volumes and diminished pricing power in several key US markets, particularly in Florida and parts of the Western US, which offset strength in other key markets.
Financial Institutions Cypriot Banks Downgrade of Hellenic Bank to Ba1/NP/D-; outlook stable (Cyprus) Downgrade of Marfin Popular Bank to Baa3/P-3/D-; outlook negative (Cyprus) Downgrade of the Bank of Cyprus to Baa2/D+ from A3/C-; outlook stable
The bank downgrades follow our decision to downgrade the ratings of the Cypriot government to A2 from Aa3. That downgrade has prompted us to lower our assessment of the capacity of the Cypriot government to support its banking system. We utilise a systemic support indicator (SSI) as an anchor to assess a country's capacity to support its banking system in case of need, and uses the SSI to assign the supported deposit and debt ratings of banks. Cyprus' SSI has been repositioned at the same level as the national government's new debt rating of A2. The SSI was previously Aa2, one notch above the old rating of the government. The realignment of the SSI with the government's rating reflects the government's reduced capacity and the size of the contingent liabilities of the banking system relative to the balance sheet of the government and, in our opinion, the somewhat increased risk that these contingent liabilities may crystallise on the sovereign's balance sheet.
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MOODY¡¯S WEEKLY CREDIT OUTLOOK
7 MARCH 2011
RATING CHANGES US Public Finance Belvoir Land LLC (VA)
Significant rating actions taken the week ending 4 March 2011
Review for Downgrade 26 March 10 1 March 11 Aa3 A1 Baa1 Review for Downgrade Aa3 A1 Baa1 Stable
Revenue Bond Rating (Class I) Revenue Bond Rating (Class II) Revenue Bond Rating (Class III) Outlook
This action is based on several factors, most prominently the downgrade from A3 to Baa1 of AIG, which provides the debt service reserve fund surety for all three debt classes. We consider the debt service reserve fund to be an important component of support for the bonds and a key factor in the rating. In order to understand the impact of this downgrade on the rating of the bonds, we will obtain further information on project performance, including the 2010 audit. As of the 2009 audit, there had been a slight decline in debt service coverage for the project from 2008, to 2.03x from 2.13x on the Class I bonds, 1.56x from 1.64x on the Class II bonds, and 1.20x from 1.26x on the Class III bonds. Oakland Unified School District (CA) 16 April 10 Revenue Bond Rating Outlook A1 Stable
Downgrade 2 March 11 A2 Stable
The downgrade reflects the district's trend of operating deficits over the past three fiscal years through fiscal 2010 (ended June 30) resulting in relatively narrow reserves. This positions the district poorly for the challenges likely to be faced as a result of the state's budget difficulties. The absence of audited financial statements since fiscal 2008 adds to the risk associated with the district's bonds. The A2 rating continues to incorporate Oakland USD's very large tax base with slightly above-average wealth levels, and its comparatively high-but-manageable debt burden.
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MOODY¡¯S WEEKLY CREDIT OUTLOOK
7 MARCH 2011
RATING CHANGES Southeast Housing, LLC. (FL)
Significant rating actions taken the week ending 4 March 2011
Review Direction Uncertain 29 March 09 1 March 11 Baa2 Review Direction Uncertain Baa2 Developing
Revenue Bond Rating Outlook
The action is due to a decrease in the scope of the project. In conjunction with the modified scope, the issuer intends to purchase and cancel a portion of the bonds outstanding, and the Navy will make an equity contribution. The rating will be updated once we receive information that is sufficient to determine the impact of the modified scope on the project's credit rating. The overall number of housing units of the project will be reduced because six of the 11 bases have experienced significant reduction in actual occupancy vs. the occupancy projected at closing and incorporated in the financing pro forma. In addition to decreased occupancy, the weighted average rent is less than was projected at closing due to the presence of lower-rank tenants, more civilian tenants, and decreases in the basic allowance for housing rates.
Infrastructure FirstEnergy Corp. 11 Feb 10 Senior Unsecured Rating Outlook Baa3 Stable
Affirmation 25 Feb 11 Baa3 Stable
Our action reflects the expectation that the merger between FE and AYE will be consummated shortly. The merger, which was announced on February 11, 2010, has received all needed regulatory approvals. The affirmation of the ratings considers the increased scale and scope of the merged entity and the potential to achieve significant synergies. The rating affirmation also reflects an expectation for near-term improvement in the company's consolidated balance sheet through debt reduction.
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MOODY¡¯S WEEKLY CREDIT OUTLOOK
7 MARCH 2011
RATING CHANGES FirstEnergy Solutions Corp.
Significant rating actions taken the week ending 4 March 2011
Review for Downgrade 11 Feb 10 25 Feb 11 Baa2 Review for Downgrade Baa2 Stable
Senior Unsecured Rating Outlook
Our action reflects the expectation that the merger between FE and AYE will be consummated shortly. The review was triggered by a reduction in the price for electricity that has impacted the company's financial performance. Specifically, FES' ratio of CFO pre-WC to debt and interest coverage declined to approximately 18% and five times for the 12-month period ended September 30, 2010, from 22% and seven times, respectively, during the 12 months ended December 31, 2009. FES' cash flow in 2011, however, is expected to be in line with 2010 levels due in part to the impact of bonus depreciation. Internal cash flow, combined with a reduction in capital expenditure requirements and no near-term dividend requirement from FE, should provide FES an opportunity to meaningfully reduce its debt load. While this may be the case, the outlook for power prices and the impact on FES' future financial performance is such that the company's current rating may no longer be warranted Allegheny Energy, Inc. 10 Jan11 Unsecured Bank Facility Rating Outlook Ba1 Stable
Upgrade 25 Feb 11 Baa3 Stable
Our action reflects the expectation that the merger between FE and AYE will be consummated shortly. The rating upgrade of AYE's bank credit facility reflects the lack of any funded debt at the holding company level, the diversification benefits that will come to AYE as being a part of larger and more diverse organization, and the expectation that AYE's modest holding company working capital needs will be satisfied in the future at the FE level. PPL Corporation & subsidiaries 9 Nov 10 Issuer Rating Outlook Baa3 Stable
Affirmation 2 March 11 Baa3 Stable
The rating affirmation recognizes that the planned acquisition of Central Networks further de-risks PPL's overall business platform as more than 70% of consolidated results will be provided by predictable, rate-regulated businesses from three different jurisdictions, making the company's earnings, cash flow, and dividends less reliant on the company's commodity business. We consider the pro-forma consolidated credit profile of PPL, and factors in the increasing proportion of regulated activities, the geographic diversity across the businesses, and the declining exposure to the commodities business as a source of cash flow and earnings.
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MOODY¡¯S WEEKLY CREDIT OUTLOOK
7 MARCH 2011
RATING CHANGES Sovereign Angola
Significant rating actions taken the week ending 4 March 2011
Review for Upgrade 19 May 10 28 Feb 11 B1 B2 Ba3 Baa3 Baa3 Review for Upgrade B1 B2 Ba3 Baa3 Baa3 Positive
Government Bond Rating Foreign Currency Deposit Ceiling Foreign Currency Bond Ceiling Local Currency Deposit Ceiling Local Currency Bond Ceiling Outlook
The review is motivated by the strengthening of Angola's fiscal and external accounts, on the back of the 2010 recovery in oil prices, and the significant progress the country has made towards paying down its arrears. The rating review, which is likely to be concluded within three months, will focus on the sustainability of recent improvements in Angola's fiscal and external metrics and the clearing of arrears built up during the global financial crisis. We will also look at the implementation of structural elements of the IMF stand-by agreement, particularly with regard to the fiscal framework and its impact on Angola's institutional strength. Cyprus 13 Jan 11 Government Bond Rating Outlook Aa3 Review for Downgrade
Downgrade 24 Feb 11 A2 Stable
The key drivers for today's rating action are: 1. Concerns that the deterioration in the Cypriot government's fiscal metrics, relative to levels recorded prior to the financial crisis, is largely structural; 2. The banking sector's exposures to macroeconomic stress in Greece; and 3. Concerns about the country's competitiveness. The stable outlook reflects our view that the A2 rating captures the increased risks that Cyprus faces, and that, at present, upside and downside risks are evenly balanced. Cyprus's country ceilings for bonds and bank deposits are unaffected by our ratings review and remain at Aaa (in line with the Eurozone's rating).
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MOODY¡¯S WEEKLY CREDIT OUTLOOK
7 MARCH 2011
RATING CHANGES Structured Finance
Significant rating actions taken the week ending 4 March 2011
Rating sweep of pre-2005 subprime RMBS transactions We downgraded 25% of the ratings that we had placed on review for downgrade in April. The average rating changed by 8.8 notches, although in some instances the rating change was as high as 16 notches. While most of these pools have paid down significantly, higher losses are still expected on the remaining loans due to weak housing and macroeconomic conditions.
Rating sweep of pre-2005 Alt-A and Option ARM RMBS transactions We downgraded 27% of the ratings we had placed on review for downgrade in April. The average rating changed by 6.4 notches, although in some instances the rating change reached 17 notches. While most of these pools have paid down significantly, higher losses are still expected on the remaining loans due to weak housing and macroeconomic conditions.
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MOODY¡¯S WEEKLY CREDIT OUTLOOK
7 MARCH 2011
RESEARCH HIGHLIGHTS Corporates
Notable research published the week ending 4 March 2011
US Medical Products and Device Sector to Maintain Margins but Challenges Abound US For-Profit Hospitals: Profitability to Remain Healthy Despite Pressures Our two broad industry reports outline how US for-profit hospital operators and medical products and device companies will continue to see their revenues stressed by soft volume trends as well as pricing pressures over the next 12 to 18 months. But profitability should remain healthy in both sectors owing, in part, to cost-containment efforts. The credit outlooks for both sectors remain stable through mid-2012, but growing uncertainty surrounding pricing and demand result in a negative bias on both outlooks. For example, these headwinds and additional investment in growth initiatives may make it difficult for hospitals to maintain their current margins. Our SGL Monitor FLASH Higher oil prices run the risk of raising costs for many businesses and consumers, yet these pressures haven¡¯t triggered immediate liquidity concerns for most speculative-grade debt issuers. More widespread turmoil in the Middle East could push energy prices higher. If sustained,