FLEMING'S CREDIT RATINGS DIVE

DALLAS -- As Fleming here tries to restructure its debt in more favorable terms, three ratings agencies in New York downgraded the distributor's credit because of questions about its long-term financial health.ing said Kmart has agreed to pay $37 million in cash to settle those claims -- a significant difference from the $1.47 billion Fleming originally said it was owed.Fleming said it has hired Glass

DALLAS -- As Fleming here tries to restructure its debt in more favorable terms, three ratings agencies in New York downgraded the distributor's credit because of questions about its long-term financial health.

ing said Kmart has agreed to pay $37 million in cash to settle those claims -- a significant difference from the $1.47 billion Fleming originally said it was owed.

Fleming said it has hired Glass & Associates, a turnaround management firm based in Canton, Ohio, to help deal with its relationship with vendors, bondholders and other constituencies. The company previously announced it has retained Gleacher Partners, a New York-based investment banker, to help it improve its cash management systems and financing needs.

In response to trade reports that some vendors have altered their payment credit terms with Fleming, a spokesman told SN last week the company has had "no discussions regarding terms with vendors outside the normal course of business."

Industry sources pointed out that Fleming has not defaulted on any debt payments and could still avoid any default.

However, Fitch Ratings said it was dropping Fleming's secured bank facility to B from BB, its senior unsecured debt to CCC from B+, and its senior subordinated debt to CC from B- "due to the significant weakness in Fleming's operating performance, the uncertainty as to the status of its efforts to amend or renegotiate its existing secured bank facility, and the lack of clear direction for Fleming from what may be a transitional management team.

"The ratings remain on Rating Watch Negative until further clarity is provided as to its strategic and operating plans going forward and as to Fitch's belief Fleming's tenuous financial position renders its ability to continue to manage its existing obligations questionable."

Standard & Poor's Ratings Services said it lowered its corporate credit rating on Fleming to CCC from B- "based on the company's likely need for covenant relief, the lack of a new or renegotiated bank facility, and the hiring of Gleacher & Co.

"The rating remains on CreditWatch negative. Fleming is in negotiations to either revise its existing bank loan agreement or obtain a new facility, and although the banks are secured, lending support to prospects for an amended or new loan, the company has not to date had success in obtaining the banks' cooperation."

Moody's Investors Service said it was lowering all credit ratings on Fleming "because of its constrained liquidity position and concerns regarding the company's ability to quickly and sharply reduce expenses following the abrupt loss of the Kmart volume, to improve wholesale efficiency despite significant volume declines, and to complete its retail divestitures in a timely manner."