Moody's rates Fisher Scientific notes B2

Moody's Investors Service assigned a B2 rating to Fisher Scientific International, Inc.'s planned $200 million senior subordinated notes due 2013 and confirmed its existing ratings including its $142 million 7.125% senior notes due 2005 and $300 million 2.50% senior unsecured convertible notes due 2023 at B1, $357 million 8.125% guaranteed senior subordinated global notes due 2012 at B2 and $175 million guaranteed senior secured revolving credit facility due 2008 and $399 million guaranteed senior secured term loan due 2010 at Ba3.The outlook remains stable.

Moody's said the ratings reflect Fisher's strong and improving financial performance, supported by substantial recurring revenues; its track record in successfully integrating acquisitions; its position in its market; and the rapidity with which it is likely to reduce its debt burden.

The company's improving financial performance, which had been putting upward pressure on the ratings, will offset its assumption of significant new debt and acquisition integration risks.

Moody's said the stable outlook reflects its belief that Fisher will continue to grow revenues at a mid to high single digit rate and that EBITDA will grow at a rate in the low to mid-teens. The outlook further incorporates Moody's expectation that the company will make no further material debt-financed acquisitions over the next two years, utilizing free cash flow from operations or asset sales to reduce debt.

Fisher's financial performance is strong and has been improving, a trend Moody's expects to continue. EBITDA has grown from $218 million in 2000 to $318 million in 2002, for a CAGR of 20.8%. The rating agency expects EBITDA to continue to grow at a rate in the mid-teens over the next two years. Improving gross margins and better working capital management, together with acquisitions, have driven growth in EBITDA.

Despite the increase in debt, EBITDA/Interest should continue to improve, rising to above 4.0x by the end of 2003, Moody's said. The company's position in the market, where it serves as an intermediary between a fragmented supplier base and a fragmented customer base, coupled with its ability to self-manufacture, has driven these trends.

S&P rates Fisher Scientific notes B+

Standard & Poor's assigned a B+ rating to Fisher Scientific International Inc.'s planned $200 million senior subordinated notes due 2013 and confirmed its existing ratings including its senior secured debt at BB+ and subordinated debt at B+. The outlook is negative.

S&P said the ratings reflect Fisher Scientific's substantial debt burden, which outweighs the benefits of its average business position as a leading distributor of supplies for life science research and clinical laboratories.

Fisher has used debt-financed acquisitions to increase the range of self-manufactured products it distributes. The proposed $714 million purchase of Swedish Perbio AB would increase the proportion of self-manufactured products to more than 25% from 21% of revenues.

However, the acquisition will pressure financial measures and reverse some of the improvements realized during the past few years.

Lease-adjusted total debt to EBITDA will increase to 4.5x from 3.4x and funds from operations to total debt will fall to about 16% from 23%, S&P said. These measures are expected to improve, given Fisher's ability to repay borrowing with ample free cash flow.

S&P says Xerox unchanged

Standard & Poor's said Xerox Corp.'s ratings are unchanged after the company lost an appeal in the Seventh Circuit Court of Appeals, where it hoped to reverse a lower court's ruling that the company had underpaid employees in its cash balance pension plan, and will have to pay about $300 million to about 13,000 former employees.

Earlier this year, Xerox took an after-tax charge of $183 million in anticipation of the decision.

Xerox has said that any final judgment would be paid from the pension plan's assets. If the payment results in a shortfall in the pension plan, Xerox could contribute additional funds, but not until 2005, S&P noted.

S&P said as of June 30 Xerox had cash balances of $2.3 billion, a strengthened balance sheet following its recent $3.6 billion re-capitalization and improving operating profitability.

S&P says Calpine sale increases liquidity and volatility

Standard & Poor's said Calpine's plan to sell its unconsolidated 50% interest in the 240-MW Gordonsville Power Plant to Dominion Virginia Power will slightly strengthen liquidity at the expense of some long-term revenue stability.

However, this is in keeping with Calpine's stated plan to sell some of its qualifying facilities to boost liquidity and is factored into the current ratings, S&P added.

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