Fitch ups Deutsche Telekom outlook

Fitch Ratings raised its outlook on Deutsche Telekom AG to positive from stable and confirmed its long-term ratings at BBB+, reflecting an improving credit profile, based on the group's positive free cash flow position before asset sales.

The change also reflects Fitch's expectation that the group will be fully funded going forward as it has covered debt maturities until 2005 and is likely to be in a position to service debt with pre-dividend free cash flow thereafter.

While management has announced plans to reinstate dividend payment for fiscal yearend 2004 and beyond, and is expected to adopt an opportunistic approach to acquisitions, Fitch believes Deutsche Telekom will maintain a strong investment grade profile.

The agency notes management's intention to maintain a ratio of net debt to EBITDA in the 2x to 3x range in fiscal 2003 and in the 3x area in fiscal 2004 and thereafter. Going forward the agency expects Deutsche Telekom not to exceed the 3x leverage multiple.

Given the group's capacity to generate free cash flow from its operations, Deutsche Telekom would be in a position to reduce net debt reasonably quickly, Fitch said.

Moody's cuts Health Management outlook

Moody's Investors Service confirmed the ratings of Health Management Associates Inc., including the convertibles at Baa3, but lowered the outlook to stable from positive, reflecting the impact on credit metrics of the acquisition of five Tenet facilities, which reduces the likelihood of a ratings upgrade over the near term.

Moody's anticipates debt levels will increase by some $400 million from fiscal year-end Sept. 30, 2002. On a pro forma basis, Moody's expects operating cash flow to lease adjusted debt to decline from the 40% range to the 25% range.

Around 90% of HMA's debt matures or becomes putable over the next three years, creating a liability profile that is short-dated in nature.

These include the bank facility maturing in November 2004, the $330 million 0% convertible notes - putable in cash in January 2005 - and the recently issued $575 million of convertible senior subordinated notes - putable in cash or stock in August 2006.

Moody's said it believes the potential convertible puts present a modest degree of refinancing risk in this timeframe.

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