Fitch ups GTech outlook

Fitch Ratings raised GTech Holdings Corp.'s outlook to positive from stable and confirmed the BBB+ rating on its 7.87% senior note due 2007 and 1.75% convertible debentures due 2021.

The ratings reflect generally predictable earnings and cash flow as well as diversification, a strong technology base and a history of high contract renewal rates.

Credit protection measures are strong with EBITDA coverage of interest in the double digits over the past five years and total debt to EBITDA generally at 1x.

Concerns relate to the potential loss of its lottery contract with Brazil, increased competition from diversified technology companies and limited domestic growth prospects.

Fitch rates new Liberty notes BBB-

Fitch Ratings assigned a BBB- rating to Liberty Media Corp.'s new $1.5 billion 20-year 0.75% senior exchangeable notes.

The issue will increase total consolidated debt to about $8.7 billion. Excluding a pro forma cash balance of around $4.2 billion, Liberty Media's public investments including hedges covered $8.7 billion of debt by about 2.1x.

Though interest coverage in the mid-one times range is low for the rating, Fitch believes the company will continue to manage liquidity to meet debt service requirements.

S&P cuts Chubb ratings

Standard & Poor's lowered the ratings of Chubb Corp., including senior debt to A from A+, saying it does not believe operating performance and capital strength support the former ratings.

The outlook is stable.

Regarding capital strength, Chubb is more capital constrained today than in prior years and that it will likely remain so into 2004.

The company's capital position has been negatively affected by a number of charges over the past 18 months relating to the Sept. 11, 2001, terrorism attacks, Enron-related surety losses, asbestos reserve strengthening, and reserve strengthening for directors and officers liability exposure.

Moody's rates Watson convert Ba1

Moody's Investors Service assigned Ba1 ratings to Watson Pharmaceuticals Inc.'s new convertible contingent senior debentures and new bank credit facility.

The outlook remains positive.

The ratings reflect a diverse portfolio, successful track record in integrating acquisitions and large market capitalization that supports financial flexibility. The ratings also consider strong liquidity position and low leverage.

The ratings, however, also reflect rapid growth through acquisitions, the expectation that it will continue to make additional product acquisitions, integration risks and the potential for margin compression due to competition within the generic business.

The positive outlook reflects a view that a ratings upgrade could occur if Watson sustains current margins and a conservative approach to acquisitions and a good relationship with the FDA.

S&P puts Airborne on positive watch

Standard & Poor's placed the ratings of Airborne Inc. and unit Airborne Express Inc. on positive watch on discussions to sell its ground operations to a subsidiary of Deutsche Post AG.

The announced discussions involve a sale for cash at a premium to Airborne's current share price, implying $800 million.

As part of the transaction, Airborne's air operations would become an independent public company that would continue to be wholly owned by Airborne's current shareholders. Under U.S. law, foreign ownership of U.S. passenger and cargo airlines is limited to no more than 25%.

The watch reflects the potential for an upgrade if the transaction is consummated as outlined and Airborne's operations become tied to those of DHL.

Airborne has adequate liquidity with $376 million of cash at Dec. 31, S&P said. The revolving bank credit agreement, which expires in June 2004, provides for a total commitment of $275 million.

Fitch cuts Toys 'R' Us to junk

Fitch Ratings lowered the ratings of Toys 'R' Us Inc. senior notes to BB+ from BBB- and commercial paper to B from F3, reflecting soft operating results and growing competitive pressure from Wal-Mart and Target. The outlook is stable.

Offsetting factors are adequate cash flow and solid liquidity.

Soft operations have exerted pressure on bondholder protection measures. Financial leverage remains high, with adjusted debt/EBITDAR of 4.4x at Feb. 1 compared with 4.1x at Feb. 2, 2002. EBITDAR/interest plus rents of 2.7x in 2002 compares with 2.5x in 2001, Fitch said.

Toys 'R' Us built a solid liquidity position with the issuance of $643 million of debt and equity in 2002 and had $1 billion of cash on hand at yearend. This plus availability on its $685 million long-term bank facility should be more than adequate to finance substantial seasonal working capital needs.

Two debt issues totaling $800 million mature in January and February of 2004 but the company is expected to have sufficient access to capital markets to pre-finance these maturities during 2003.

The outlook reflects a more conservative financial posture and the expectation that there will be no further deterioration in credit measures.

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