Moody's puts Cox on downgrade review

Moody's Investors Service put Cox Enterprises, Inc. (senior unsecured at Baa1) and its majority-owned subsidiaries, Cox Communications, Inc. (Baa2 senior unsecured, Baa3 subordinated and P-2 short-term debt ratings) and Cox Radio, Inc. (Baa2 senior unsecured) on review for possible downgrade, affecting $12.5 billion of debt. Cox Enterprises, Inc.'s short-term rating of Prime-2 is confirmed and is not on review.

Moody's said its review will focus on its concern that the "current challenging economic environment and deterioration in the advertising market is hampering the companies' ability to reduce debt leverage significantly within the near-term to levels that Moody's regards as more commensurate with the group's current ratings."

The rating agency will also look at continuing event risk in cable, TV, radio and newspaper businesses over the longer-term.

"Moody's expects that the company will continue to evaluate and take advantage of acquisition opportunities which may prove to provide excellent growth opportunities for the company's shareholders, but depending on how they are financed, could lead to higher financial risk," the rating agency added.

S&P rates Lear convertible at BB+

Standard & Poor's on Wednesday assigned a BB+ rating to Lear Corp.'s $200 million convertible senior notes due 2022. At the same time, S&P affirmed teh BB+ corporate credit rating on Lear, which has about $2.5 billion of debt. The outlook is stable. Financial risk increased following Lear's $2 billion debt-financed acquisition of UT Automotive Inc. in 1999. Although the acquisition strengthened Lear's business profile, S&P said it also resulted in a more leveraged capital structure and weaker cash flow protection. Since the acquisition, Lear has primarily used its free cash flow to reduce debt and the company's total debt to capital now stands at about 65%.

Management expects free cash flow to total $150 million to $225 million in 2002, S&P said, but future debt reduction may be hindered by acquisitions in the consolidating automotive supply industry, or by the current downturn in demand for new automotive vehicles. Lear's strong market positions, efficient operations, and variable cost structure should limit downside risk. Upside ratings potential is limited by an aggressively leveraged capital structure, competitive and cyclical market conditions, and ongoing investment requirements.

Fitch affirms Continental converts at B-

Fitch Ratings on Wednesday removed Continental Airlines Inc. from negative rating watch and affirmed the B- rating for the senior unsecured debt, B- for the convertible notes and CCC for its preferred securities. The current rating outlook is negative.

The action reflects the latest signs of stabilization in Continental's cash flow position that have begun to appear over the last several weeks, Fitch said. After suffering an unprecedented decline in air travel demand following the events of Sep. 11, Continental has reported steady improvements in revenue per available seat mile, a key indicator of financial performance. Still, the current ratings indicate that a high level of financial risk continues to exist for Continental as it seeks to stabilize its operations. Until business traffic returns to more normal levels and rampant fare discounting abates, RASM levels will remain weak in 2002. Furthermore, Continental's high debt levels ($4.6 billion as of Dec. 31) and significant off-balance sheet aircraft lease commitments of roughly $9 billion on a present value debt-equivalent basis will keep fixed financing obligations high well into the growth phase of the next airline traffic cycle, Fitch said.

Continental's effort to maintain an adequate liquidity position in the months since September has been largely successful, the rating agency said. Including the $175 million from the convertible note issue, $172 million from a common stock offering in November and $264 million from the government assistance program, management expects the cash balance at the end of this quarter to lie somewhere in the range of $925 million to $975 million. Given the company's expectation that operating cash flow generation will resume in the second and third quarters as a result of a more robust traffic environment, the liquidity picture appears brighter, Fitch said.

Moody's puts UAL on downgrade review

Moody's Investors Service put the ratings of UAL Corp. and its subsidiaries on review for possible downgrade. A total of $15 billion of debt is affected including United Air Lines Inc.'s senior unsecured rating and industrial revenue bonds at Caa1 and its equipment trust certificates at B1, UAL Corp.'s convertible preferred stock and cumulative preferred stock at Ca, and UAL Corp. Capital Trust I's preferred stock at Caa3.

Moody's said the review follows the vote by the members of the IAM (International Association of Machinists and Aerospace Workers) to reject a proposed new labor contract and authorizing a strike as early as Feb. 20 if an agreement with the airline cannot be reached.

"Although both management and labor have indicated their intention to continue negotiations, the rejection of the contract increases the potential for a labor action that could have severe negative implications for United's operations and as a result, its financial risk profile," Moody's said.

In the event of a strike or labor action, Moody's said the downgrade could potentially be by more than one notch.

S&P says United strike would cause downgrade

Standard & Poor's said it would likely downgrade the ratings of UAL Corp. and its United Air Lines Inc. unit if the mechanics union goes on strike. And the rating agency warned a prolonged work stoppage could force the companies into bankruptcy.

Moody's puts SEMCO on review for possible downgrade

Moody's Investors Service on Wednesday placed under review for possible downgrade the ratings of SEMCO Energy Inc., including the Baa2 rating for the SEMCO Capital Trust II 9% mandatory convertible preferred. Moody's said the review was prompted by concerns about SEMCO's weaker than expected results and higher than expected leverage (debt-to-capital of almost 80%, including preferred stock, the convertible and leases as debt). The company has a new management team that is restructuring its operations and strategy, Moody's noted, saying the review will assess SEMCO's prospects for improving profitability, cash flow and reducing leverage.

S&P affirms Danaher at A+

Standard & Poor's on Wednesday affirmed the A+ corporate credit rating on Danaher Corp., following the decision by Danaher not to pursue its proposed purchase of Cooper Industries Inc. in light of the current difficult business environment and sensitivities with respect to Cooper's asbestos exposure. The outlook is stable.

Fitch rates EOP Operating notes at BBB+

Fitch Ratings on Wednesday assigned a BBB+ rating to the recent offering of $500 million 6.75% senior notes due 2012 by EOP Operating L.P., the principal operating subsidiary of parent and general partner Equity Office Properties Trust. Fitch also affirmed the BBB+ rating for $8.6 billion outstanding senior unsecured notes due 2002 through 2031 and BBB for $864 million outstanding preferred stock of Equity Office Properties Trust. The outlook is stable.

Fitch said the rating balances these strengths against concerns regarding rising vacancy in the U.S. office market, which has been negatively impacted by high levels of new building completions, weak tenant demand, and a sharp increase in sublease availability and tenant failures.

Moody's cuts Elan, keeps on review for possible downgrade

Moody's Investors Service on Wednesday downgraded Elan Corporation plc senior guaranteed debt to Baa3 from Baa2, among other ratings, and kept the ratings on review for possible further downgrade. Moody's said the action is based on an expectation that Elan's near term cash flow relative to debt will be impacted by lower earnings with higher capital expenditures.

In addition, Moody's said it believes the recent SEC investigation into the company's accounting may limit Elan's ability to access new funds to support business development. Moody's noted that Elan reported $594 million in cash flow from operations in 2001 on a U.S. GAAP basis, but the rating agency said it believes that after certain adjustments - including interest on off-balance sheet debt, and any one-time benefits from 2001 product rationalization-the ongoing rate of operating cash flow generation is substantially lower.

Fitch rates Duke Capital notes at A

Fitch Ratings on Wednesday assigned an A rating to Duke Capital Corp. new senior notes, a $500 million issue due 2013 and a $250 million issue due 2032. The rating is based on the collective cash flows of Duke Capital's six business segments, an ample equity base, the good quality of its assets and management team, and the meaningful earnings contribution derived from federally regulated gas pipelines. The ratings also take into account Duke Energy Corp.'s acquisition of Westcoast Energy Inc. for $3.5 billion plus the assumption of about $4.5 billion of debt, which will boost debt leverage above historical levels reflecting the $4.5 billion of assumed debt and about $1 billion of additional bridge financing.

S&P takes Danaher off watch

Standard & Poor's removed Danaher Corp. from CreditWatch with negative implications and confirmed the company's ratings. The outlook is stable. Ratings affected include Danaher's $450 million LYONS and other bonds and bank debt, all rated A+.

S&P said its action follows Danaher's decision to abandon its proposed acquisition of Cooper Industries Inc. because of the difficult business environment and Cooper's asbestos exposure.

Moody's keeps Danaher on review

Moody's Investors Service kept Danaher Corp.'s A2 long-term debt rating on review for possible downgrade.

Moody's noted that although Danaher dropped its planned merger with Cooper Industries, Inc. its acquisition activities have heightened with approximately $900 million having been spent so far this year.

"Additional acquisitions could compound integration risks associated with the recently closed transactions and could require debt financing to supplement cash flow," Moody's said.

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