Fitch rates Watson convert BBB-

Fitch Ratings assigned a BBB- rating to Watson Pharmaceuticals Inc.'s new $500 million of convertible contingent senior debt due 2023.

Also, Fitch rated the company's proposed $300 million five-year senior revolving credit facility at BBB-.

The outlook is positive.

The new $300 million five-year facility contains less restrictive financial covenants than those in the existing credit facility, Fitch noted

Watson's rating and outlook are supported in part by continued strategic direction of focusing on branded drug products and increased breadth of the generic product portfolio and development pipeline.

At the end of 2002, leverage as measured by total debt-to-EBITDA was 1.1x and interest coverage as measured by EBITDA-to-interest incurred was about 16.8x.

Watson had cash and cash equivalents of around $230 million and a net debt position of $185.1 million at Dec. 31.

S&P rates Watson convert BBB-

Standard & Poor's assigned a BBB- senior unsecured debt rating to Watson Pharmaceuticals Inc.'s $500 million of convertible senior debentures due 2023, and a BBB- rating to its proposed five-year, $300 million senior unsecured revolving credit facility.

The outlook remains stable.

The ratings reflect a solid position in the generic and specialty pharmaceutical business and the expectation that it will maintain a strong financial profile, offset by high level of competition in generic drugs and uncertain success in expansion efforts.

Watson has become increasingly acquisitive, but financial protection measures that are strong for its ratings, S&P said.

Pro forma for the convertible, funds from operations to total outstanding debt is a healthy 41%. S&P expects debt to capital to remain below 35%.

S&P cuts Toys 'R' Us

Standard & Poor's lowered the ratings of Toys 'R' Us Inc., including cutting its senior unsecured debt to BBB- from BBB. The outlook is stable.

The downgrade reflects weaker-than-expected credit protection measures in 2002 due to poor profitability, S&P said.

Although credit protection measures improved in 2002, S&P had expected EBITDA coverage to be at least 3.5x and total debt to EBITDA to be about 3.5x. In 2002, EBITDA to interest improved to 3.3x from 2.9x in 2001, and total debt to EBITDA declined to 4.2x from 4.5x in 2001.

Liquidity is provided by a $300 million 364-day unsecured credit facility that matures in August 2003 and a $685 million unsecured credit facility that matures in September 2006. The company had no borrowings under the facilities and $889 million of cash and cash equivalents on the balance sheet as of Feb. 1

Considering diverse sources of liquidity, financial flexibility is good, despite heavy maturities in 2004. But S&Ps expects the company will take steps to refinance the $840 million of debt that is due in 2004 as maturity dates get nearer.

Moody's puts Provident on review

Moody's Investors Service put the ratings of Provident Financial Group Inc., including the 9% mandatory at Ba1, on review for possible downgrade following its announced restatement of operating results for 1997 through 2002.

Although the earnings restatement results in a decline in equity, capital ratios remain healthy in Moody's view.

S&P cuts HealthSouth to BB-

Standard & Poor's lowered the ratings of HealthSouth Corp. including cutting its senior debt to BB- from BB and subordinated debt to B from B+ in response to weaker-than-expected operating results and significant charges in fourth quarter.

The ratings remain on negative watch, reflecting an uncertain liquidity position as the company seeks an amendment on its bank facility.

S&P confirms Baxter ratings

Standard & Poor's confirmed the ratings of Baxter International Inc. and assigned an A senior unsecured debt rating to its proposed $500 million senior unsecured notes due in March 2015.

Proceeds from the proposed notes are expected to be used to reduce existing debt, creating additional capacity for Baxter to meet a probable $800 million bondholder put on its convertibles in June.

The outlook is stable.

In 2003, cash flow benefits are expected from continued sales growth in the bioscience and medication delivery lines and from divestiture of the renal services operations. The ratings accommodate prudently timed ESOP-related share repurchases in the future.

S&P cuts Fiat to junk

Standard & Poor's downgraded Fiat SpA to junk, cutting its short-term rating to B from A-3 and assigning a BB+ long-term corporate credit rating. The ratings were removed from CreditWatch with negative implications and assigned a negative outlook.

S&P said the long-term rating on Fiat reflects its participation in industry segments that are cyclical and in the midst of rapid consolidation, as well as the group's weak cash flow generation prospects and its aggressive financial leverage.

The downgrade follows Fiat's announcements that it will sell two relatively well performing businesses. Through the imminent sale of these businesses, Fiat will reduce its ongoing earnings and cash flow generating ability. Moreover, the planned conversion to equity of €3 billion ($3.3 billion) of intragroup loans to its problem-plagued auto unit, Fiat Auto Holding BV, puts in further doubt Fiat's ultimate ability to receive value for its investment in Fiat Auto, S&P said.

S&P added that it does not believe Fiat's credit measures will return to levels appropriate for an investment-grade rating in the foreseeable future.

The negative outlook reflects the possibility of a further downgrade should the negative free operating cash flow at Fiat Auto exceed its impending capital infusion, or should Fiat's performance otherwise lag management's publicly stated targets, S&P said.

Moody's puts Provident on review

Moody's Investors Service put Provident Financial Group Inc and subsidiaries on review for possible downgrade including its senior debt at Baa3 and preferred stock at B1.

Moody's said the review is in response to Provident's announcement that it restated operating results for years 1997 through 2002. During those years, net income was overstated by a total of $70.3 million.

Moody's said the review will examine the adequacy of Provident's restated core earnings in providing protection to creditors when related to Provident's current risk profile. The review will also focus on Provident's systems and procedures, an area that Moody's had perceived to have improved in recent years.

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