S&P says Ford upsizing won't affect rating

Standard & Poor's said the increase in size of Ford Motor Co.'s cumulative convertible trust preferred securities offering to $4.5 billion from $3 billion will "have no immediate effect on the current ratings on the company."

"If completed, this financing should help to solidify Ford's ratings at the current level by bolstering the company's liquidity," S&P said.

But it added: "Even so, the ratings could still be lowered if at any point during this year Standard & Poor's comes to doubt that Ford is on a trajectory towards at least breakeven pre-tax earnings (before special items)."

Moody's affirms Kimco Realty senior debt at A3, revises outlook to negative

Moody's Investors Service confirmed the senior unsecured debt A3 and preferred stock Baa1 ratings of Kimco Realty Corp., and concurrently revised the outlook to negative from stable following the bankruptcy filing by Kmart Corp. - a major Kimco tenant.

Moody's said the action reflects the potential adverse impact on Kimco's financial profile and coverages from the likely exercise by Kmart of its lease rejection rights as the retailer works through its reorganization process. Kmart currently leases 69 stores from Kimco, and six additional stores from a Kimco affiliate and accounts for about 12% of Kimco's base rents. Thirteen Kmart stores in the Kimco consolidated portfolio are currently vacant, with the leases on those stores being the most vulnerable to rejections. Moody's noted that Kimco could be further affected should Kmart exploit the reorganization process as an opportunity to renegotiate some of its leases in its favor, particularly for those stores that exhibit above-market rents, or have weak sales.

A change in the rating outlook back to stable from negative depends on the successful resolution by Kimco of its Kmart exposure through repositioning rejected space while meeting all of the REIT's non-recourse obligations on Kmart properties, Moody's said. But Kimco's ratings could come under additional pressure should the REIT increase its risk appetite further by expanding its joint venture activities and ancillary business lines such as merchant building and disposition services, without maintaining strong coverage ratios and financial flexibility, Moody's said.

Moody's rates AMD convertible at B3

Moody's Investors Service assigned a B3 rating to Advanced Micro Devices Inc., and confirmed the company's senior implied rating of B2 and senior unsecured of (P)B3, reflecting the company's recently good execution in broadening the end market capabilities of its microprocessor business while advancing processor technology and cycle times, all of which help to compete against the significantly larger Intel Corp. At the same time, a meaningful level of business and financial risk persists, deriving from ongoing weak demand in the personal computer sector, intense microprocessor price competition, significant capital expenditure requirements and execution risk to consistently transition to new technology and manufacturing capabilities and expectations for weak demand, diminished pricing and losses over the next year in its flash memory business, Moody's said. The outlook is stable.

Moody's said the ratings incorporate the expectation that AMD will continue to successfully develop and introduce performance competitive versions of its microprocessor family. In addition to its core consumer, desktop market, where its unit share has increased to approximately 20% from 16% last year, the company appears better positioned to further penetrate the mobile computing and server applications, where the company has not so far participated in a meaningful way.

Notwithstanding AMD's recent market share gains in its core microprocessor business and good manufacturing yields, Moody's noted the business has lost money in the last two quarters and is likely to lose a smaller amount of money for at least another quarter, even assuming continued good manufacturing execution, a smaller than usual seasonal downturn in the first quarter, and stable average selling prices.

The rating agency said that the company's flash memory operations, conducted through three fabrication facilities in a joint venture with Fujitsu, continue to suffer from very weak pricing and weak demand primarily in the networking and infrastructure sectors, but also in the handset area. As a result, flash profits have declined sequentially throughout 2001, with small losses in the last two quarters. Moody's said it expects that profitability in this business will be challenging over the next year as a result of continued weak demand and pricing pressure. Even in this difficult environment, AMD is investing to convert Fab 25 in Austin Texas to a flash production after having been used to make earlier microprocessor product, highlighting its constant reinvestment requirements.

Weaker than expected market conditions, more intense price competition from Intel, or insufficient manufacturing yields could place additional pressure on its liquidity and financial resources. While some elements of capital expenditures are discretionary, the company must continue to invest in performance enhancing and cost minimizing processes and technologies in order to remain relevant in the market over the intermediate to longer term. To this point, as technology nodes proceed to and below 0.13 microns, with increasing use of copper interconnect and silicon on insulator (all of which AMD does or is about to do), and the prospects of 300 millimeter wafer fabs finally approaching, which cost about $3 billion to build, Moody's said it believes that AMD will need to partner with financially strong players who have consistent capabilities in leading edge manufacturing.

S&P rates new AMD convertible B

Standard & Poor's assigned a B rating to Advanced Micro Devices Inc.'s new $500 million convertible senior unsecured notes due 2022 and affirmed its existing ratings on the company including its senior secured bank loan at B+.

S&P said the ratings reflect the challenges AMD faces in executing its business plan in a very competitive market.

AMD's more recent microprocessors have "established good, but second-tier, positions in the consumer and small business personal computer market," S&P noted. "However, the company continues to lack presence in the enterprise customer market and has only a modest position in the high-performance server market."

Dominant competitor, Intel Corp., continues to cut prices very aggressively on mainstream products, pressuring AMD's margins, S&P noted but added that AMD's manufacturing performance remains good.

In flash memories, AMD has a solid position but near-term prospects are weak due to continued stress in communications markets.

S&P downgrades Akamai

Standard & Poor's downgraded Akamai Technologies Inc. including lowering its 5.5% convertible subordinated notes due 2007 to CCC- from CCC. The outlook is negative.

S&P said it cut Akamai's ratings after the company said it is unlikely to achieve EBITDA break-even by mid-2002 and because of weak operating performance and lagging sales growth.

S&P said Akamai has "an unproven business model in the competitive and emerging market for Internet-based content-delivery services, ongoing financial losses, and highly leveraged financial profile."

The rating agency added: "Deteriorating business prospects for Akamai's internet-based customers, which comprise a considerable portion of the company's customer base, add a measure of uncertainty to future operating performance. In addition, lagging information technology expenditures by customers is likely to lead to sales deterioration in the near term and compound management's operational challenges."

Failure to reduce losses in 2002 - EBITDA losses in 2001 were $94 million - will result in lower ratings, S&P added.

S&P downgrades Orbital Sciences

Standard & Poor's downgraded Orbital Sciences Corp. and removed it from CreditWatch where it was placed on Nov. 17, 1999. The outlook is negative. Ratings affected include Orbital Sciences' $100 million 5% convertible subordinated notes due 2002, lowered to CCC+ from B-. The rating was withdrawn on Orbital Sciences' bank line, which is being replaced.

S&P said Orbital Sciences' business diversity is significantly reduced because of divestitures and its financial flexibility is constrained by the need to refinance $100 million of notes coming due in October 2002.

"Orbital Sciences sold numerous operations over several years, using proceeds to support continuing businesses and to pay down debt, and has resolved issues related to failed high-risk business ventures with only moderate cash outlays required," S&P said. "Although the company is much more focused, internal cash generation is expected to be modest in the intermediate term."

S&P rates new Health Management convertible BBB+

Standard & Poor's assigned a BBB+ rating to Health Management Associates Inc.'s new zero coupon senior subordinated convertible notes due 2022.

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