Fitch rates Ford convertible preferred at BBB-

Fitch assigned a BBB- rating to Ford Motor Co.'s $4.5 billion 6.50% cumulative convertible trust preferred. Ratings on Ford's senior unsecured debt recently downgraded and commercial paper that were recently affirmed remain unchanged at BBB+ and F2, respectively, Fitch said, and the rating outlook is negative. Fundamental factors affecting the industry as well as factors specific to Ford culminated in operating under-performance and a continuing decline in Ford's competitive position. In a global automotive market with structural over-capacity, Ford had seen its competitive position in its core North American market deteriorate versus a revitalized General Motors and foreign competition which continue to increase share and North American capacity. Intense price discounting and share erosion along with other operating factors have undermined Ford's cash generating abilities.

While Ford's current automotive cash balances of $15.1 billion plus another $2.6 billion of VEBA pre-funding, (leading to a positive $3.9 billion net liquidity position at Dec. 31) are healthy at this time, key risk factors weigh heavily looking forward, Fitch said. Current industry dynamics with heavy incentive spending and market share trends favoring foreign brands and GM most recently in North America seem unlikely to abate through 2002. This will challenge Ford to reverse recent operating losses. Also, execution risk of the recently announced restructuring plan which is to gain traction over the coming years and fully realized by the mid-decade remains a prominent credit concern.

Over the longer-term, however, Ford's brand strength, research and development capabilities, production assets, strong distribution network and capital investment capacity position the company to remain a viable competitor in the global automotive industry, Fitch said.

Moody's upgrades Amazon ratings, convertible to Caa2

Moody's Investors Service upgraded Amazon.com Inc., including the convertible subordinated note to Caa2 from Caa3, reflecting expectations that the company has sufficient cash on hand to finance its operations for the medium term and will not be required to access the capital markets in 2002.

The upgraded ratings reflect improved operating measures and sharply lower cash drain from operations at Amazon, Moody's said. At the same time, Moody's noted that Amazon's spending to develop new business lines and maintain existing initiatives has fallen as a percentage of sales and will likely continue to fall in absolute terms as the company matures. As a result, Moody's said, Amazon's cash drain has declined substantially and the $1 billion of cash on the balance sheet at the end of 2001 will be sufficient to finance year-end vendor payables and finance cash needs through the medium term. Barring unexpected changes to corporate strategy, such as acquisitions or renewed expansion of business lines or physical plant, Moody's sid it does not believe that Amazon will need to access the capital markets to finance ongoing operations over the next two years.

Still, Moody's noted the ratings reflect Amazon's high leverage, resulting from its decision to raise large amounts of early capital primarily through debt rather than equity, and from accumulated losses. Moody's said Amazon could become cash flow neutral in the next year. Future rating actions will depend on Amazon's ability to maintain improving operating trends and demonstrate the ability to generate positive free cash flow, Moody's said.

Fitch rates Solectron's new notes at BBB-

Fitch on Friday rated Solectron Corp.'s new $500 million of seven-year senior notes at BBB-. The company's BBB- senior bank credit facility, BBB- senior unsecured and BB+ mandatory convertibles ratings were all affirmed, and Fitch said the rating outlook remains negative.

The ratings balance the company's current cash position and the effect of the changes in its capital structure on liquidity, financial flexibility and credit protection measures, which result partially from the portion of equity credit assigned to the mandatory convertibles against the prolonged significant reduction in demand from Solectron's customers and the company's continued declines in operating performance, Fitch said. The ratings also consider Solectron's leading position in the electronic manufacturing services industry, actions to resize its cost structure against revenue prospects, solid cash position, diversity of end-markets and geographies and adequate liquidity. The company continues to focus on managing working capital in a difficult environment and has generated positive cash flow from operations in recent quarters. It is anticipated that capital spending will remain at significantly lower levels due to reduced capacity utilization as a result of the industry downturn.

Fitch said the negative outlook indicates that if adverse market conditions persist, if outsourcing contracts do not materialize from new customers, if the company makes significant cash acquisitions or if it is unsuccessful in execution of planned cost reductions, facilities rationalizations and restructuring actions, the ratings may be further impacted. The deep downturn in the market for the electronic end products has significantly delayed expected improvement in credit protection measures, particularly the company's high leverage. Solectron has communicated to investors a continuing series of reduced expectations and has taken restructuring actions to resize the company appropriately. Despite the downturn, the company has continued to make acquisitions to strengthen its portfolio of capabilities for the eventual industry recovery. As a result of these factors, credit protection measures have continued to erode, Fitch said.

Moody's confirms Fleming ratings, convertible at B2

Moody's Investors Service on Friday confirmed all ratings of Fleming Cos. Inc., including the $150 million 5.25% convertible senior subordinated notes due 2009 at B2, and said the rating outlook is stable. Confirmation of the ratings, in spite of the Jan. 22 bankruptcy filing of Kmart Corp., reflects the success of Fleming's efforts to minimize adverse financial consequences while continuing with its business plan, Moody's said. The stable outlook considers the rating agency's belief that Fleming's ratings will be constrained until the status of Kmart becomes clearer. Fleming has minimized the impact on its operations, balance sheet and business plan, but Moody's said it believes that significant debt protection measure improvements resulting from higher revenue and greater efficiencies cannot reliably be expected over the intermediate term. At a minimum, Moody's said it anticipates that Fleming will lose the distribution business of several hundred Kmart stores as the bankruptcy process evolves. Since the lowest volume stores for Fleming comprise those likely to be closed, Moody's expects that cash flow generation and debt protection measures will only be modestly impacted. Nevertheless, the uncertainty of the Kmart franchise represents a setback for Fleming's longer-term business plan.

Moody's puts American Tower on review for possible downgrade

Moody's Investors Service on Friday placed the ratings of American Tower Corp. and subsidiaries on review for possible downgrade, including the B3 rating for the company's 2.25% convertibles due 2009, 6.25% convertibles due 2009 and the 5% convertibles due 2010. Moody's also withdrew the B1 rating on the company's Term Loan C due to its cancellation.

Moody's said it is concerned about the potential softness in the demand for tower space from the major wireless carriers in the U.S. given the current outlook for slower subscriber growth going forward, and this concern applies to all the independent tower operators. In the case of American Tower, the combination of a potentially weak business environment combined with the reduced liquidity due to the cancellation of the recently received commitment for $250 million of incremental bank debt prompted the review, Moody's said. The incremental term loan had been viewed as providing the company with important operating and financial flexibility. Moody's said it intends to discuss with management how the company plans to manage through what could be a prolonged soft demand environment without the benefit of the liquidity that was to be provided by the cancelled term loan, as well as to review business conditions generally.

S&P rates new Sunrise convertibles B-

Standard & Poor's assigned a B- rating to Sunrise Assisted Living Inc.'s offering of $100 million 5.25% convertible subordinated notes due Feb. 1, 2009 and confirmed the company's existing ratings including its B- subordinated debt ratings. The outlook is positive.

S&P said its assessment of Sunrise reflects the company's success as a leading provider in the assisted-living segment of the long-term care market offset by its aggressive-debt usage.

Despite rapid expansion, Sunrise continues to post "same-store" occupancy rates of more than 90% and new facility fill-up rates of 40%, contributing to net income, S&P noted.

"Attractive site locations and the company's policy of owning and building, rather than leasing, have provided Sunrise the ability to sell significantly appreciated assets to fund growth," S&P added.

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