S&P cuts Orbital convertible to CCC-

Standard & Poor's lowered Orbital Sciences Corp.'s $100 million of subordinated convertible notes due Oct. 1, 2002, to CCC- from CCC+ and the corporate credit rating to CCC+ from B.

The ratings were placed on watch with developing implications.

Orbital has approximately $130 million in debt.

The downgrade reflects constrained liquidity and concerns the company will not be able to refinance or repay the convertible, S&P said.

Liquidity of $57 million cash and a $12 million revolver availability at June 30 is likely adequate for day-to-day operations, but not sufficient to make the debt payment in October.

Management is exploring several alternatives to refinance the notes, including issuing new debt or equity, as well as an exchange for debt and equity securities, S&P added, noting that current market conditions may complicate the company's efforts to refinance.

The company has stated in a recent 10-Q filing with the SEC that its ability to continue as a going concern is contingent on successfully refinancing the notes.

Operating performance improved significantly in 2002 after the company sold a number of operations in 2001 and improved operations at the remainder.

Orbital was profitable for the first two quarters of 2002, for the first time in several years. The company has benefited from a contract with Boeing related to the missile defense booster vehicle program and improvements in its satellite operations.

The watch will be resolved when the company has either arranged refinancing or fails to make its principal payment in October.

A failure to make the $100 million principal payment or an exchange offer that does not give noteholders what they are contractually entitled to receive would result in the rating on the notes being lowered to D and the corporate credit rating on Orbital being lowered to SD, or selective default.

If Orbital is successful in refinancing, ratings will likely be raised.

Fitch cuts Williams convertible to B-

Fitch Ratings downgraded The Williams Cos. Inc.'s mandatory convertible and senior unsecured debt to B- from BB-. Short-term ratings remain at B. All ratings remain on negative watch.

The downgrades are based on Fitch's ongoing analysis and reflect a lack of progress in restoring its cash and liquidity profile since the expiry of a $2.2 billion unsecured credit facility on July 23.

Since the lapse of the credit facility, Williams has repaid $175 million of maturing Transco senior notes and posted cash margins to support energy marketing and trading activities of at least $280 million.

As a result, Fitch estimates that its available cash position has dwindled to less than $700 million from around $1.14 billion just one week ago.

With upcoming debt maturities of $300 million on July 31, 2002, and $350 million on Aug. 1, 2002, and the potential for more than $300 million of additional cash collateral calls at energy trading in the near term, Williams' liquidity position is becoming increasingly tenuous.

Given execution risk on near-term asset sales and continued pressure on liquidity, in the absence of securing a new credit facility Fitch anticipates further downgrades of the ratings.

S&P: No change in Calpine credit profile

Standard & Poor's said that neither the recent fall in Calpine Corp.'s (BB/stable) share price, which at times has been as low as about $2.75 per share, nor its announcement last week that it expects a second-quarter profit of 18c to 19c a share will affect its near-term credit profile.

Construction projects remain both on schedule and on budget for the year and Calpine is still pursuing several sale-lease back transactions in California that will improve liquidity.

In addition, Calpine's income stability fund offerings in Canada should yield about C$400 million to C$500 million this year. Calpine is still pursuing some asset sales but may find prices unattractive under current market trends for power assets.

S&P said it also expects Calpine's financial flexibility to be constrained near term. The capital and bank markets are providing very little debt to the power sector, but Calpine's recent $2 billion secured borrowing gives it immediate liquidity.

Although Calpine issued about $800 million in equity earlier this year when its stock price was depressed - $11.54 a share on April 24 - current, even more depressed price levels make another offering unlikely, S&P added.

S&P puts Alpharma on negative watch

Standard & Poor's placed the ratings of Alpharma Inc. on negative watch following the company's downward earnings revision for 2002 due to increasing competition in the animal health sector and a production slow-down at its Baltimore manufacturing facility.

The BB- corporate credit and senior unsecured debt and B convertible subordinated ratings as well as the BB- corporate credit and bank loan and B subordinated debt ratings for Alpharma Operating Corp. are affected.

Alpharma's animal health business accounts for roughly 25% of total revenues. Recent increased generic competition to several swine products have led to lower sales and operating margins at the franchise.

Meanwhile, its U.S. human generics business, which accounts for roughly 20% of total revenues excluding the F.H. Faulding & Co. acquisition, also saw revenues decline due to a product recall in early 2002 and continued production slow-down at its Baltimore plant.

The FDA is currently conducting an inspection of the facility and Alpharma hopes to receive the results sometime in August.

Free cash flows are only expected to be break even for the year.

Due to the late 2001 acquisition of the generic oral solid-dose pharmaceutical business of Faulding, there is more than $900 million of debt outstanding.

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