Moody's ups Halliburton view to positive

Moody's Investors Service said it changed the outlook for Halliburton Co.'s Baa1 senior long-term debt rating to positive from stable following the initial public offering of its engineering, construction and services subsidiary KBR, Inc.

The IPO generated $441 million, the proceeds of which will be used largely to repay intercompany subordinated notes to Halliburton. After the IPO, Halliburton will hold 83% of KBR's common stock. Halliburton intends to distribute the rest of its holdings in KBR in a tax free spinoff to shareholders sometime in early 2007 subject to, among other factors, a tax-free ruling from the Internal Revenue Service.

The agency said the positive outlook reflects the benefit of Halliburton's separation from the lower-return businesses of KBR and its expected future insulation from most of KBR's ongoing legal contingencies. Under the terms of the IPO, Halliburton will retain liability for a number of KBR's legal contingencies, including certain guarantees and indemnifications for a variety of letters of credit and surety bonds, a lingering dispute in arbitration over KBR's liability for performance on the Barracuda-Caratinga project in Brazil and the U.S. government's investigations of a KBR affiliate under the Foreign Corrupt Practices Act for illegal payments related to the Bonny Island LNG project in Nigeria.

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