S&P rates Travelers convertible at BBB

Standard & Poor's assigned a BBB rating to Travelers Property Casualty Corp.'s pending 30-year convertible junior subordinated note issue that will underlie a mandatory convertible, totaling $850 million. S&P also assigned an A- counterparty credit rating to the company. The outlook is stable.

The company is expected to demonstrate strong revenue and GAAP earnings growth from its property/casualty businesses in 2002, noted S&P, with a very strong, diversified portfolio of commercial and personal lines businesses as well as strong consolidated earnings, capital strength and liquidity. The group's 2001net income exceeded $1billion, and total equity exceeded $10 billion.

Fitch rates new Qwest notes at BBB+

Fitch Ratings assigned a BBB+ rating to the proposed Qwest $1.5 billion Rule 144A debt issue and affirmed its BBB+ senior unsecured rating assigned to Qwest Corp., the local exchange subsidiary of Qwest Communications International. Qwest's senior unsecured rating was affirmed at BBB and other units of Qwest assigned a BBB senior unsecured rating, including Qwest Capital Funding. The rating outlook is negative.

The ratings reflect materially reduced liquidity following the draw down of Qwest's previously untapped $4 billion bank facility in mid-February to retire maturing commercial paper. Near-term considerations regarding additional action on Qwest's ratings include the resolution of negotiations on its bank agreement and the ability to access the capital markets. The proposed issue will contribute to an improvement in Qwest's near-term liquidity position. Additional near-term steps are likely to include the issuance of equity securities or securities with a high equity content of up to $1.25 billion. Qwest also has board approval to securitize between $500 million and $1 billion in receivables.

S&P cuts Hewlett-Packard to A on Compaq merger

Standard & Poor's lowered the corporate credit and senior debt ratings as well as commercial paper rating on Hewlett-Packard Co., reflecting S&P's view of Hewlett-Packard's business and financial risk profile on the merger with Compaq Computer Corp. S&P's ratings on Compaq Computer Corp. remained on watch with developing implications. The Hewlett-Packard ratings remain on watch with negative implications. If the merger is completed, Hewlett-Packard's ratings will be affirmed with a negative outlook and Compaq's ratings reviewed for upgrade. If the merger is not completed, Compaq's and Hewlett-Packard's ratings will be on watch with negative implications.

S&P said it recognizes the strategic validity of the merger, the improved market position of the combined company, and Hewlett-Packard's strong financial profile for the rating but said those are offset by the heightened level of operational and strategic execution risk inherent in a merger of this size in the highly competitive and rapidly evolving technology market.

Even if the merger with Compaq had not been announced, Hewlett-Packard's ratings would have been lowered to a comparable level, S&P said, because the company's weaker profitability levels and diminished earnings predictability reflect the impact of its computer hardware segments that are currently unprofitable and operate in extremely challenging and competitive environments. While the merger offers the scale and market positions in hardware that could lead to greatly improved profitability, the execution risks are significant, S&P said.

In response, Larry Tomlinson, HP treasurer said: "HP continues to have one of the technology industry's strongest balance sheets with total cash and short-term investments growing $4.3 billion during the last 12 months." As of January, the company's total cash and short-term investments totaled $7.1 billion compared to total short-term and long-term debt of $6 billion and cash generation from operations was strong, totaling $4.8 billion. During the period, inventories were down $2 billion and accounts receivable were down $1.3 billion.

"By merging with Compaq, our balance sheet will become even stronger, with a combined company capable of generating $6 billion annually in free cash flow and with zero net debt," said Tomlinson.

"HP's planned merger with Compaq addresses many of the issues raised by S&P by significantly improving our market position and profitability in key segments of the enterprise computing market and by creating a healthy PC business capable of generating significant cash," he added.

"Moreover, while S&P acknowledged integration challenges as part of their decision, we believe Institutional Shareholder Services' recent report noting that 'half a million man-hours of work have thus far been devoted to integration planning, which surely makes HP-Compaq one of the most exhaustively planned combinations ever,' validates our efforts to ensure a successful integration."

Moody's confirms Danaher at A2

Moody's Investors Service confirmed the A2 senior debt rating of Danaher Corp., including the 0% convertible bonds, reflecting its leading market positions, strong and consistent earnings and cash flow and conservative balance sheet, which was recently strengthened by the issuance of about $400 million of common stock. Also, Moody's assigned (P)A2 senior unsecured, (P)A3 subordinate, and (P)Baa1 preferred ratings to Danaher's new $1.0 billion 415 shelf registration.

Danaher's rating outlook is stable, reflecting Moody's expectation that earnings and cash flows will remain strong despite weakness in end markets, which is expected to continue at least through the first half of 2002. However, if the decline in these end markets is protracted, or if large, debt-financed acquisitions are made, then downward pressure on the company's ratings could result.

Moody's rates new Qwest notes Baa2, still on review

Moody's Investors Service assigned a Baa2 rating to Qwest Corp.'s new offering of $1.5 billion 10-year senior unsecured note issuance and kept the company's ratings on review for possible further downgrade.

Moody's said it expects some of the proceeds from the new offering to pre-fund $800 million of current maturities at Qwest Capital Funding due in July.

The rating agency added that "it remains critical that Qwest obtain a covenant amendment on the $4 billion bank facility before pressure on Qwest's liquidity is truly reduced."

S&P rates new Qwest notes BBB

Standard & Poor's assigned a BBB rating to Qwest Corp.'s new offering of senior unsecured notes due 2012 and confirmed the existing ratings on Qwest Corp. and its parent, Qwest Communications International Inc. The outlook is negative.

Proceeds from the new deal are expected to be used to refinance debt at Qwest Corp. and Qwest Capital Funding Inc., including upcoming debt maturities, S&P said.

S&P noted Qwest has announced plans to reduce leverage through a combination of the issuance of equity-linked securities and asset sales, or the sale of securities associated with assets in 2002. In connection with the possible issuance of equity-linked securities, the company filed a shelf registration with the SEC on Feb. 5, 2002, which has not yet become effective, S&P said.

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