Moody's cuts Hilton long-term debt to Baa1

Moody's downgraded the long-term senior unsecured debt ratings of Hilton Group plc to Baa2 from Baa1, reflecting the still uncertain pace and sustainability of recovery in occupancy rates and revenue per available room (Revpar) rates, in the currently difficult trading environment, which are critical to the group's ability to continue to improve operating cash flow. The reduction also takes into account the group's relatively high lease adjusted leverage, which has risen over the last year, and which is likely to remain at levels more consistent, in Moody's view, with the Baa2 rating category. The rating outlook is stable reflecting the solid business profile of the group, the stable cash flow generated by the betting and gaming business and its conservative management.

Although there have been clear signs of recovery in the fundamental industry indicators and specifically for Hilton's business, Moody's said it factored into the rating action a slower than originally anticipated recovery in business, which may cause the company to operate under relatively weak debt protection ratios for longer than previously expected.

Moody's rates Prudential CP at Prime-2

Moody's assigned a Prime-2 short-term debt rating to Prudential Financial Inc.'s (A3 issuer rating) commercial paper program. The rating is based primarily on the company's good earnings capacity, adequate capitalization relative to balance sheet and operational risks, well-known brand name, access to dividends and interest from its subsidiaries and diverse short-term funding sources. Furthermore, Moody's said it believes the company has sound liquidity contingency management plans.

The strengths are offset primarily by the weak outlook for Prudential Securities, the challenge of improving the cost structure in the company and earnings volatility related to the operations of Prudential Property and Casualty, Moody's said, noting that the company will be challenged to balance the growth in fee-based and spread based products.

Fitch revises Williams outlook to negative

Fitch Ratings affirmed the Williams Cos. Inc. BBB senior unsecured notes and debentures and F2 commercial paper ratings, and pipeline subsidiaries debt was affirmed at BBB+. But Fitch revised the rating outlook to negative from stable, reflecting challenges as Williams works to achieve its targeted year-end 2002 debt reduction plan. In addition to the more difficult and volatile capital market environment currently plaguing the energy sector, Fitch noted a near-term concern over the possibility that Williams Communications Group may file bankruptcy.

Williams' financial exposure to WCG is about $2.2 billion, consisting of a contingent equity obligation under the $1.4 billion WCG Note Trust and the guarantee of a $750 million synthetic lease, Fitch noted. While these obligations have already been factored into Fitch's rating analysis, payment under these transactions could be accelerated under a bankruptcy scenario, thus placing greater than anticipated liquidity pressure on Williams in the near term.

Williams is in the process of renegotiating terms of the WCG Note Trust transaction in a manner, which, if ultimately approved, would extend payment of principal to the original maturity date of March 15, 2004, even in the event of a WCG bankruptcy. While Fitch believes that Williams currently maintains sufficient financial flexibility to fulfill its WCG obligations if necessary under a downside scenario, a favorable outcome of these negotiations would enable Williams to avoid near term liquidity pressures. Moreover, Williams's underlying business fundamentals remain sound with its core gas pipeline and integrated energy service businesses continuing to generate stable earnings and cash flow measures.

Moody's confirms Hanover Compressor

Moody's confirmed the Hanover Compressor and Hanover Equipment Trust ratings, including the $86 million of non-guaranteed trust convertible preferreds at B1 and the $192 million of 4.50% senior convertible notes due 2008 at Ba3. The rating outlook is negative.Structural issues shape the ratings, Moody's said. Hanover is a non-operating parent company with operating assets held by Hanover Compression LP, the HET synthetic lease entity and three bank-funded synthetic lease entities.

Hanover's disclosure issues and risks seem manageable for the ratings if Hanover reduces leverage, Moody's said. The ratings benefit from durable cash flow and a sound business position and growth outlook. Holding spending to cash flow, the 2002 $250 million capital budget funds $180-$190 million of growth outlays to grow compression horsepower by some 9%. The ratings have always incorporated debt plus leases, on- or off-balance sheet. Covenant flexibility seems sound. The seasoned new chief financial officer and two key board additions add balance to formulation of business, funding, and accounting strategies previously been shaped by a range of objectives.

The negative rating outlook reflects combined pressures of a strong growth bias, leverage and recent rise in debt, weakened though recovering equity, and need to absorb shareholder lawsuits and resolve SEC matters. The outlook is negative pending a material decline in consolidated leverage, release of fourth quarter 2001 results and improving consolidated returns, Moody's said. Consolidated debt (includeing gross leases and unconditional debt guarantees) is now roughly $1.850 billion, with bank debt rising $50 million since yearend 2001. In 2002, EBITDAR must cover roughly $130 million in funds service - $91 million in lease payments, $33 million in interest, $6.4 million in convertible TIDES distributions.

With the Aug. 1 upgrades to Hanover debt, Moody's said it noted that leverage needed to fall to protect the ratings. The ratings would not absorb flat to rising leverage to fund growth or other obligations until Hanover's equity recovers to levels tolerable for itto issue equity, Moody's said, adding that the ratings may be downgraded if Hanover's strategies and business model cannot reduce leverage as Hanover plans.

Moody's ups CommScope convertibles to Ba3

Moody's raised CommScope Inc.'s ratings, including the $172.5 million 4% convertible subordinated notes due 2006 to Ba3 from B3, reflecting structural as well as contractual subordination to bank facility and other obligations of CommScope's North Carolina operating subsidiary. Moody's said it does not expected to maintain rating coverage of CommScope's $350 million guaranteed senior secured revolving credit facility, all of which remains available. The rating outlook is stable.

The upgrade is based on revised terms of CommScope's fiber optic cable venture with Lucent and Furukawa, particularly in reference to CommScope's issuance of equity to Lucent as its exclusive funding vehicle in the absence of incremental debt borrowings, and taking into account the more modest debt that could potentially be incurred if the company subsequently repurchased its shares from Lucent. However, the net effectof the sequence of ratings actions undertaken since September is a downgrade of CommScope's previously assigned investment grade ratings, Moody's noted.

Fitch affirms AOL senior debt at BBB+

Fitch Ratings affirmed the BBB+ senior unsecured and F2 commercial paper ratings of AOL Time Warner Inc.and AOL Time Warner Entertainment Co. LP, reflecting AOL's significant subscription based revenue, leading market positions in core businesses, unparalleled brands, content and distribution network in addition to its strong financial profile and liquidity position. It also reflects the company's exposure to advertising, albeit less significant relative to industry peers as advertising and commerce is less than 25% of total revenue.

Based on management's growth assumptions for EBITDA in 2002, it is anticipated that leverage and coverage ratios will remain within the target range of approximately 3.0 and 4.0 times, respectively. The rating does not incorporate a material debt-financed transaction in 2002 other than AOL Europe but does incorporate an analysis of AOL's off-balance sheet transactions and the fact that AOL's adoption of FAS 142 and resulting write-down of goodwill does not impact AOL's credit profile, Fitch said, noting that AOL management continues to remain committed to its BBB+ rating.

The rating outlook remains stable, Fitch said, incorporating a belief that the impact on AOL from the weak economy and advertising market will continue to be less severe compared to industry peers that depend more heavily on advertising revenues. Although the slowdown in the advertising market has clearly impacted the company's operations, Fitch also recognizes the competitive advantage the company has with advertisers due to its many premier brands, large scale and cross-medium platform.

Moody's cuts New World outlook

Moody's Investors Service lowered its outlook on New World Infrastructure Ltd. to negative from stable and confirmed the company's ratings, concluding a review begun on January 31, 2002. Ratings affected include New World's $173 million 1% convertible bonds due 2003.

Moody's said the confirmation follows New World's announced it will no longer proceed with a internal reorganization with its parent New World Development Co. Ltd. in the fixed-line telecommunications businesses.

However, Moody's says the rating assumes infrastructure investments will continue to produce a significant majority of New World's recurring cashflow; the outlook change to negative reflects Moody's growing concern about New World's increasing focus on the technology sector as evidenced by its growing investments in the sector.

S&P rates Adaptec convertibles B-

Standard & Poor's assigned a B- rating to Adaptec Inc.'s $250 million convertible notes due 2007.

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