Moody's rates new IOS notes Ba1

Moody's assigned a Ba1 rating to the proposed $250 million senior unsecured notes of IOS Capital LLC due 2008. All ratings remain under review for possible downgrade, including the 5% convertible due 2007 at Ba2.

The rating reflects a downgrade on May 20, based in part on expectations that continued cautious spending and competitive pricing in the office equipment sector will constrain further improvement in operating profitability, Moody's noted.

This is expected to contribute to modest interest coverage for the non-finance operations in spite of the good progress the company has made in maintaining gross margins and reducing operating costs and non-finance debt levels over the last several quarters.

The continuing review is predicated on IOS Capital raising and applying sufficient proceeds to redeem or defease the $240.5 million of its senior unsecured notes due June 2004. Should the company be successful, it would eliminate the potential December 2003 early maturity of the $300 million bank facility and reinstate the original May 2005 maturity.

Then, Moody's said, the review would then likely be concluded and ratings confirmed at present levels. However, given the potential tightness after March 2004 under its corporate leverage covenant in its $300 million bank facility, the rating outlook would likely be negative.

S&P rates new Cephalon convert B-

Standard & Poor's assigned a B- rating to Cephalon Inc.'s new 0% convertible issues due 2006 and its existing 2.5% convertibles.

The ratings reflect an aggressive growth strategy and leveraged financial profile, mitigated by the growing cash flows from the company's two main pharmaceutical products - Provigil and Actiq, S&P said.

The outlook is positive, indicating the rating may be raised in the intermediate term if Cephalon is successful at increasing cash flows in its core pharmaceutical products and diversifying its drug portfolio.

S&P cuts Loews senior debt to A

Standard & Poor's lowered the senior unsecured ratings on Loews Corp. to A from A+ and its subordinated debt to A- from A, reflecting risk in the U.S. cigarette industry and reduced financial flexibility near term resulting from lower cash balances after the Texas Gas Transmission LLC acquisition from The Williams Cos. Inc. for about $1.05 billion.

Separately, S&P said it also remains uncertain about the level of financial support, if any, Loews could give to insurance subsidiary CNA Financial Corp., which has experienced weak financial performance.

The outlook is stable, as S&P expects Loews to restore cash balances and maintain a strong financial profile and moderate investment strategy despite uncertainties associated with ongoing litigation risk and a highly competitive U.S. cigarette market.

In addition, S&P expects operating performance at CNA will continue to improve and that any future capital contributions by Loews to the subsidiary would be modest.

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