Fitch affirms WellPoint Health senior A-, subordinated BBB+ ratings

Fitch on Wednesday affirmed its senior A- and subordinated debt BBB+ ratings on WellPoint Health Networks Inc. and said the ratings maintain a stable outlook. The rating action follows Fitch's review of WellPoint's proposed merger with RightCHOICE Managed Care Inc., parent of Blue Cross Blue Shield of Missouri, in October. The merger is consistent with WellPoint's stated long-term expansion strategy, which focuses on acquiring concentrated enrollment and established provider networks. RightCHOICE's excellent regional franchise, solid management and strong multi-state network represent significant value for the combined organization, Fitch said.

Fitch expects WellPoint to add value to RightCHOICE's existing operations primarily through administrative efficiencies and strong product development capabilities. The transaction also represents another firm step in the geographic diversification of WellPoint's enrollment, which has historically been highly concentrated in California. The company began a significant diversification of its enrollment base with its March acquisition of Cerulean Cos. Inc., the parent company of Blue Cross Blue Shield of Georgia. WellPoint shares lost $2.29 to $112.91.

Fitch rates Chesapeake mandatory convertible at B

Fitch on Wednesday assigned a B rating to Chesapeake Energy Corp.'s new convertible preferred stock and affirmed the BB- rating on the company's senior notes and BB+ rating on its senior secured bank facility.

The outlook is stable. Chesapeake Energy announced on Wednesday it had priced $150 million of convertible preferred stock, following the pricing of $250 million of 8.375% senior notes in late October. Proceeds from the two offerings will be used to reduce Chesapeake's bank facility and to fund three tuck-in acquisitions. Chesapeake is negotiating for three acquisitions of primarily Mid-Continent natural gas reserves for approximately $330 million in cash. If all transactions are finalized and closed, Chesapeake expects to add as much as 287 billion cubic feet equivalent of proved reserves consisting primarily of Mid-Continent developed natural gas reserves with initial average daily natural gas production of around 55,000 million cubic feet equivalent. This would increase reserves by about 18% and daily production by about 14%. The valuation of the three transactions is about $1.06 per million cubic feet equivalent, lower than other recent acquisitions made in this region.

As a result of these transactions, Fitch said Chesapeake's pro forma total debt as of Sept. 30, would be $1.3 billion, an increase of about $60 million from quarter-end. While Chesapeake's present debt on both an absolute and a proven barrel of oil equivalent basis is high for the rating, Fitch said it expects Chesapeake's debt to decrease over the intermediate term from significant hedge proceeds. Debt-to-capital should decrease to about 60% by Dec. 31 from around 67% presently. Chesapeake shares added 6c to $6.17.

S&P cuts Enron credit linked notes to BBB from BBB+

Standard & Poor's on Wednesday lowered its ratings on Enron credit linked notes trusts' credit linked notes from BBB+ to BBB, and placed them on watch with negative implications. The lowered ratings reflect the Nov. 1 rating action taken on Enron, which was based on S&P's belief that Enron's plan to employ asset sales and other means to repair its damaged balance sheet will be insufficient to restore its long-term credit quality to the historical BBB+ level. The watch placements recognize the uncertainties that surround the company and its credit quality in the short run due to the possibility of further unanticipated developments in the capital markets, S&P said. These synthetic issues use a credit default swap that references Enron's senior unsecured debt and therefore the rating on the credit-linked notes will reflect the current senior unsecured rating of Enron. Enron shares dropped 63c to $9.04.

S&P takes AES ratings off watch

Standard & Poor's on Wednesday removed its BB corporate credit and senior unsecured debt ratings on The AES Corp., its B+ rating on AES' subordinated debt, and its B rating on the company's trust preferred securities from watch with negative implications. S&P also removed from watch, with negative implications, its ratings on certain AES subsidiaries whose ratings are linked to AES. These include IPALCO Enterprises Inc. and its affiliate, Indianapolis Power & Light Co. and the local currency and national scale ratings of Eletropaulo Metropolitana Eletricidade de Sao Paulo S.A.. The outlook on all AES, IPALCO and IPL ratings is stable. The outlook on all Eletropaulo ratings is negative, reflecting the outlook of the Brazilian sovereign. The actions follow AES' announcement Wednesday that it had formally withdrawn its $1.4 billion tender offer for 43.2% of the outstanding shares of CANTV, Venezuela's only full-service telecommunications company. The watch reflected S&P's concern about the heightened risk profile for AES that the acquisition of CANTV would have caused. AES shares declined 51c to $12.95.

S&P rates new AIG convertible at AAA

Standard & Poor's assigned its AAA rating to American International Group Inc's zero coupon convertible senior debentures due 2031, with a principal amount at maturity of about $1.57 billion. The convertible debentures are offered with an original-issue discount, with anticipated proceeds of about $1 billion. AIG shares fell $1.88 to $80.97.

Fitch rates new AIG convertible at AAA

Fitch has rated the zero coupon convertible senior debentures issued by American International Group Inc. at AAA, noting a stable outlook. AIG shares fell $1.88 to $80.97.

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