Moody's ups American Tower liquidity rating

Moody's raised the speculative-grade liquidity rating of American Tower Corp. to SGL-3 from SGL-4 based on the successful $420 million of 12.25% senior subordinated discount notes due 2008 issue plus covenant and amortization relief from its secured bank lenders.

The upgrade also was based on the achievement of positive free cash flow in 4Q02 and Moody's expectation that this will continue in 2003.

Proceeds from the note issue have been used to repay $200 million of term loans, and the balance has been placed into a segregated proceeds account that can be accessed to repay debt, including retirement of its 2.25% convertible notes.

Moody's noted that American Tower has the option of redeeming the convertibles with common stock or cash, and if stock was used then cash in the proceeds account must be used to repay other debt by June 30, 2004.

Importantly, American Tower was able to get covenant and amortization relief from its bank group in conjunction with its latest capital raising.

The maximum leverage ratio permitted under the credit agreement, which excludes parent debt, was increased to 5.75x at 4Q03 and 4.75x at 4Q04, from 4.75x and 3.75x respectively. Also, 2004 term loan amortization was reduced by $60 million in 2004 to $129 million from $189 million.

Moody's ups New World review to positive

Moody's said it has changed the rating review on the Ba3 1% convertible bond of New World Infrastructure Ltd. from direction uncertain to positive following the company's announcement that its restructuring has been completed.

Moody's understands conditions precedent for the bridging bank financing have been satisfied and that the loan has been drawn by NWS Holdings Ltd. to fund the acquisition of infrastructure assets from NWI.

Moody's also noted that NWI has sent a notice to fully redeem the convertible.

S&P rates Quanta Display convertibles B

Standard & Poor's assigned a B rating to Quanta Display Inc.'s $180 million convertible bonds due 2008. The outlook is stable.

S&P noted that the convertibles are rating lowered than the B+ corporate credit rating due to the amount of secured debt held by Quanta Display.

Quanta Display's ratings reflect the highly volatile and capital intensive industry risks, the company's short operating history, and limited market position, S&P added.

These weaknesses are partially mitigated by its strong relationship with its parent, Quanta Computer Inc., and technology support from Sharp Corp..

Quanta Display manufactures and assembles thin film transistor liquid crystal display (TFT-LCD) panels, principally for use in notebook personal computers and LCD monitors. This industry is characterized by high cyclicality, intense competition, rapid technological change, and capital intensity.

Quanta Display had a net income of NT$1.2 billion in the first three quarters in 2002. However, as the price of TFT-LCD panels has continued to fall since the third quarter of 2002, the company revised its net income target for the full year ended Dec. 31, 2002 down to only NT$27 million. The company also forecasts a net loss of NT$2.5 billion in 2003 in view of the depressed price of TFT-LCD panels.

Despite the forecast net loss, high depreciation should enable EBITDA interest coverage to remain at 8x in 2003, S&P said. The company's ratio of funds from operations to total debt is expected to be about 15% to 20% in 2003, depending on new share offering plans in that period.

S&P rates Inco convertibles BBB-, BB+

Standard & Poor's assigned a BBB- rating to Inco Ltd.'s planned $250 million convertible debentures due 2023 and a BB+ rating to its $250 million convertible subordinated debentures due 2052. S&P also confirmed Inco's existing ratings including its corporate credit rating at BBB-. The outlook is stable.

Inco's ratings reflect the company's position as a leading nickel producer with a strong financial profile stemming from its large, low-cost mines and its moderately leveraged capital structure, S&P said.

S&P rates William Lyon notes B-

Standard & Poor's assigned a B- rating to William Lyon Homes' new $200 million senior unsecured notes due 2013 and confirmed its existing ratings including its senior unsecured notes at CCC+. The outlook is stable.

The rating actions acknowledge the company's steady improvement in its homebuilding operations, highlighted by improving profitability and cash flow, S&P said. The company's leverage, while high, has remained stable, and historically constrained financial flexibility will improve with the proposed offering, as secured debt levels decline and overall maturities will be extended.

These improvements are modestly countered by a somewhat complex financial profile, due to reliance on joint ventures to finance a meaningful portion of active communities under development.

The company has long ranked among the larger builders on the West Coast, but has always been highly leveraged. A sizable inventory write-down in 1997 (which at the time represented approximately 20% of inventory) eliminated the company's book equity base.

Covenants related to the company's existing 12.5% senior notes required William Lyon to repurchase portions of its public senior notes and also restricted the company's ability to incur additional on-balance sheet secured indebtedness.

With financial flexibility constrained, management turned to off-balance sheet joint ventures as a way to pursue the acquisition of better-positioned land using, non-recourse financing. These off-balance sheet ventures are, in the aggregate, conservatively leveraged at 38%, which is substantially less leveraged than the parent. The joint ventures have been very profitable, and income from the joint ventures accounted for 43% of operating income in 2002.

As on-balance sheet homebuilding operations have improved, William Lyon has reduced it reliance on the joint ventures, managing to increase the proportion of activity, which is financed on-balance sheet, S&P noted.

At year-end 2002, the aggregate size of the joint ventures ($266 million in assets) has become smaller relative to that of the parent ($552 million, net of investment in the joint ventures), which compares to $252 million and $280 million, respectively, at the end of 2000.

Moody's rates Inco convertibles Baa3, Ba1

Moody's Investors Service assigned a Baa3 rating to Inco Ltd.'s planned $250 million senior unsecured convertible debentures due 2023 and a Ba1 rating to its $250 million subordinated convertible debentures due 2052. The outlook is stable

Moody's said the ratings reflect Inco's favorable cost profile, strong operating capability and long lived reserves.

Focus on productivity, investment discipline and cost reduction has positioned Inco to better weather cyclical downturns in the nickel industry, the rating agency noted. A consideration in the rating is potential balance sheet stress should the Voisey's Bay and Goro projects have significant overlapping development, and the technological, environmental and permitting risks inherent in any mining project.

The rating acknowledges the benefits of the extension in the tenor of Inco's debt profile as a result of the new issuance, Moody's added. This is expected to contain cash requirements for debt repayment during the development of the Voisey's Bay and Goro projects. However, Inco's leverage to the price of nickel and the importance of fundamental conditions in the nickel market remain critical factors in the rating.

The stable outlook reflects Moody's expectation that Inco will continue to manage its capital investment requirements within the overall context of maintaining a prudent capital structure. An important factor in the outlook is Inco's strong cash position and the actions it has been taking to lengthen its debt maturity profile in light of expansion plans.

In addition, fundamentals in the nickel industry show encouraging signs and supply and demand factors are in better balance than for other metals, Moody's said.

Fitch rates LNR convertibles BB-

Fitch Ratings assigned a BB- rating to LNR Property Corp.'s new $200 million 5.5% contingent convertible senior subordinated notes.

Fitch said it views the issuance as constructive as it adds to LNR's unsecured capital base and adds another level to the company's funding diversity.

The yield of the notes, at 5.5%, is significantly lower than LNR's existing senior subordinated debt. Additionally, the long tenor of the notes will push LNR's weighted average debt maturity out to 4.5 years.

Fitch views the use of proceeds as neutral from a rating perspective. LNR announced that approximately 50% of the proceeds will be used to repurchase stock, an action that will dilute unencumbered assets. While LNR's stock buy back is consistent with is repurchase program, Fitch is, in general, more comfortable with the redemption of equity through retained earnings than the use of incremental leverage.

Fitch has noted weaknesses in the composition of LNR's unencumbered asset base as it includes significant repositioning property and partnership equity components. However, LNR's internal capital formation rate combined with the partial use of proceeds to repay a mix of senior unsecured and secured debt help to offset concerns.

Fitch raises Watson outlook

Fitch Ratings raised its outlook on Watson Pharmaceutical Inc. to positive from negative and confirmed its ratings including its BBB- senior unsecured and bank loan ratings.

Watson's strategic direction of focusing on branded drug products with less emphasis on the generic business continues to be a priority as demonstrated most recently by the Feb. 26 FDA approval of the internally developed Oxytrol product, the oxybutynin transdermal patch for over-active bladder, Fitch noted. Also, the October 2002 in-licensing agreement with Ortho McNeil regarding three oral contraceptive products and the February 2003 acquisition of the Novartis pain management products - Fiorinal and Fioricet, also strengthens the branded drug business.

Fitch said it anticipates that Watson will continue to strengthen the branded drug offering through internal research and development, product acquisitions and licensing agreements. The revenues and earnings stemming from branded (and branded generic) products offset volatility of revenues and earnings inherent with the generics business, improving the credit profile of the company.

Additionally, Fitch recognizes that Watson successfully addressed current good manufacturing practices compliance concerns with FDA, continued to reduce the debt load, and increased the breadth of the generic product portfolio.

Fitch concerns regard the volatility of revenues derived from the generics business (representing approximately 45% of total company revenues), the impact of aggressive competition in the oral contraceptive market, the risk of large acquisitions, and the effect to operations of continued consent decrees.

Watson had cash and cash equivalents of approximately $230 million and a net debt position of approximately $200 million at the end of 2002. Leverage as measured by total debt-to-EBITDA was 1.1 times and interest coverage as measured by EBITDA-to-interest incurred was 16.8x at Dec. 31, 2002, Fitch said.

Fitch confirms CenterPoint Energy's ratings

Fitch Ratings confirmed CenterPoint Energy Inc. and its subsidiaries CenterPoint Energy Houston Electric LLC and CenterPoint Energy Resources Corp. The outlook remains negative.

The confirmed ratings include: CenterPoint Energy's senior unsecured debt at BBB-, unsecured pollution control bonds at BBB-, trust originated preferred securities at BB+ and zero premium exchange notes at BB+; CenterPoint Energy Houston Electric's first mortgage bonds at BBB+ and $1.3 billion secured term loan at BBB; and, CenterPoint Energy Resources' senior unsecured notes and debentures at BBB and convertible preferred securities at BBB-.

The confirmation follows the company's announcement that it had reached an agreement with its lenders to restructure terms under an existing $3.85 billion credit facility, including extending the maturity to June 30, 2005 from Oct. 10 and eliminating mandatory commitment reductions. In return, the company has agreed to seek SEC authorization to pledge its 81% interest in the capital stock of Texas Genco Holdings Inc. as collateral.

"In analyzing the impact of the new bank agreement and the likely pledge of TGN capital stock to those lenders upon CNP's unsecured bondholders, Fitch believes that the issue of structural subordination is largely offset by the removal of near-term refinancing risk, as well as the fact that the value of the pledged stock represents less than 5% of total consolidated assets. Moreover, unsecured bondholders and bank lenders will continue to share equally in the residual value of both CNP Electric and CNP providing meaningful asset coverage for both secured and unsecured creditors," Fitch explained.

Underlying ratings reflect the weakness in the company's post-restructuring credit profile offset by low business risk and the prospects for de-leveraging by 2005.

The company's negative outlook remains in place since Fitch believes that the company needs to de-leverage and reduce dependency on bank debt, Fitch added.

CenterPoint Energy Resources negative outlook reflects the need to refinance a fully drawn $350 million revolver by March 31. A $350 million bridge loan is available if the company is unable to place capital market bonds.

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