S&P cuts El Paso to BBB-

Standard & Poor's lowered El Paso Corp.'s senior unsecured rating on El Paso to BBB- from BBB, and other ratings along with its units' ratings, to more adequately reflect debt-service coverage from cash flow. All ratings remain on negative watch.

El Paso has about $17 billion in debt.

Of concern is that cash flow from the trading and marketing unit will be minimal, if any, over the next few years due to an increasingly poor environment, S&P said. Also, El Paso has decided to seek to carve away its energy trading book into a new entity, Travis Energy Services L.L.C., in an effort to liquidate its positions.

Notably, El Paso has strengthened itself remarkably well since Enron Corp.'s bankruptcy by lowering its business risk, reducing debt, issuing equity and improving its liquidity.

However, the extreme turmoil in the energy sector has caused a decline in credit quality.

Sizable execution risk exists in El Paso's debt-reduction program. Key is the asset sale program for $4 billion in 2002 and $2 billion in 2003, which is absolutely necessary to offset cash flow shortfall of about $2.8 billion less capital spending of $3 billion and dividend requirements of $500 million in 2003.

Resolution of the watch will depend on greater clarity regarding the ongoing investigation into market manipulation in California, which could cause El Paso's corporate credit rating to be lowered into the BB category, S&P said.

El Paso's liquidity cushion is buoyed by a $4 billion credit facility backstopping minimal commercial paper borrowings, and cash and cash equivalents of $1.3 billion.

Additional means to meet the company's obligations are expected asset sale proceeds of nearly $4 billion through 2003. El Paso should have no difficulty in meeting debt maturities of about $240 million in 2002 and $1.7 billion in 2003.

With the elimination of rating and stock price triggers on all but $300 million of the company's financings, S&P believes that El Paso's liquidity cushion is ample.

Moody's cuts Getronics

Moody's Investors Service downgraded Getronics NV's subordinated convertible bonds to Caa3 from B3 following a profit warning and plans to restructure the issue and extend its maturity profile.

The ratings reflect primarily Moody's estimate of the recovery prospects for investors in a possible financial restructuring.

Also considered were a challenging operating environment with no material improvement expected before 2004, shrinking generation of cash flow and operating profit from 2001, which have become inadequate relative to debt service obligations and maturity profile, and the continuing erosion of its equity base.

The outlook is negative, relating to the possibility of even lower recovery rates following a forced unwinding than from a structured refinancing of the debt and for further deterioration in Getronics' business performance and outlook, Moody's said.

While Getronics continues to expect positive operating profit before goodwill amortization and a free cash flow, the size of these amounts have shrunk to level that creates challenges for debt service and particularly the refinancing of about € 480 million debt maturities in April 2004.

There is no indication of a near-term turnaround in the information communications and technology service business and management focuses on downsizing, cost savings and extending the maturity profile of debt, Moody's added.

At midyear, Getronics had €270 million of cash and expects another € 190 million proceeds from the sale of its U.S.-based government solutions business.

At the same time, it had about € 900 million debt, of which the € 500 million syndicated revolving credit facility and the € 350 million subordinated convertible bond mature in April 2004.

With the updated business outlook the financial covenants on the € 500 million syndicated loan facilities are becoming tight. Getronics refinancing plan relies on the unit sale and timely receipt of the proceeds.

Fitch rates AmerisourceBergen

Fitch Ratings assigned AmerisourceBergen Corp.'s planned $275 million, 10-year senior unsecured notes a BB+ rating, and affirmed its other ratings, including the convertibles at BB.

Proceeds from the issue are expected to be used to refinance current indebtedness including its $150 million, 7.375% senior unsecured notes due January 2003.

The outlook is positive, reflecting better than anticipated financial performance andcredit metrics, plus prospects for continued improvement in the credit profile.

A robust generic drug market and stronger margins lends confidence to the sustainability of recent profitability gains.

For fiscal 2002 ended Sept. 30, operating revenue growth was about 16. Additionally, AmerisourceBergen generated $535 million in cash from operations in fiscal 2002.

Credit metrics met or exceeded expectations, with coverage of 5.7x and leverage of 2.3x, Fitch said.

Total debt at Sept. 30, 2002 was about $1.8 billion, which was 26% of free cash flow.

While cash flows vary due to large working capital commitments, the liquidity position is solid with some $1.7 billion available through various liquidity sources.

S&P confirms FPL

Standard & Poor's confirmed the A corporate credit ratings on energy provider FPL Group Inc. and subsidiary Florida Power & Light Co.

The outlook is negative, reflecting FPL's ability to secure construction financing, concerns about meeting performance forecasts and FPL Group Capital's exposure while bringing merchant plants on line in a depressed market.

FPL Group has about $6.8 billion in outstanding debt. Subsidiaries include Florida Power and Light and FPL Group Capital Inc.

The watch listing was removed as the acquisition of an 88% share of the 1,161MW Seabrook nuclear facility in New Hampshire was financed and closed, providing clarity regarding the capital structure, S&P said.

Ratings incorporate a stable, regulated utility located in the growing Florida markets, increasing business risk due to the growing merchant energy portfolio, adequate credit protection measures coupled with high leverage relative to financial benchmarks and significant capital needs.

Credit protection measures are adequate for the current rating.

At yearend 2001, adjusted consolidated funds from operations interest coverage are greater than 7.5x, reflecting several nonrecurring items.

Forecasts indicate adjusted funds from operations interest coverage will be in excess of the 4.7x to 5.3x historic levels, S&P said.

Adjusted total debt-to-capital was 55% in 2001, which is higher than expected for this rating level. According to the company, leverage will begin to decline in 2005 when the proceeds from the conversion of $1.06 billion of equity units to equity will be used to reduce corporate debt.

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