S&P rates new GM convertible at BBB+

Standard & Poor's affirmed its ratings on General Motors Corp. following the company's announcement of a proposed $2.5 billion issue of convertible senior debentures due 2032. S&P rated the new convertible at BBB+. Completion of the offering would be a modestly positive development, in S&P's view. GM's gross liquidity would be bolstered and the issue ultimately might convert into common stock. On the other hand, holders have the option to put the issue back to the company.

The ratings on GM reflect the company's average business position as the world's largest automaker, S&P said. However, the company's overall profitability has deteriorated from very strong levels of previous years. Management has just indicated an estimate for calendar year 2002 net earnings of about $2 billion, excluding Hughes Electronics Corp. and any European restructuring charge, which would be basically even with the weak level of 2001. S&P said it believes financial performance is likely to remain subpar for at least the next several years.

GM's liquidity position has dwindled as a result of special actions taken to reward shareholders, acquisitions and weaker operating cash flow, but the company's financial flexibility remains adequate, S&P said. One important source of flexibility is the remaining 33% economic interest in Hughes. GM is seeking to monetize this interest through a planned transaction announced on Oct. 28 that could, if completed, generate up to $4.2 billion in cash and some additional consideration, but it faces significant regulatory hurdles.

A ratings change within the next few years is unlikely, S&P said, noting that present ratings reflect the expectation that financial performance could be relatively weak for a sustained period but also that restructuring actions will eventually restore earnings and cash flow to more acceptable levels. GM's overall financial flexibility is still above average because of its remaining cash positions, ample contractually committed credit facilities, exceptional capital market access and ability to securitize finance assets, S&P said.

S&P downgrades Williams Communications, still on watch

Standard & Poor's downgraded Williams Communications Group Inc. and kept the ratings on CreditWatch with negative implications. Ratings affected include Williams Communications' $500 million seven-year amortizing secured senior term loan and $500 million six-year senior secured reducing revolving credit facility, both cut to C from CCC+; its $1.5 billion 10.875% senior notes due 2009, $575 million 11.7% senior redeemable notes due 2008, $425 million 11.875% senior reedemable notes due 2010 and $575 million 11.7% senior redeemable notes due 2010, all cut to C from CCC-; and its $250 million redeemable cumulative convertible preferred stock, cut to C from CC.

S&P said it cut Williams Communications' ratings after the company said it was considering filing for Chapter 11 bankruptcy or undertaking other measures to restructure its balance sheet.

"The active consideration of a bankruptcy filing or a debt restructuring runs contrary to William Communications' recent publicly announced intentions," S&P noted, adding that if the company chooses one of these options all its ratings will be lowered to D.

Fitch cuts Williams Communications convertible to C

Fitch Ratings downgraded Williams Communication Group Inc.'s senior unsecured rating to CC from CCC-, convertible preferred to C from CC and senior secured credit facility to CCC- from CCC+. All ratings remain on negative watch. Fitch said the downgrades reflect the potential that the company's ongoing discussions with its banks regarding restructuring could result in a default, noting the company said Monday that it has expanded the scope of restructuring options to include a Chapter 11 reorganization.

Given the need to effectively manage liquidity during 2002 and the amount of cash required to meet debt service requirements together with the company's limited access to public capital markets, Fitch said it believes the potential exists for William Communications to restructure its capital structure to reduce interest expense and leverage. This scenario is magnified especially if industry conditions do not stabilize.

S&P rates Entercom debt sheft at B+

Standard & Poor's assigned a B+ preliminary rating to the the company's $250 million subordinated shelf of Entercom Communications Corp. and raised its corporate credit ratings onthe radio station owner to BB from BB-. S&P also assigned a B+ rating to the proposed $150 million drawdown of subordinated notes due 2014 of Entercom Radio LLC and Entercom Capital Inc. Note proceeds and $150 million from a concurrent common stock offering will be used for radio station acquisitions.

The ratings reflect the assumption of successful completion of the equity offering. Ratings stability is enhanced by steady debt reduction from discretionary cash flow in the current soft ad environment. Equity financing of acquisitions further bolsters stability.

Fitch affirms Nuevo Energy at B

Fitch Ratings affirmed Nuevo Energy Co.'s senior subordinated debt at B and changed the rating outlook to stable from positive, based on Nuevo's modest credit profile and the size and scope of its operations. The outlook change, Fitch said, is due to Nuevo's limited credit improvement following two very strong years in terms of commodity prices.

A positive development for Nuevo was the recent hiring of its new chief executive, Jim Payne, Fitch said. Most importantly, he has gained more flexibility in constructing Nuevo's hedge policy. Debt-to-capital will likely remain above 60% throughout 2002. While Fitch expects Nuevo to improve financially and operationally under this new management team, it is likely to be an intermediate term event.

Moody's cuts Broadwing convertibles to B2

Moody's Investors Service lowered all ratings of Broadwing Inc. and its units, including the Broadwing convertible subordinated notes to B2 from Ba3 and the Broadwing Communications junior exchangeable preferred to B3 from B1.

The downgrade reflects the company's recent operating performance and 2002 guidance that fall short of our earlier expectations, Moody's said, and concern that Broadwing' s operating growth will likely be further hampered by the troubles affecting the emerging wireline telecom sector. The ratings are supported by Broadwing's diversified revenue base, the relative stability and defensibility of its ILEC business operated by Cincinnati Bell Telephone Co. and asset coverage provided by operations.

The outlook is stable.

Moody's rates new AmerUs convertible at Ba1

Moody's Investors Service assigned a Ba1 subordinated debt rating to AmerUs Group Co.'s $150 million issuance of convertible OCEANs, or optionally convertible equity-linked accreting notes.

Commenting on the new instrument, Moody's noted that the OCEANs' 30-year maturity should provide AmerUs with greater financial flexibility than its current medium-term bank debt. In addition, the rating agency noted that cash interest payments are relatively low, and early redemption for cash is unlikely, given the specific preconditions to redemption, which would most likely cause conversion. The rating agency did note that the issuance of the OCEANs together with the company's plans to use some of the proceeds to repurchase common stock will somewhat increase the group's financial leverage, particularly since Moody's deems the timing and probability of conversion of the OCEANs into common stock as uncertain. However, Moody's said it expects that AmerUs will continue to keep its financial leverage at a maximum 25% of its capital.

Commenting on AmerUs itself, Moody's noted the group's growing presence, through its life insurance subsidiaries, in the individual fixed annuity market, as well as their profitable block of in-force individual life insurance. Strengths are tempered by the companies' continuing emphasis on highly competitive asset accumulation products and rapid growth of equity-indexed annuities, modest consolidated profitability and earnings growth and somewhat low level of statutory capital and surplus. Financial leverage at the holding company has declined considerably in recent years, Moody's said, but is expected to remain within the company's still-significant target range of approximately 20-25%.

S&P downgrades New World Infrastructure

Standard & Poor's downgraded New World Infrastructure Ltd., including lowering its $250 million 1% convertible bonds due 2003 to BB+ from BBB-.

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