Moody's confirms Sierra Pacific

Moody's Investors Service confirmed the ratings of Sierra Pacific Resources, including senior unsecured debt at B2, which applies to its new 7.25% convertible notes.

The rating outlook is stable.

Moody's also confirmed the Ba2 senior secured ratings of subsidiaries, Nevada Power Co. and Sierra Pacific Power Co., and upgrade the outlook for the utilities to stable from negative.

The confirmation reflects improved liquidity and addresses prior concerns about potential near-term default risk due to the convertible along with other recently announced strategic financial and operational initiatives, Moody's said.

The stable outlooks reflect Moody's belief that the companies now have additional flexibility to work through lingering issues such as the treatment by Nevada regulators for deferred energy costs, the FERC complaint and current limitations on Nevada Power to pay dividends to the parent.

S&P rates Brocade convert B-

Standard & Poor's assigned a B- subordinated debt rating to Brocade Communications Systems Inc., which includes the 2% convert due 2007.

The ratings reflect profitability pressures, high leverage and risk associated with rapid market evolution, offset by a strong position in the $1.5 billion fiber channel networking market.

Brocade has historically generated positive cash flow, due to a combination of good profitability and the heavy use of stock options.

Total debt-to-EBITDA, which increased to 6.6x in 2002 from less than 1.6x historically because of the issuance of the $550 million convertible, may increase in 2003 because of depressed profitability.

Expected improvements in profitability and cash flow in later years, however, are expected to produce better debt protection metrics. Concerns over debt-protection capacity are further mitigated by Brocade's significant net cash position.

Brocade's key source of liquidity, beyond positive operating cash flow, is a considerable balance of cash and liquid investments, which totaled $837 million at Dec. 31. The company has no bank lines.

The outlook is stable. Financial flexibility provides downside ratings protection, while weak industry conditions and profitability limit upside potential.

S&P cuts LTX outlook

Standard & Poor's confirmed the ratings of LTX Corp., including the 4.25% convertible due 2006 at CCC+, but revised its outlook to negative from stable.

The outlook revision reflects reduced liquidity and ongoing cash usage amid a prolonged semiconductor capital equipment industry slump, S&P said.

LTX used $111 million in cash in the 12 months ended Jan. 31, primarily to fund operating losses and working capital, lowering cash balances to $162 million from $273 million a year earlier. And ongoing operating losses are expected over the near term.

LTX has a $25 million secured credit facility backed by its assets, of which $20 million is drawn. There is a second $30 million credit facility secured by cash that is not drawn and a modest-sized program with its commercial lender to sell receivables.

As such, the company relies on cash balances for financial flexibility.

Failure to materially reduce cash usage rates over the near term could lead to lower ratings.

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