S&P ups Affiliated Computer subordinated notes

Standard & Poor's on Tuesday raised its corporate and senior unsecured bank ratings on Affiliated Computer Services Inc. from BBB- to BBB and its subordinated notes from BB+ to BBB-, and removed them from watch. The upgrade follows the issuance of equity to finance the August 2001 acquisition of Lockheed Martin IMS Corp. Net proceeds from the equity issuance, about $715 million, will be used to repay the $550 million bridge loan incurred with the acquisition, with the remainder used to repay a portion of Affiliated Computer's bank debt. The acquisition is expected to add to earnings and bolsters Affiliated Computer's position in the rapidly growing state and local government business process outsourcing industry.

The ratings on Affiliated Computer reflect its good competitive position, growing annuity-like revenue streams, and solid cash flow generation. With fiscal 2001 revenues approaching $3 billion, Dallas, Texas-based Affiliated Computer provides business and data processing outsourcing, electronic commerce transaction processing, and systems integration services. Although operating in a fragmented and competitive industry, the company has averaged about 40% revenue growth over the past four years, half of which was internally generated. It has also maintained relatively good cash flow and profitability measures. Affiliated Computer faces competitive threats, however, from larger and better-financed competitors, as well as the challenges of integrating on-going acquisitions. While acquisitions are expected to remain an integral part of Affiliated Computer's growth strategy, the company is expected to maintain a financial profile consistent with the current rating.

S&P affirms Bell Canada at BB- on recapitalization plan

Standard & Poor's on Tuesday affirmed its BB- corporate credit and senior unsecured debt ratings on Bell Canada International Inc., following the company's announced recapitalization plan effective Feb. 15 that will allow the company to meet commitments totaling about C$1.3 billion to April 30. BCI also announced the reorganization of 41.7%-owned subsidiary Telecom Americas Ltd. into a pure-play Brazilian mobile company, subject to regulatory approvals and third-party consents. The outlook is stable.

Moody's rates Quest Diagnostics convertible at Ba1

Moody's Investors Service assigned ratings to Quest Diagnostics Inc.'s $250 million incremental universal shelf registration and rated Quest's recent issuance of $250 million of contingent convertible debentures due 2021 at Ba1. The senior implied rating and the issuer rating are Ba1. All ratings for the company, including those for the existing notes and bank facilities, have been confirmed and the outlook remains positive.

Over the past several months, the company has successfully refinanced all of its debt that was outstanding at fiscal yearend 2000, contributing significantly to lower interest expense going forward. Our ratings on the company continue to reflect improvement in many operating metrics, Moody's noted.

Moody's puts NRG on review for possible downgrade

Moody's Investors Service on Tuesday placed the corporate securities of NRG Energy Inc. and its senior unsecured debt rating of Baa3 under review for possible downgrade following NRG's announcement Nov. 29 that it planned to acquire a 2,535 megawatt portfolio of generating assets from subsidiaries of FirstEnergy Corp. for $1.5 billion.

Moody's acknowledges the assets' strategic fit within NRG's U.S. business as well as the benefit of the FirstEnergy transition agreement. However, the $1.5 billion price is significant, and NRG must arrange $1.35 billion of new money to fund the acquisition. NRG currently plans to raise the money through a sale leaseback, cash from operations, short term debt, redeployment of capital from existing and contemplated projects and, possibly, additional funds from controlling owner Xcel Energy Inc. Moody's review will address NRG's ability to raise the net $1.35 billion necessary to finance the purchase and the acquisition's affect on NRG's projected base case and downside case cash-on-cash coverage ratios.

Moody's upgrades Anthem ratings

Moody's Investors Service on Tuesday upgraded Anthem Insurance Companies Inc. credit ratings, moving Anthem Casualty Insurance Group's Baa1 guaranteed senior notes upgraded to A3 and the A3 insurance financial strength rating was boosted to A2, along with other ratings. Since Moody's assigned the first surplus note rating of Baa3 in 1997, the rating agency said Anthem has improved the rigor and quality of its financial management, and, accordingly has produced higher quality earnings. In addition, the company has added members to its management team who have sharpened the company's strategic focus. Moody's said it also believes Anthem's demutualization, which closed on Nov. 2, will provide several benefits to the company, including greater access to capital and a more disciplined financial culture.

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