Moody's cuts Cummins unsecured debt, convertibles

Moody's Investors Service lowered Cummins Inc.'s senior unsecured debt to Ba2 from Ba1 and convertible trust preferred securities to Ba3 from Ba2.

Also, Moody's assigned a Ba2 rating to its proposed $200 million senior notes due 2010, for which proceeds will be used to repay $125 million of notes maturing in March 2003.

The downgrade reflects the replacement of a $500 million unsecured revolver maturing in January 2003 with a new $385 million three-year secured revolver, which diminishes protection measures for unsecured creditors, Moody's said.

For the 12 months to September, operating margins were only 2.3%, debt/EBITDA exceeded 4.5x, EBIT/interest was about 1.3x, adjusted debt exceeded $1.5 billion and there was a cash burn of about $33 million.

Recent restructuring initiatives should help maintain a competitive position in truck engines and improve longer-term returns, Moody's said.

Nevertheless, the outlook is negative, as near-term operating performance and cash generation will remain under pressure.

Fitch cuts Cummins unsecured debt, convertibles

Fitch Ratings downgraded the senior unsecured notes of Cummins Inc. to BB- from BB+ and the mandatory convertible to B+ from BB-.

Also, Fitch assigned a BB- rating to its new $200 million of senior unsecured notes and a BB+ rating to the new $385 million secured revolver.

Downgrades reflect persistently weak end markets, longer term concerns related to Cummins' competitive position and profitability, weak credit measures, increasing pension obligations and the granting of security for the revolver, Fitch said.

The outlook remains negative.

S&P notes SpectraSite bankruptcy plans

Standard & Poor's said that upon SpectraSite Holdings Inc.'s prepackaged bankruptcy, expected by Nov. 15, its senior debt ratings will be lowered to D from C.

Furthermore, at the time of a bankruptcy filing, implications of the watch for the CC bank loan rating on SpectraSite Communications Inc.'s $1.1 billion secured facility will be revised from negative to positive.

The subsidiary is not expected to file bankruptcy and is expected to continue to service borrowings under its $1.1 billion secured bank loan, which totaled $785 million at June 30.

SpectraSite said it has reached an agreement with bondholders for a restructuring of its $2 billion accredited value of senior notes as part of a planned prepackaged bankruptcy.

On emerging from bankruptcy, S&P will re-evaluate the corporate credit rating in light of a much less leveraged capital structure and the bank loan at SpectraSite Communications will be re-evaluated for potential upgrade.

Fitch rates Aon at A-

Fitch Ratings assigned an A- senior debt rating to Aon Corp.'s new $300 million senior convertible debt, but the rating was placed on negative watch, consistent with Fitch's current long-term rating on Aon.

Aon at the end of this week will have raised approximately $900 million in new capital, including $550 million from a stock sale. Proceeds are expected to be used to pay down commercial paper, offset an increase to the minimum pension liability anticipated for fourth quarter and other corporate purposes.

The senior debt rating of Aon remains on negative watch pending Aon's ultimate capital structure.

Favorably, the capital structure is expected to transition to a longer weighted duration and will be less dependent on short-term debt, Fitch said.

A major uncertainty at this point involves the pension funding requirement and the ultimate impact on shareholders' equity relative to recent periods.

The watch also considers the need to address the $300 million of debt securities that mature in 2003.

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