Fitch rates Baxter mandatory A

Fitch Ratings assigned Baxter International Inc.'s planned $850 million mandatory convertible an A rating.

Fitch also affirmed Baxter's A-rated senior unsecured debt and convertible debentures.

The outlook is stable.

Although interest cost is expected to increase, the equity nature of the mandatory and Baxter's use of equity to fund acquisitions limits the impact on Baxter's leverage and the company's credit profile remains appropriate for the rating, Fitch said.

Baxter's ratings reflect a strong credit profile and the company's capabilities, focus and leading market presence in technology to treat a variety of diseases.

Concerns include pricing and cost pressures, and any significant changes in product liability exposure, Fitch added. For the 12 months ended Sept. 30, Baxter's EBITDA/interest was 29.1x, with total debt-to-EBITDA of 1.8x.

Moody's cuts Navistar

Moody's Investors Service lowered Navistar International Corp. and Navistar Financial Corp. senior debt to Ba3 from Ba1 and subordinated debt to B2 from Ba2. The outlook is stable.

The downgrade reflects the expectation that cash generation and debt protection measures will remain under considerable pressure through 2003, Moody's said.

As a result, manufacturing operations are expected to generate negative cash from operations during 2003 and debt protection measures will remain stressed.

Moreover, despite the recent improvement in portfolio quality at Navistar Financial, this unit will likely remain very highly leveraged on a managed asset basis with adjusted debt to equity of about 10:1, Moody's added.

The outlook anticipates that Navistar will complete a refinancing of about $200 million of manufacturing company debt that matures during 2003. Also, that the $549 million cash position and the range of committed bank and ABS facilities will provide adequate liquidity as the downturn in the truck market continues.

Longer-term, initiatives Navistar has diligently pursued to improve the efficiency of its manufacturing business should enable it to preserve a competitive market position and to improve operating performance and cash generation as the truck market recovers during 2004, Moody's said.

Moody's confirms PerkinElmer

Moody's confirmed PerkinElmer Inc.'s ratings, including its 0% convertibles at Ba2, and assigned a (P)Ba1 rating to the proposed senior secured credit facilities and (P)Ba3 to the proposed $225 million senior subordinated notes due 2012. The outlook is stable.

All ratings reflect ongoing concern about low returns on assets as well as weakened earnings and cash flow generation, Moody's said.

Ratings also reflect the decision to defer the sale of the Fluid Sciences unit, resulting in relatively high debt levels and stretched-out paydown.

The outlook reflects the expected success in implementing the refinancing and profit improvement strategies near-term, Moody's said. Protracted delay could have adverse rating implications.

Proceeds from the term loan and notes will be used to refinance roughly $73 million outstanding under current senior unsecured revolvers and to fund tender offers for PerkinElmer's 6.8% notes and convertibles that are putable in August 2003.

A cash escrow account of about $392.1 million will be established for funding the tender of the convertibles. Cash balances will be augmented by additional liquidity under the proposed $100 million revolver.

Moody's noted that the ability to obtain the new credit facilities is contingent on the offering of at least $225 million of subordinated notes. The tenders are contingent on executing the refinancing plan and paying off a $30 million synthetic lease.

S&P notes SpeedFam call

Standard & Poor's said it will withdraw the ratings on SpeedFam-IPEC Inc. (CCC+/positive watch) when all $115 million of SpeedFam's convertible subordinated notes are redeemed by parent Novellus Systems Inc.

S&P cuts Protein Design outlook

Standard & Poor's revised its outlook on Protein Design Labs Inc. to stable from positive, but confirmed the CCC subordinated debt rating.

The outlook reflects uncertainty regarding the strategic direction of the company after the appointment of two new officers in key management positions, and also reflects S&P's belief that cash usage is likely to accelerate as candidate drugs enter the latter, more expensive stages of development.

The low, speculative-grade ratings reflect the large risks inherent to drug discovery and the unpredictable future royalty-based revenues, S&P said.

Negative factors are partially offset by proven patented technologies to humanize monoclonal antibodies, technologies used by other companies that have provided Protein Design Labs with a consistent royalty stream.

The cash burn rate is low for the industry but current cash usage of about $30 million for the 12 months ended Sept. 30 is expected to accelerate as pipeline candidates advance and the company continues to invest in manufacturing capacity.

Protein Design Labs had $624 million in cash and marketable securities at Sept. 30, versus only $150 million in convertible debt due 2007.

Moody's rates Hercules revolver

Moody's Investors Service assigned a rating of (P)Ba1 to the proposed new senior secured $150 million revolving credit facility and $200 million term loan of Hercules Inc.

The financing replaces an existing undrawn revolver, refinances a $125 million bond 2003 maturity and provides additional working capital.

Moody's also confirmed the existing ratings of Hercules (Ba2 senior implied and preferreds at Ba3).

The outlook remains stable.

S&P rates SPX bank facilities

Standard & Poor's assigned a BB+ rating to SPX Corp.'s new $500 million senior secured revolving credit facility and new $175 million senior secured tranche A term loan, both maturing in 2008, and a BB- rating to the $250 million senior unsecured notes due 2012.

S&P affirmed the BB+ senior secured and BB- senior unsecured ratings.

The outlook is a stable.

Ratings reflect an above-average business profile, partially offset by a somewhat aggressive financial policy and fair cash flow protection, S&P said.

Balance sheet leverage and cash flow protection are satisfactory with adjusted debt to EBITDA for 2002 expected to be under 3x and funds from operations to adjusted debt in the mid-20% area.

Going forward, total debt to EBITDA is expected to range between 2.5x to 3.0x and funds from operations to total debt should average between 20%-25%, S&P said.

SPX has ample liquidity, with about $527 million available under its secured $600 million revolving credit facility that matures in September 2004 and cash and cash equivalents of $271 million at Sept. 30. SPX

Diverse operations and substantial aftermarket activity mitigate cyclical exposure, thus limiting downside ratings risk. A somewhat aggressive financial policy and somewhat elevated debt usage restrict upside potential.

Moody's cuts Standard Motor

Moody's Investors Service downgraded the ratings of Standard Motor Products Inc., including the 6% convertible due 2009 to B2 from B1. The outlook is stable.

The downgrades were precipitated by Standard Motor's substantial reserves recently recorded for both uninsured asbestos exposure and goodwill impairment, combined with continued concerns regarding several other elements of the company's operations.

Standard Motor remains characterized by high leverage, greater-than-average seasonality, plus a combination of unpredictability of demand and lower margins.

Moody's also questions the sustainability of operating cash flow generation at levels necessary to cover ongoing capital expenditures and acquisition needs, along with a steady pace of overall debt reduction.

Moody's rates SPX new financing

Moody's Investors Service rated SPX Corp.'s proposed $250 senior unsecured notes due 2012 at Ba3, and the proposed $500 million senior secured revolver due 2008 and for the proposed $175 million senior secured term loan A due 2008 at Ba2.

The outlook remains positive, reflecting the expectation of continuing operational improvements and a more favorable operating environment over the medium term.

Moody's confirmed the $859 million of 0% convertible notes due 2021 at Ba3.

Ratings continue to reflect a strong market position and increasing diversification, solid operating and financial performance through the economic downturn, substantial cash flow and good liquidity condition and strong management team, Moody's said.

However, the ratings are constrained by the moderate debt leverage, significant goodwill and negative tangible net worth, active stock repurchase program, acquisitive growth strategy and uncertainty in its future acquisition finance structure.

Factors that could cause a positive rating action include sustained free cash flow generation, continued de-leveraging and demonstrated commitment to its stated capital structure.

Factors that could cause a negative rating action include major debt-financed acquisitions that result in higher debt and leverage and protracted weakness in key-end markets.

S&P rates Dominion notes at BBB+

Standard & Poor's assigned a BBB+ rating to Dominion Resources Inc.'s $300 million 2002 series D senior unsecured notes due 2009 and $300 million 2002 series E senior unsecured notes due 2032. The outlook is stable.

Ratings are supported by cash flow stability, favorable regulation and an above-average business profile. Virginia Electric & Power Co.'s service territory continues to be strong in growth and per capita income.

Strengths are offset by the higher-risk nature of the integrated energy strategy, heavy capital requirements in the E&P business, regulatory uncertainty beyond 2007 and financial measures that are weak for a BBB+ rating.

Dominion's balance sheet has become over-leveraged, causing cash flow interest coverage ratios to fall below targets on an adjusted basis but S&P said it expects Dominion will continue to reduce leverage and improve cash flow coverages to maintain its credit rating.

The stable outlook is conditional on improving and sustaining better cash flow interest coverages in 2003 and 2004.

Relative to some of its peers, Dominion's execution risk of its financial plan is low, as the company does not have to sell assets to meet its financial targets and can further reduce discretionary capital spending, S&P said.

A downgrade could occur if there is no further improvement in financials or if the company's business risk profile increases due to acquisitions, asset purchases, or a deterioration of its existing businesses.

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