Moody's cuts WorldCom to Baa2

Moody's downgraded the long-term ratings of WorldCom Inc. from A3 to Baa2, as well as all subsidiaries and kept them on review for possible further downgrade.

The downgrade reflects the revised earnings forecast for 2002, which was significantly below Moody's expectations.

WorldCom's credit position is further weakened by high levels of operating and financial leverage, the rating agency said.

Moody's added that it remains concerned by the uncertain outlook for the industry and believes that further revisions to WorldCom's projected operating performance could occur before year-end as pricing pressure continues.

While the company has seen growth in new services, it has not been enough to offset combined declines in pricing and downsizing in network grooming, and Moody's does not see a reversal of this trend near-term.

Moody's does not believe WorldCom faces significant liquidity challenges in 2002, although debt maturities step up in 2003 and beyond. WorldCom's 2002 current maturities include only a modest $172 million and the company currently has no outstanding commercial paper balances. Furthermore, the company had $2.3 billion of cash on hand at the end of the first quarter.

The company's $2 billion accounts receivable securitization program contains ratings triggers.

The first trigger occurs when the company is rated below Baa2 by Moody's or BBB by Standard & Poor's at which point the company must establish a dilution reserve.

The second trigger occurs when the company's rating falls below Baa3 at Moody's or BBB- at Standard & Poor's, at which point the company's ability to sell receivables into its securitization program terminates unless amended.

Moody's believes that long distance is and will remain a critical component of the nation's telecom network.

Even so, Moody's remains concerned that carriers with large long distance exposures like WorldCom are under considerable pressure to increase network utilization in order to service the large debt balances originally incurred to construct the networks.

Fitch cuts WorldCom to BBB-

Fitch Ratings downgraded the senior unsecured debt ratings for WorldCom Inc. to BBB- from BBB+. The convertible QUIPS were lowered to BB+ from BBB. The rating action also applies to Intermedia Communications senior unsecured debt, which was lowered to BB+ from BBB.

The outlook was changed to negative from stable.

The downgrade reflects Fitch's expectation that the company's revenue and EBITDA will deteriorate during 2002 and that prospects for recovery in 2003 are uncertain.

Generation of free cash flow will be critical for the company as some $1.7 billion of debt matures in 2003 and an additional $2.6 billion in 2004. Considering the company's current cash balances, free cash flows and its expected $4.25 billion of available bank facilities, the company appears to have adequate liquidity resources to meet funding requirements during 2003 provided that WorldCom's $2 billion accounts receivable program is not subject to rating-triggered liquidity events.

Fitch's assessment also incorporates a high likelihood that $500 million in debt will be put to the company in 2003, and that the company will be able to remarket $1.0 billion in remarketable securities in 2003.

The negative outlook reflects expected weak operating performance during 2002, uncertain timing of recovery in data and Internet products portfolio as well as voice long distance business. In addition to these operating factors, key considerations include the company's ability to generate consistent meaningful free cash flow, the impact of potential rating downgrades on the company's accounts receivable securitization program, and clarity with how the company will address its debt maturity schedule during 2003 and 2004.

Fitch anticipates that WorldCom will not be able to maintain credit protection measures, including debt-to-EBITDA, indicative of the previous BBB+ rating profile during 2002 and 2003.

S&P rates IDEC convertibles BB

Standard & Poor's assigned a BB rating to IDEC Pharmaceuticals Corp. planned offering of $675 million zero coupon convertible LYONS due 2022. The outlook is positive.

S&P downgrades Sierra Pacific

Standard & Poor's downgraded Sierra Pacific and its Nevada Power unit and put them on CreditWatch with negative implications, changed from CreditWatch with developing implications.

Ratings affected include Sierra Pacific Power Co.'s secured medium-term notes and senior secured notes, cut to BB from BBB-, preferred stock, cut to CCC+ from B, Sierra Pacific Resources credit facility, senior notes, floating rate notes and premium income equity securities, cut to B- from B+, Nevada Power's first mortgage bonds and senior secured notes, cut to BB from BBB-, credit facility and senior unsecured notes, cut to B- from B+, and quarterly income preferred securities, preferred stock and trust preferreds, cut to CCC+ from B.

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