Moody's rates Markel notes Baa3

Moody's Investors Service assigned a Baa3 rating to Markel Corp.'s recently issued $200 million of 6.8% senior notes.

Proceeds are expected to be used primarily to pay down outstanding balances on its revolving credit facility and also to prefund a $67 million principal debt maturity in November.

Moody's rates Markel's lead operating subsidiaries A3 for insurance financial strength.

In fourth quarter, Markel drew down its credit facility, increasing borrowings to $175 million, and used the proceeds along with some liquid funds to contribute capital to support its growing insurance operations.

In Moody's view, substantial outstanding balances on the credit facility present substantial risk in view of the agreement's rating trigger, which is one notch below Markel's current rating.

Moody's believes Markel is well positioned to take advantage of improved market conditions in the commercial lines sector and noted it is achieving significant rate increases as well as improved operating results.

The outlook is stable, reflecting the expectation that Markel will not substantially draw from its bank credit facility, that financial leverage will moderate and that its reserve position will continue to strengthen without a material disruption to earnings and capital generation.

Fitch rates Markel notes BBB-

Fitch Ratings assigned a BBB- rating to the $200 million of 10-year senior notes issued by Markel Corp and affirmed its other ratings, plus upgraded its Markel International Insurance Co. Ltd. outlook to positive from stable.

Other rating outlooks are stable.

Ratings reflect continued strong underwriting results in Markel North America and improved underwriting results in Markel International.

The ratings also positively reflect conservative accounting and reserving practices, which improve the quality of earnings, as well as moderately high financial leverage, which is around 30% when adjusted to give partial equity credit to the convertible.

The change in Markel International's outlook reflects improved underwriting performance in 2002 and prospects for profitable growth in 2003, Fitch said.

S&P rates Rainbow Media bank loan

Standard & Poor's assigned a BB+ rating to Rainbow Media Holdings Inc.'s $280 million secured bank loan facilities and affirmed the ratings of its parent Cablevision Systems Corp.

The ratings on Cablevision are based on its favorable position in the cable television industry. Yet ongoing weakness in the overall economy and ongoing competition from direct broadcast satellite services could challenge expansion plans for digital services in 2003.

The negative outlook, therefore, reflects some degree of uncertainty about its ability to grow operating cash flows from cable services. Largely as a result of competitive factors, the company has lost 45,000 subscribers since the beginning of 2002, or about 1.5% of its subscriber base.

The outlook is negative.

Although asset sales and restructuring efforts provide additional financial flexibility, the company still faces the challenge of increasing overall cash flows in 2003 to improve financial metrics, S&P said.

Moody's upgrades Dean Foods

Moody's Investors Service upgraded the ratings of Dean Foods Co., including the $600 million of trust convertible preferreds to B1 from B2.

The ratings outlook is stable.

The upgrade reflects reduction in leverage since the $1.7 billion acquisition of Old Dean in December 2001. Ratings are supported by Dean's scale and geographic reach as the dominant fluid milk processor in the U.S. and its cash flow durability, but restrained by Dean's high financial leverage.

The outlook accommodates share repurchases if funded from cash flow, as well as add-on acquisitions that do not result in leverage above Dean's targeted parameters of 3-3.5x EBITDA, excluding the convertible, Moody's said.

Dean's SGL-1 liquidity rating reflects cash flow generation sufficient to fund capital spending and scheduled debt maturities over the next year, significant availability under its $800 million revolving credit facility and $400 million accounts receivable facility, and ample cushion under financial covenants.

S&P puts Northrop on positive watch

Standard & Poor's placed the ratings of Northrop Grumman Corp., including the senior unsecured debt at BBB-, on positive watch.

The watch reflects improving prospects for earnings and cash flow generation in the next few years, given a favorable environment for defense spending and Northrop's well-positioned portfolio of programs and capabilities, S&P said.

Moody's cuts Aquila, still on review

Moody's Investors Service downgraded Aquila, Inc. including cutting its senior unsecured debt to B1 from Ba2, subordinate debt to B2 from Ba3 and preferred stock to B3 from B1. The ratings remain on review for possible further downgrade.

Moody's said the downgrade reflects weak cash flow generation relative to total debt; asset sales proceeds which have not sufficiently reduced the debt that was incurred to purchase the same assets; liquidity pressures related to the trading business that Aquila is winding down; the need to extend or replace maturing bank facilities; which Moody's believes will require regulatory approvals for the provision of security.

Aquila advises that it has over $300 million in cash on hand, Moody's said but noted one of the company's principal bank credit facilities matures in April, and a waiver of default under the other facility also expires in April. Without an extension of its bank credit facilities the company would not have sufficient cash to repay its maturing debt obligations and leave itself a comfortable cash cushion with which to operate.

S&P cuts MeriStar

Standard & Poor's downgraded MeriStar Hospitality Corp. including cutting its $150 million 4.75% convertible subordinated notes due 2004, $150 million 8.75% senior subordinated notes due 2007 and $55 million 8.75% senior subordinated notes due 2007 to CCC from CCC+ and MeriStar Hospitality Operating Partnership, LP's $100 million revolving credit facility due 2005, $250 million 10.5% senior unsecured notes due 2009 and $300 million 9% tranche 1 senior unsecured notes due 2008 to B- from B. The outlook is negative.

S&P said the downgrade is based on MeriStar's limited liquidity position and S&P's expectation that MeriStar's credit measures will deteriorate more in 2003 than previously expected.

Based on the company's EBITDA guidance of $46-$50 million for the first quarter and roughly $190 million for the full year, total operating lease adjusted debt to EBITDA ratio will likely be in the mid- to low-8x area throughout the year, S&P noted.

For 2002, the company's portfolio of hotels experienced an 8.6% decline in revenue-per-available room (RevPAR) and generated $216 million in EBITDA. This represented a 20% decline in EBITDA over 2001.

At the end of 2002, MeriStar's credit measures were very weak with debt to EBITDA in the high-7x and EBITDA coverage of interest expense under 2x, S&P said.

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