Moody's cuts Brightpoint convertible to Ca

Moody's downgraded the ratings of Brightpoint Inc., including the $380 million subordinated 0% notes due 2018 to Ca from B2. The outlook is negative. The Ca rating on the convertible reflects Moody's belief that full recovery of principal is at risk. The bonds, which accrete at 4% per year, are putable in March 2003 at 552.07 and Moody's said it does not believe Brightpoint will have the liquidity to satisfy the put with cash and ascribes little value to satisfying the put in stock.

In general, Moody's said the ratings reflect Brightpoint's recent decline in profitability and uncertainty associated with the growth in the global wireless handset market over the next several quarters. The ratings benefit from Brightpoint's relatively low level of debt requiring cash servicing, sufficient liquidity to meet its cash needs and its position as a global leader in the handset distribution market.

Although liquidity is tight, Moody's is comfortable with Brightpoint's liquidity position as the business does not rely on substantial capital investment and debt service is relatively modest. Moody's also noted that last fall, Brightpoint secured a new $90 million asset backed revolving credit facility due 2004.

The negative ratings outlook recognizes the challenges the company will face and the possibility that business conditions may not improve in the near term. Further, the B2 senior implied rating assumes that Brightpoint does not sacrifice its current liquidity position to make substantial purchases of its outstanding LYONs.

Fitch rates Ohio Casualty convertible at BBB-

Fitch Ratings assigned a BBB- senior debt rating to Ohio Casualty Corp.'s senior convertible notes and a BBB- long-term issuer rating to Ohio Casualty. The outlook is stable.

The rating reflects Ohio Casualty's conservative financial leverage, increased strategic focus on underwriting, and progress made thus far in the company's turnaround improvement plan. Weighted against these positives are recent poor operating performance, weak earnings based coverage, and competitive conditions in the workers' compensation and personal lines markets.

S&P cuts Tower Automotive long-term ratings to BB

Standard & Poor's lowered its long-term corporate credit rating to BB from BB+ on Tower Automotive Inc., and said failure to improve financial flexibility over the near term could lead to further downgrades. The downgrade reflects deterioration in financial flexibility following a challenging year in which the company has had to deal with declining automotive production, significant launch activity and delayed program launches by key customers.

S&P believes that 2002 will be another challenging year for Tower and that the company's financial profile will remain weaker than previously expected. The ratings are based on the assumption that Tower will take steps to bolster its financial flexibility over the near term and that restructuring efforts underway will lead to a gradual improvement in operating performance.

There was a significant deterioration in credit protection measures during the past year when the company reported a net loss of $267.5 million, including a restructuring and asset impairment charge of $383.7 million. Funds from operations to debt, which was about 29% in 1999, is now estimated to be in the mid- to upper-teen percentage area. Some improvement is expected in credit protection measures this year, although the magnitude will depend to some extent on the market acceptance of several key new platforms.

As a result of earnings and cash flow pressures during the past year, Tower faces very tight covenants. In addition, borrowing capacity under its credit lines has been severely curtailed by covenant limitations. The ratings incorporate the expectations that Tower will retain access to credit lines and that it will take steps to increase its borrowing capacity over the near term.

Moody's rates new Hughes bank debt at Ba3 ahead of EchoStar merger

Moody's assigned a Ba3 debt rating to Hughes Electronic Corp.'s newly amended and expanded $1.812 billion senior secured credit facility, which consists of a new $577.3 million term loan and $1.235 billion revolving credit facility maturing on the earlier of Dec. 5 or at the close of the merger with EchoStar Communications Corp. (B1 senior implied rating with developing outlook). The entire facility will be secured by the assets and capital stock of significant wholly-owned domestic subsidiaries, excluding PanAmSat Corp. and DirecTV Latin America.

Hughes' Ba3 rating remains on review for possible further downgrade pending the EchoStar merger. Hughes' rating is now positioned at the anticipated ceiling for what Moody's believes to be the high probability scenarios and the range of possible ratings pending the merger.

Hughes ratings reflect high debt leverage and weak operating profit performance at Hughes.

The primary risk for the bank facility is refinancing risk, given the short duration to maturity. If the merger is not completed, we believe that EchoStar would still be required to purchase Hughes' 81% stake in PanAmSat, which Moody's believes it has adequate capital and capital commitments to complete, and pay a transaction termination fee to Hughes of $600 million under most scenarios. The proceeds from both should be adequate to repay the outstanding debt under the bank facility.

Fitch revises Sovereign Bancorp outlook to positive

Fitch Ratings revised the outlook for Sovereign Bancorp Inc.'s BB+ senior and B short-term debt to positive, and affirmed the ratings, reflecting several positive developments, including the successful integration of the company's sizable New England branch acquisition, an improved level of tangible equity and continued debt reduction at the parent.

Although tangible equity remains relatively low, it has been steadily improving. Moreover, a recent common stock issuance was used to pay down a portion of the parent's long term debt. These actions have provided additional financial flexibility.

Sovereign's credit quality remains sound, however, as with its peers, has exhibited a slight increase in non-performers, especially within its commercial loan portfolio. Nonetheless, as the company has transitioned away from its past thrift-like balance sheet, which reflected a concentration in low credit cost residential mortgages, Fitch expects the company to build its reserves to reflect moderate increased credit risk and costs associated with its current loan mix. Sovereign's funding profile has transitioned to a more stable transaction account concentration versus its previous reliance on certificates of deposits.

Moody's rates King Pharmaceuticals new bank facility at Baa3

Moody's assigned a Baa3 rating to King Pharmaceuticals Inc.'s proposed new $400 million senior secured credit facility due 2007 and confirmed the existing ratings, including the $345 million guaranteed convertible senior debentures due 2021at Ba1. The rating outlook is positive.

The Baa3 rating of the $400 million senior secured credit facility, which is increased from a prior $100 million secured facility that was terminated in October, reflects the fact that the credit facility is secured by a first priority security interest in substantially all assets of the company, including intangible assets and capital stock of its subsidiaries, which Moody's believes would provide good collateral coverage in a distress situation.

The ratings continue to reflect the company's continued successful growth in sales and earnings but also anticipates a future conservative leverage profile. The Ba1 senior implied rating reflects the significant enterprise value of the company in a distress scenario.

The Ba1 rating of the convertible debentures reflects the fact that, although the debentures will be effectively subordinated to outstanding loans under the senior secured credit facility, total debt is not expected to comprise a large portion of the capital structure and the debentures will rank pari passu with other senior debt based upon the guarantees of the domestic subsidiaries.

The positive rating outlook reflects that a rating upgrade could occur in the intermediate term as the company gains more experience with its existing products, and continues its successful growth in sales and earnings, improves product diversification, maintains significant cash balances, continues conservative leverage policies, and demonstrates a commitment to an investment grade rating. Also, an unsecured credit facility would be characteristic of an investment grade rating. Failure to successfully achieve its objectives could result in a stable rating outlook. A material deterioration in operating results could result in a negative rating action.

Moody's rates new St. Paul note A2

Moody's has assigned an A2 rating to The St. Paul Companies Inc. new $500 million senior notes due 2007 and affirmed the company's A2 senior unsecured debt rating, A3 subordinated debt rating and Prime-1 commercial paper rating. The ratings currently have a stable outlook.

Proceeds from the notes will be used primarily to replace outstanding short-term borrowings, namely commercial paper, and Moody's understands that the transaction is not intended to incrementally increase outstanding debt levels.

St. Paul reported pretax operating losses of nearly $1.34 billion for 2001 and Moody's noted the company has taken a series of large charges in the last two quarters. Strategic plans to reduce or exit exposures in its healthcare, international and reinsurance segments should temper future earnings volatility and positively impact the bottom line, pending successful execution. The most significant charge in the fourth quarter was $612 million after-tax of reserve strengthening, goodwill write-downs and other restructuring charges.

Fitch confirms Thermo Electron

Fitch Ratings confirmed Thermo Electron Corp.'s senior unsecured debt at BBB+ and its subordinated convertible debt at BBB, affecting $1.2 billion of debt. The outlook is stable.

Fitch said its action follows Thermo Electron's completion of its reorganization into a single entity focused on instrumentation, started in 1998, and effectively ending with the short-form merger of Spectra Physics Lasers, Inc. on Feb. 26.

As the reorganization progressed, Thermo Electron's balance sheet remained highly liquid and the company's credit profile remained consistent with its rating, Fitch said.

Thermo Electron has taken advantage of its financial flexibility by releasing $100 million tranches of cash to repurchase stock and repay debt, Fitch noted, adding that seven tranches have been released in the last 12 months. Approximately 60% has been used to repay debt.

Thermo Electron also announced on Feb. 19 it will redeem its $398 million outstanding 4¼% convertible subordinated debentures due 2003 and $58 million outstanding 4 5/8% convertible subordinated debentures due 2003.

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