S&P keeps WorldCom on negative watch

Standard & Poors said it is keeping the BB corporate credit rating on WorldCom Inc. on watch with negative implications, following the company's announcement that it would eliminate the MCI Group tracking stock as of July 12 and the related dividend.

The elimination of the dividend will result in annual savings of $284 million, which will bolster near-term liquidity. However, WorldCom will need to negotiate a longer-term credit facility or other source of funds to assuage S&P's concerns.

S&P cuts PerkinElmer ratings

Standard & Poor's lowered its corporate credit, senior unsecured and bank loan ratings on PerkinElmer Inc. to BBB- from BBB+, including the 0% convertible notes due 2020, and lowered its short-term corporate credit and commercial paper ratings to A-3 from A-2.

The outlook remains negative and could be pressured unless operating performance improves throughout the year from weak first quarter levels, S&P said.

The downgrade is based on lower-than-expected profitability and weaker credit protection measures.

The ratings reflect an average business risk profile and an improving market position in life sciences, which has favorable growth prospects, supports the business profile.

These factors are offset by weaker-than-expected operating performance, challenges associated with its Optoelectronics business and a weaker economic environment.

Total debt was $821 million as of March 31 and total debt to EBITDA for the 12 months ended March 31 was more than 4 times, which is somewhat high for the rating level.

However, EBITDA interest coverage remains adequate at above 6 times for the same period.

S&P expects that proceeds from announced divestitures of non-core businesses will be used to materially reduce debt levels in the near term and improve credit measures.

Additionally, the ratings incorporate the expectation that PerkinElmer will generate moderate amounts of free operating cash flow in 2002 despite weaker profitability and restructuring charges.

Working capital needs are modest and capital expenditures are likely to be reduced considerably from nearly $90 million in 2001.

Although the company has a $170 million cash balance at the end of its first quarter, about $220 million of commercial paper was outstanding. The company has available credit facilities totaling $370 million as of March 31.

S&P says rate hike has no effect on Nevada Power

Standard & Poor's said a temporary one cent per kilowatt hour rate increase in June for Nevada Power Co. will not have a materially positive impact on the company's liquidity situation.

The order by the Public Utilities Commission of Nevada will bring in an additional $16 million in June for the cash-strapped utility but will not provide any additional revenues to the company. It will merely accelerate the collection of the $485 million rate increase for power and fuel purchase expenses approved in March, S&P said.

In fact, the acceleration will probably result in Nevada Power receiving slightly lower carrying charges for collecting the $485 million over three years, S&P added. However, the increase does provide some additional cash to fund power purchases during the critical month of July.

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