Moody's puts PNC on downgrade review

Moody's Investors Service placed on review for possible downgrade the ratings of PNC Financial Services Group, including the convertible debt at A3, following the announcement that PNC has received a "deferred prosecution" from the Department of Justice.

The "deferred prosecution" follows an investigation by the DOJ into the transfer of certain assets to companies formed with American International Group Inc. PNC will establish a $90 million restitution fund to satisfy shareholder claims stemming from this and to pay a $25 million penalty to the government.

PNC has already entered into a written agreement in July with the Federal Reserve Bank of Cleveland and the Office of the Comptroller of Currency with regard to disclosure, accounting and record-keeping violations, in respect of these transactions.

The agency noted that following the July supervisory agreements, PNC was forced to make a number of managerial and operational changes.

Moody's said it continues to assess these changes. If well executed Moody's expects that the longer-term effects should have positive implications for PNC's core fundamentals.

Existing ratings incorporate solid liquidity position at both the bank and holding company, while earnings power and diversity is complemented by a number of fee related revenue generators.

Fitch revises Xcel watch to positive

Fitch Ratings revised the watch status for Xcel Energy Inc. and subsidiaries to positive from negative, to reflect NRG Energy Inc.'s recent voluntary bankruptcy and the reasonable possibility of a resolution in which Xcel's exposure to NRG is limited.

The watch status also considers that Xcel and its consolidated subsidiaries have adequate liquidity to meet expected cash requirements and have demonstrated the ability to finance in the capital and banking markets.

NRG's bankruptcy filing on May 14 includes a reorganization plan that incorporates the terms of an overall settlement signed by Xcel and holders of 40% of NRG's long term notes and bonds as well as two banks. Under the plan, Xcel would pay NRG creditors up to $752 million in three installments in the next 12 months in exchange for a release by creditors of any future claims against Xcel.

Ratings affected by the watch include Xcel Energy senior unsecured debt at BB+, along with several other subsidiary ratings.

Moody's confirms Cablevision ratings

Moody's confirmed its ratings for Cablevision Systems Corp. following board approval of a tax-free spin-off to shareholders of its satellite business and the Clearview Cinemas. The outlook remains stable.

While Cablevision's commitment to provide up to $564 million of incremental capital to finance Rainbow DBS is a credit negative, credit metrics are not materially weakened nor is liquidity sufficiently threatened to warrant any rating changes at this time.

Moody's noted the proposed spin-off partially offsets recent liquidity strengthening and provides no value to Cablevision creditors.

Pro forma for the spin-off, CSC will have spent about $900 million by Moody's estimates on the DBS venture.

Moody's estimates that, inclusive of the Clearview Cinemas and The Wiz acquisitions, capital expended in this regard will likely exceed $1.5 billion in aggregate for businesses that either no longer exist or will not be available to help service obligations.

Moreover, the spin-off is tantamount to a large stock dividend for shareholders, which is a credit negative from a rating perspective, Moody's said.

On a broader basis, though, Moody's noted the generally positive trend in the company's ratings over the last several months as a mitigating factor for these credit negatives. The intrinsic strength of core businesses, as anticipated, lends further ratings support.

S&P rates new IOS notes BBB-

Standard & Poor's assigned a BBB- rating to IOS Capital LLC's proposed $250 million senior unsecured notes due 2008. Ratings on IOS Capital and parent, IKON Office Solutions Inc. (BBB-), remain on negative watch, however.

IKON Office Solutions has a $300 million unsecured revolving credit facility contractually maturing in May 2005. The facility had no amounts outstanding as of May 1, 2003, but was being used to support letters of credit.

However, the credit facility will mature on Dec. 15, 2003, unless IKON achieves certain debt ratings, or has redeemed or defeased IOS Capital's 9.75% notes due June 15, 2004. The proposed notes are being offered in conjunction with a tender offer for all of the outstanding $240.5 million 9.75% IOS Capital notes.

On completion of the tender and notes offering, the ratings will remain on negative watch.

Moody's confirms PMI ratings

Moody's Investors Service confirmed the A1 senior debt rating of The PMI Group, Inc., along with other ratings, due to recent developments at Fairbanks Capital Holding Corp., a 57% uncontrolled subsidiary, and PMI's successful consent to amend the indenture for its 2.5% convertible to remove the potential cross default with Fairbanks debt. The outlook is stable.

On May 5, Moody's downgraded the servicer ratings of Fairbanks on concerns about its ongoing financial stability and its ability to successfully address compliance issues without suffering an erosion in serviced loan performance.

Fairbanks' financial condition has been affected by ongoing investigations by the Federal Trade Commission and the Department of Housing and Urban Development that could have a negative impact on its loan performance. Also, these events put pressure on financial flexibility, liquidity and its business franchise.

The outlook for PMI reflects Moody's conclusion that despite the potential impairment of its investment in Fairbanks, PMI's financial strength and overall strong business profile are sufficient to absorb any likely potential investment loss.

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