S&P rates new Province notes B-

Standard & Poor's assigned a B- rating to Province Healthcare Co.'s new $150 million senior subordinated notes due 2013 and confirmed its other ratings, including the B- subordinated convertibles.

The senior secured bank loan rating was raised to BB- from B+, reflecting the proceeds of the new issue being used to repay outstanding bank debt and reducing the total size of the credit facility to $200 million from $250 million.

The outlook is stable.

The upgrade also reflects growth in assets and cash flow, S&P said.

The speculative-grade corporate credit rating reflects improving, but still-limited, hospital portfolio diversity and vulnerability to adverse operating trends.

These factors are offset somewhat by the company's strong market position in small, non-urban markets.

Liquidity consists of $16 million cash and a $132 million available borrowing capacity under its senior credit facility due 2005, and improves with the new debt.

There are no material debt maturities until 2005. The company will generate modest free cash flow after meeting its operating and capital needs.

Ratings incorporate expectations of a modest debt-financed acquisition program, as well as the success of refocused efforts to reduce operating volatility.

Fitch rates Hartford mandatory A

Fitch Ratings assigned an A rating to The Hartford Financial Services Group Inc.'s new mandatory convertible and senior debt but said the ratings are on negative watch, which is consistent with the current long-term issuer and outstanding senior debt ratings.

Fitch said it would anticipate affirming current ratings and assigning a stable outlook once the capital-raising transactions close.

Fitch considers the convertible to maintain a high level of equity credit. The immediate impact on financial leverage is expected to be modest. On Fitch's equity-credit adjusted basis, debt-to-capital will move from 24% at yearend 2002 to a pro forma 26%.

Moody's rates Regal convert B3, raises outlook

Moody's Investors Service assigned a B3 rating to Regal Entertainment Group's proposed convertible and a Ba2 rating to the new term loan for subsidiary Regal Cinemas Inc.

Other ratings were confirmed.

The outlook, however, was changed from positive to stable to reflect the diminished prospect of formerly favorable rating momentum and near-term upgrade potential following a meaningful diminution in the credit profile after the proposed transactions.

The rating actions broadly incorporate higher financial leverage and weaker liquidity position following the large-scale planned decapitalization, but also strong underlying asset base.

Ratings are supported by a still relatively strong balance sheet, even after removing more than 20% of the equity base through the proposed special dividend, Moody's said.

It is expected that operations will continue to perform at industry-leading levels, generating a meaningful amount of free cash flow on a sustained basis, which in conjunction with a reduction in the forward dividend rate should facilitate the replenishment of excess cash balances.

The use of debt to predominantly fund the proposed $625 million special dividend to shareholders and the permanent reduction of equity capital, which has provided some downside protective cushion for creditors since the company emerged from bankruptcy just over a year ago, runs strongly counter to the dramatic positive strides which had been made over this period.

The rating for the convertible reflects the structurally subordinated position to all claims on the company's operating subsidiaries, offset somewhat by the largely unlevered nature of the remaining unrestricted assets of United Artists, which are arguably of reduced quality.

Fitch rates Northwest convert B

Fitch Ratings assigned a B rating to Northwest Airlines Corp.'s new convertible. The outlook is negative.

The rating reflects continuing concerns over Northwest's capacity to deliver substantial improvements in operating cash flow that will be necessary if the airline is to meet growing cash financing obligations, Fitch said.

In light of the weak business travel demand environment that clouds prospects for a quick rebound in industry unit revenue, Northwest's future liquidity position will be influenced primarily by its success in negotiating labor cost reductions with its unionized employees.

The credit profile has clearly benefited from a focus on cash conservation during the revenue crisis. Liquidity remains a source of relative strength, with an unrestricted cash balance of $2.2 billion at March 31.

In addition to $497 million in current maturities of long-term debt and capital leases, Northwest faces $1.85 billion in projected 2003 capital spending, primarily related to the purchase of new aircraft.

Northwest is seeking alternatives to cash funding of its defined benefit pension plan, including a waiver of all 2003 required cash contributions. Still, the airline reported an underfunded pension obligation of $3.9 billion as of yearend 2002.

Without near-term success on the labor front, it will be difficult for Northwest to maintain its liquidity position and begin the process of rebuilding a highly leveraged balance sheet.

Moody's confirmed Xcel Energy

Moody's Investors Service confirmed the ratings of Xcel Energy Inc. (Baa3 senior unsecured, Ba2 preferreds),

The outlook is stable, and Moody's revised the rating outlook of Xcel's regulated utility operating subsidiaries to stable from negative.

The confirmation reflects the May 14 bankruptcy filing by Xcel subsidiary, NRG Energy Inc., and a settlement among NRG, Xcel and NRG's major creditors under which Xcel will pay NRG and creditors up to $752 million in three payments commencing with NRG's emergence from bankruptcy.

NRG's bankruptcy results in increased clarity around Xcel's exposure to potential litigation by those creditors. Xcel will be able to deconsolidate the NRG financials from consolidated results, improving its debt to total capitalization ratio to 58% from 78%.

Moody's expects settlement payments to be funded with cash, tax NOLs and a refund from the IRS relating to Xcel's filing to claim NRG as a worthless stock tax deduction. These sources are expected to provide sufficient resources to fund settlement payments, debt service and pay stock dividends.

The outlook reflects expected recovery of Xcel's financial profile and the lower risk nature of its remaining businesses as the company's largest non-regulated business has been eliminated.

Xcel's consolidated funds from operation to total debt is expected to approximate 20% over the next few years and consolidated FFO coverage of interest should hover around 4x.

Fitch cuts EDS to BBB+

Fitch Ratings downgraded Electronic Data Systems Corp.'s senior unsecured debt to BBB+ from A- but affirmed the commercial paper program at F2. Also, the outlook was revised to stable from negative.

The downgrade reflects an expectation that the company will not meet its operating targets for 2003, the $334 million loss on the Navy and Marine Corps Intranet contract in first quarter, an expansion of the SEC investigation, write-downs of problem contracts in first quarter and a belief that financial and operating performance in the intermediate term will be more volatile than historical patterns, Fitch said.

The outlook reflects the additional capacity for operational shortfall within the current rating category as the possibility of further credit erosion exists for the next few quarters. However, Fitch does not believe leverage will go beyond 2x and interest coverage should remain within the 10x range.

Liquidity at March 31 included $1.8 billion of cash and equivalents and $1,250 million of unused committed lines of credit which serve as backup facilities for CP borrowings. Total debt at March 31 was about $5.2 billion, including the $1.6 billion mandatory and $800 million of 0% convertible notes.

There is a put on the 0% convertible in October, payable in cash, and Fitch said the unrestricted cash position of $1.4 billion is expected to be used to satisfy that, as well as dividends for $300 million.

Estimated leverage for the last 12 months at March 31 was about 1.6x. With 80% equity credit given for the mandatory, leverage is estimated at 1.2x.

Fitch believes further credit erosion could occur for the next few quarters as a result of cash flow pressures, offset by an expected net debt reduction.

Moody's puts Central Parking on review for downgrade

Moody's Investors Service placed the ratings of Central Parking Corp. on review for possible downgrade, including the B1 convertible trust preferreds, based on weakening financial performance and concern that margins and coverage ratios will remain under pressure.

As of March 31, the company required a waiver for both its leverage and senior leverage ratio covenants. Central Parking received a temporary waiver and is in the process of seeking an amendment and renegotiating covenants.

Ratings may be downgraded before the conclusion of the covenant renegotiation if financial performance and overall credit quality continue to deteriorate, Moody's said.

Moody's noted that the company's previous CFO and CEO both resigned from their positions in recent months, and founder and chairman Monroe J. Carell, Jr. was named chief executive officer. Moody's understands that the change in senior management is to result in a greater emphasis on expense reduction.

Fitch affirms Countrywide

Fitch Ratings confirmed the ratings of Countrywide Financial Corp., including the convertible debentures at A. The outlook is negative.

The confirmation is the result of additional capital support, strong origination and servicing platforms, declining capitalization of mortgage servicing rights in relation to capital and continued strength in operating results.

The outlook reflects relatively more aggressive MSR valuations compared to industry peers and the need for improvement in the processes and procedures to effectively manage the complex process of hedging the MSR asset.

In addition, Fitch has a concern that increased growth and complexity of the business has outpaced corporate governance, internal controls and audit capabilities regarding MSR management.

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