S&P cuts Hanover Compressor

Standard & Poor's lowered its ratings on Hanover Compressor Co., including the 4.75% convertible due 2008 to B+ from BB- and the convertible preferred to B- from B+.

The downgrade reflects a slower-than-anticipated rebound in industry conditions, tight liquidity, diminished financial flexibility and the uncertain impact of the Venezuela oil strike on Hanover's cash flow, S&P said.

Although Hanover improved liquidity by successfully negotiating amendments to financial covenants in its bank credit facility, liquidity will remain tight as the new covenants still limit available borrowing capacity.

Hanover granted lenders under its revolver and certain operating leases a security interest in inventory, equipment and property, plus pledged 65% of the equity interest in its foreign subsidiaries, therefore excluding it from using these assets as a potential source of security for future financings.

The outlook is negative, reflecting continued concerns regarding Hanover's ability to fortify its capital structure and the uncertainty surrounding the outcome of the SEC's formal investigation into its financial restatements, S&P said.

Ratings could be revised downward if Hanover continues to run significant free cash flow deficits and is required to seek external financing that increases its debt burden materially. Longer-term, ratings could be downgraded if there is difficulty in refinancing debt maturing in 2004.

Fitch affirms U.S. Bancorp

Fitch Ratings affirmed U.S. Bancorp's ratings, including the 0% convertible due 2021 at A, following its announcement that it is spinning off its wholly owned brokerage unit, U.S. Bancorp Piper Jaffray, to shareholders.

This decision ends speculation surrounding the fate of Piper Jaffray which has long been rumored to be for sale. USB has taken steps over the last year or so to manage Piper Jaffray as a stand-alone entity, easing its transition to an independent company, Fitch noted.

Following the expected 3Q03 spin-off, USB will not retain an equity interest in Piper Jaffray, however it will continue to hold $215 million of Piper Jaffray's subordinated debt. As Piper Jaffray was not a major contributor to the combined company's earnings - 1% of 2002 earnings - no material financial impact is expected.

Fitch affirms Prudential

Fitch Ratings affirmed the ratings of Prudential Financial Inc., including the long-term issuer rating of A and short-term issuer rating of F1, following the merger agreement with Wachovia Corp.

The outlook is stable.

S&P cuts Reliant Resources

Standard & Poor's downgraded Reliant Resources Inc. and kept it on CreditWatch with developing implications. Ratings lowered include Orion Power Holdings Inc.'s $200 million 4.5% convertible senior notes due 2008 and $375 million 12% senior notes due 2010, cut to CCC from B-, and Reliant Energy Mid-Atlantic Power Holdings LLC's $210 million 8.554% passthrough certificates series A due 2005, $220 million 9.681% passthrough certificates series C due 2026 and $421 million 9.237% passthrough certificates series B due 2017, cut to B- from B+.

S&P said the downgrade reflects the time frame that Reliant Resources has to reach an agreement with its lenders.

S&P said it believes that the possibility of a default and a bankruptcy filing within the next 12 months, and particularly within 60 days, is not consistent with a default rating of B+.

Reliant Resources faces no new uncertainties regarding the refinancing of its bank maturities. The company has obtained an extension from its banks extending the due date until March 28, 2003. However, should less than 100% of the bank lenders agree to commit to the terms of a renegotiated deal representing a long-term solution, a default could occur, S&P said. Reliant Resources currently has no access to the capital markets and lacks adequate liquid funds to fully repay the $2.9 billion maturity on March 28.

If Reliant Resources is unable to obtain commitments from all of its bank lenders, it may resolve its credit situation in a bankruptcy filing.

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