Fitch cuts Atlantic Mutual

Fitch Ratings downgraded Atlantic Mutual Cos. including cutting Atlantic Mutual Insurance Co.'s surplus notes to BB- from BB. The outlook is stable.

Fitch said the action follows announcements that Atlantic Mutual has had sold the renewal rights to a substantial portion of its marine business to Travelers Indemnity Co. to conclude a previously announced capital-raising initiative.

Fitch said it believes it is likely that the proceeds from the renewal rights sale will not be sufficient to replenish the capital that would be lost if Atlantic Mutual were to strengthen reserves to the required level indicated by Fitch's modeling.

Fitch has considered the results of Atlantic Mutual's recently completed ground-up asbestos study, which suggested a range of reserve deficiency somewhat less than Fitch's estimate. Fitch has incorporated its expectations of the reserve strengthening needed into its analysis and, therefore, is assigning a stable outlook.

Positively, Fitch noted Atlantic Mutual's progress in its capital raising efforts and improvements in the quality of capital. In addition to the benefits realized on the renewal rights sale, Atlantic Mutual raised $15 million through the sale of surplus notes earlier this year. Atlantic Mutual also realized gains of approximately $50 million on its investment portfolio. Fitch also noted that Atlantic Mutual has used the proceeds of these efforts to substantially reduce the level of soft capital that had been generated by previous reinsurance transactions.

S&P upgrades Tatneft

Standard & Poor's upgraded OAO Tatneft's corporate credit rating to B from B-. The outlook is stable.

S&P said the action is in response to the improving financial profile of Tatarstan and Tatneft's gradual debt reduction.

S&P upgraded Tatarstan's foreign-currency rating to B- from CCC+ on Sept. 22.

Tatarstan's improving budgetary performance and low debt burden have helped reduce the republic's immediate need for Tatneft's financial support, S&P said.

The rating on Tatneft continues to be constrained, however, by the close and non-transparent influence of the republic, as well as the company's below-average profitability, low downstream integration and weak liquidity position.

The full benefit of Tatneft's participation - in cooperation with other Tatarstan entities - in the Nizhnekamsk refinery construction in Tatarstan can only be realized after the second stage is commissioned, no earlier than 2006-2007, and if the shareholding structure is finalized.

S&P rates MMK notes B

Standard & Poor's assigned a B rating to MMK Finance SA's proposed five-year senior unsecured notes.

The notes are guaranteed by related Russian steel company OAO Magnitogorsk Metallurgical Kombinat (B/positive).

The rating on the bond reflects the long-term corporate credit rating on MMK. In the short term, the key uncertainty for MMK is the privatization of the Russian government's 23.76% stake in MMK, which is scheduled for later this year. MMK's management currently controls a 62% stake in the company and is expected to seek control of the government stake.

The effect of the privatization process on the company's credit quality is still uncertain and will depend on the identity of the successful buyer, the price to be paid and the structure of the transaction, S&p said.

In addition, the ratings on MMK reflect the steel industry risks, the company's position as a land-locked export-oriented commodity manufacturer with high capital requirements and the risks of operating in the Russian Federation (foreign currency: BB/stable).

These risks are offset, however, by the company's low, albeit eroding, cost base, supported by access to low-cost energy and labor resources, and by its currently strong financial profile, S&P said. This improves the company's resilience to industry downturns.

Furthermore, MMK has been able to demonstrate high profitability and healthy debt protection ratios.

S&P said it believes MMK's current strengths are likely to warrant a one-notch upgrade if the privatization does not significantly drain the company's financial resources or threaten to alter its demonstrated strategy of measured investment in modernization.

S&P rates Vitro notes B-

Standard & Poor's assigned a B- rating to Vitro SA de CV's proposed $250 million senior notes due 2013. The outlook is negative.

S&P said Vitro's liquidity is limited and covenant room is tight. Vitro faces short-term debt maturities of $456 million (of which $206 million is revolving trade finance facilities) over the next 12 months.

Nevertheless, the company has demonstrated good access to financing and was able to obtain waivers of certain financial ratio covenants contained in two credit agreements in connection with an expected noncompliance of such covenants, S&P said.

The negative outlook reflects the challenging operating and economic environment faced by Vitro's business that could lead to continued weakness in the company's operating performance and key financial measures, S&P said. A recovery in the company's operating and financial performance and the success of the company's refinancing plans could lead to a stable outlook.

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