Moody's puts Xerox on review for downgrade

Moody's Investors Service put Xerox Corp.'s long-term ratings on review for downgrade, affecting $7.7 billion of debt securities. Ratings affected include Xerox's senior unsecured debt at Ba1, its subordinated debt at Ba2 and its preferred stock at Ba3; Xerox Credit Corp.'s senior unsecured debt at Ba1; Xerox Overseas Holdings Limited's senior unsecured debt at Ba1; and Xerox Capital (Europe) PLC's senior unsecured debt at Ba1.

Moody's said its review will look at "the prospects for improvement in core profitability and debt protection measures in 2002 and beyond" rather than the company's quarterly results.

At year end 2001, Moody's said, Xerox is expected to have approximately $3.9 billion of cash relative to $2.0 billion of public debt maturities in 2002 in addition to the need to refinance its fully drawn $7 billion senior unsecured revolving credit facility due October 2002.

S&P sees no near-term liquidity pressure for Kmart

Standard & Poor's said it sees no near-term liquidity pressures for Kmart Corp.

The rating agency noted Kmart has "successfully passes its peak borrowing season, has access to its $1.5 billion revolving credit facility, and has no significant near-term debt maturities."

It also anticipates the bank facility, which matures in December 2002, will be successfully refinanced.

S&P issued its statement after a Prudential analyst put a sell recommendation on Kmart's stock. The resulting stock price decline has no impact on Kmart's credit rating or outlook, S&P said.

S&P cut Kmart to BB on Nov. 27 in response to what it said were disappointing operating results and weak credit measures. It added that its negative outlook continues to reflect concerns that "a turnaround in operating performance will be challenging."

S&P rates Sepracor convertibles CCC+

Standard & Poor's assigned a CCC+ rating to Sepracor Inc.'s $500 million convertible subordinated notes due 2006 and $460 million convertible subordinated notes due 2007. The outlook remains stable.

S&P said Sepracor's ratings are based on the "emerging specialty pharmaceutical company's promising and diverse near-term drug pipeline and key relationships with several major pharmaceutical companies, offset by the significant uncertainties inherent in drug development."

Sepracor's first self-marketed product, Xopenex, for asthma, continues to post strong sales growth since its 1999 launch, S&P said. The company has several treatments in its near-term product pipeline, most notably Soltara, an allergic rhinitis treatment currently awaiting FDA approval.

Soltara will compete in the over $5 billion U.S. oral antihistamine market, which continues to grow, S&P said. The company hopes to have Soltara on the market in the second half of 2002.

Sepracor's sleep disorder treatment, Estorra, has completed clinical trials. The sleep disorder treatment market is rapidly approaching $1 billion and the company believes Estorra is more effective than currently marketed treatments. Sepracor plans a 2003 launch for Estorra, S&P added.

However the company also has operating losses related to its significant research efforts and their uncertain outcome. In addition, marketing costs for the expected launch of Soltara may be steep, particularly considering the advertising-intensive nature of the category, S&P said.

S&P rates Sanmina-SCI

Standard & Poor's assigned a BB+ corporate credit and senior secured bank loan rating to the new Sanmina-SCI Corp., raised the subordinated notes of the former Sanmina Corp. to BB- from B+ and lowered the subordinated notes of the former SCI Systems to BB- from BBB-. The outlook is stable.

Sanmina Corp. acquired SCI Systems Inc. in a stock transaction that closed on Dec. 6, 2001.

S&P said it raised Sanmina's rating in response to the improved market position of the combined company and its more diversified customer base. It lowered SCI because of "somewhat weaker credit measures for the prior rating and operational challenges associated with the merger."

Moody's puts Malan Realty on review

Moody's Investors Service put Malan Realty Investors, Inc.'s $43 million of convertible subordinated debentures under review with direction uncertain. The convertibles are rated B3.

Moody's said its action was in response to Malan's announcement it has refined its strategic direction to focus on retiring debt that expires in the next 2.5 years through the sale and refinancing of currently owned properties. It will also cease new investment in real estate, other than the reinvestment and redevelopment of properties already owned, until property sales and refinancing activities are completed.

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