Moody's upgrades Heller Financial on GE acquisition

Moody's Investors Service on Thursday upgraded Heller Financial Inc.'s ratings for senior debt to Aaa from A3 and subordinated to Aa1 from Baa1 as a result of the company's acquisition by General Electric Capital Corp. The rating outlook is stable, Moody's said.

S&P affirms Avaya ratings at BBB

Standard & Poor's on Thursday affirmed its triple-B corporate credit rating for Avaya Inc. S&P said the ratings reflect the company's moderate capitalization and good position in the enterprise voice communications equipment market, and resulting good cash flow-generating capability from equipment maintenance contracts. These factors are offset by aggressive industry competition, uncertain levels of enterprise capital spending in light of economic conditions, and longer-term technology transition issues. Avaya's debt levels were $645 million at Sept. 30, 2001. Debt leverage was moderate at 42% of capital. About $1.7 billion in revolving credit availability and $250 million in cash provide good financial flexibility. S&P said the outlook was negative, noting Avaya faces substantial longer-term challenges to sustain its position as data-based communications supplant traditional enterprise voice communications systems. Avaya shares closed down $1.20 to $9.40.

Moody's downgrades AT&T to A3 from A2

Moody's Investors Service downgraded AT&T Corp.'s ratings, including cutting its senior unsecured debt to A3 from A2 and its broadband operations' senior unsecured debt to Baa1 from A3. The short-term rating was cut to Prime-2 from Prime-1. All long-term ratings remain on review for further downgrade.

The rating agency said there are "reasonable scenarios" which would continue to support an A3 rating but other less favorable outcomes would lead to a downgrade.

Moody's said it would conclude the reviews once the fate of AT&T Broadband is resolved. It will be looking at debt service requirements and cash generating abilities of the various units.

Moody's said its rating actions reflect the "deterioration in the prospective performance of the company's telephony operations and concerns that debt reduction efforts from the sale or monetization of non-core assets are likely to fall short of previous expectations."

The performance outlook for the broadband business is "solid," Moody's added, but said it will not merit ratings above the Baa area.

Fitch affirms AT&T

Fitch affirmed AT&T Corp.'s ratings, including its A- senior unsecured and F1 short-term debt rating. The outlook remains stable. Also the A- senior unsecured debt ratings of MediaOne Group, Inc., MediaOne Group Funding, Inc., MediaOne of Delaware, Inc. and TCI Communications and the BBB+ senior subordinated notes and convertible subordinated debt rating of TCI Communications and the BBB TOPrs preferred stock ratings of MediaOne Group Funding, Inc., MediaOne Finance Trust III, and TCI Communications remain on Rating Watch Negative.

The rating agency said AT&T has been "successful in completing or initiating a large number of deleveraging elements" including spinning off AT&T Wireless Services.

While the outcome for the broadband unit may be different than that originally planned, Fitch said AT&T "remains committed to deleveraging and positioning AT&T Communications Services and AT&T Broadband with credit profiles reflective of their peers."

Fitch anticipates the TCI and MediaOne debt securities and the majority of hybrid debt instruments will remain with the broadband company.

The remaining AT&T debt will be transferred to AT&T Communications Services which Fitch anticipates will be rated A-. However it said its greatest concern is the expected near- and medium-term declines in EBITDA (earnings before interest, taxation, depreciation and amortization) .

S&P cuts Enron outlook to negative

Standard & Poor's cut its outlook on Enron Corp. to negative from stable. S&P rates Enron BBB+.

The rating agency said it is concerned that the significant drop in market capitalization in the apst week has adversely affected Enron's financial flexibility and could impede management's ability to rebuild its balance sheet.

S&P noted: "Enron expects to use asset sales proceeds over the next year to restore its balance-sheet strength to a level that is consistent with current ratings."

The rating agency does not believe Enron has liquidity concerns but said the company will be "challenged to economically convert its sizable portfolio of non-strategic assets into cash to reduce debt and strengthen its balance sheet."

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