Moody's downgrades Providian Financial to Ba3

Moody's Investors Service downgraded Providian Financial Corp.'s senior debt to Ba3 from Ba1,concluding a ratings review begun a week earlier following Providian's announcement that it has experienced an unexpected deterioration in credit quality in its higher-risk standard segment and that its CEO and founder, Shailesh Mehta, is resigning. The outlook is negative.

Moody's said the downgrade reflects "Providian's weaker earnings profile, which provides less protection for bondholders and depositors. In addition, the company's future business opportunities appear to be more limited given the difficulties it has encountered in two of its three main segments."

The rating agency noted Providian's "sizable" on-balance sheet liquidity is sufficent to meet its liquidity needs for several months. "This liquidity position gives the company some time to restore investor confidence and stabilize its performance,"Moody's commented. "Nonetheless, the recent decline in investor confidence raises an element of uncertainty regarding Providian's longer-term liquidity and funding position. The negative ratings outlook reflects these risk factors."

Moody's downgrades ACT Manufacturing convertibles to Caa3 from B3

Moody's Investors Service downgraded ACT Manufacturing, Inc.'s ratings inlcuding cutting its $100 million of 7% convertible subordinated notes due 2007 to Caa3 from B3. Moody's also cut ACT Manufacturing's $87 million guaranteed senior secured term loan facility due 2005 and its $150 million guaranteed senior secured revolving credit facility due 2005 to B2 from B1. The outlook is negative.

Moody's said the downgrades are based on ACT Manufacturing's "strained liquidity; leveraged capitalization; diminishing revenues and margins; and weakening communications and computing end use markets which accounted for 51% and 27%, respectively, of FY2001 Q3 revenues."

The rating agency said that during the fiscal third and fourth quarters ACT Manufacturing exceeded the borrowing base limitations on its revolver drawings, subsequently remitting the amounts required to attain compliance with the collateral availability formula."

Moody's said there have been discussions between ACT Manufacturing and its bank syndicate to obtain required consents and amendments as well as to address required liquidity. "Working capital issues with certain customers have led the company to take charges against inventory and discontinue relationships," Moody's said. "Additionally, the company's reliance on cash generated from operations has forced it to dispose of excess quantities of parts and components to customers and vendors at less than full margin."

Fitch downgrades AT&T's short-term rating, puts long-term rating on negative watch

Fitch lowered the short-term debt rating of AT&T Corp. to F2 from F1 and put its long-term A- senior unsecured rating on Rating Watch Negative.

Fitch said it cut AT&T's short-term rating because it cannot currently access the top-tier commercial paper market, removing an important source of liquidity and financial flexibility. Fitch said at the end of the third quarter AT&T had $18.4 billion of short-term debt of which $8.5 billion represents commercial paper, net of $4.2 billion of cash. Cash has subsequently increased to $6 billion due to sales of AT&T's Cablevision stake and a portion of its AT&T Wireless retained interest.

With sales of the remaining AT&T Wireless retained interest, its stake in Rainbow Media and the announced cable system sale to Adelphia producing expected net proceeds of $1.4 billion by year-end and a $5-$7 billion bond offering under way, Fitch says AT&T will have a significant cash balance heading into 2002.

For the long-term ratings, Fitch said it is concerned about the EBITDA trend at AT&T Communications Services over the next two years, the underlying industry volatility of its core long distance business and the company's ultimate ability to produce an A- like credit profile.

Moody's affirms Stilwell at Baa1

Moody's Investors Service affirmed Stilwell Financial Inc.'s long-term rating, including its senior debt at Baa1, affecting $1.2 billion of securities. The outlook is stable.

Moody's action follows the announcement that Stilwell plans to issue up to $500 million in senior unsecured debt.

Moody's said the debt issuance and Stilwell's increased leverage were anticipated when the rating agency first rated Stilwell in August 2001.

"At the time, Moody's expected that Thomas Bailey, the CEO of Stilwell subsidiary Janus Capital, would exercise his put option, requiring Stilwell to raise cash to fund this obligation," the rating agency said.

S&P rates new Fairchild convertibles B

Standard & Poor's said it rated Fairchild Semiconductor Corp.'s recent offering of $200 million of 5% convertible notes due 2008 at B.

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