S&P cuts AES ratings

Standard & Poor's lowered ratings on The AES Corp., including its senior notes to B+ from BB-, subordinated debt to B- from B and convertible trust preferreds to CCC+ from B-, and placed the ratings on negative watch.

The downgrade follows AES' launch of a $1.62 billion secured bank facility, combined with up to $350 million in senior secured exchange notes maturing December 2005.

If this transaction is successful, it will increase flexibility by pushing off any substantial maturities for up to three years, S&P said.

However, the downgrade reflects continued deterioration in Latin American businesses and anticipation that cost cutting and improved performance at other businesses will not make up for those losses to the extent that AES had projected in its guidance provided after the second quarter.

If the tender is successful, AES will not be paying down maturities out of operating cash flow as they come due, as had been the plan, but rather will be paying down debt as proceeds from asset sales are realized, which will likely result in less timely deleveraging than had been anticipated.

If AES closes the transaction, its corporate credit rating will be B+ and the outlook will be negative due to the need to execute on the remainder of the asset sale program.

While the burden of debt maturities would be lifted, AES still needs to execute an asset sale program to pay down the bank facility over time. If AES cannot execute asset sales, its solvency could be threatened, S&P said.

If and as such a plan is executed and if market access improves, the negative outlook would be lifted, and as debt is paid down, the rating would move up assuming the current cash flow profile is maintained.

If AES were to fail in executing this transaction, the rating would fall to B or further depending on the circumstances, and would remain on negative watch, S&P added. AES would then need to repay the December maturity, close on its bank facility, and begin to execute its asset sale program to maintain its solvency.

Fitch cuts AES ratings

Fitch Ratings lowered the ratings of The AES Corp. senior unsecured notes to B from BB-, senior subordinated notes to B- from B and convertible junior debentures and trust preferred convertible preferred securities to CCC+ from B- in response to its launch of a $1.6 billion senior secured credit facility and offer to exchange up to $500 million of senior notes. The ratings remain on negative watch Negative.

Fitch views the proposed transactions as a positive step for AES Corp. with the prospect to eliminate grave refinancing risks that currently overshadow the corporate credit. If the bank refinancing and exchange offer are successful, AES will have minimal debt maturities until the fourth quarter of 2005.

If these transactions fail, the B senior unsecured rating may be further reduced to reflect an imminent liquidity crisis and refinancing risk, Fitch warned.

In the next two years, relieved from the burden of heavy debt maturities, the company plans to pay down the restructured debt using excess parent operating cash flow and proceeds from more asset sales. Barring any further unforeseen deterioration, the credit metrics are expected to stabilize and see potential for improvement in late 2003 to early 2004.

Moody's assigns SPX liquidity rating

Moody's assigned an SGL-1 rating to SPX Corp., reflecting that operational cash flow should adequately cover capital spending, scheduled debt amortization and other financial commitments over the next 12 months.

SPX has built up a sizable cash balance and there is no balance outstanding on its $600 million committed revolving credit facility. It should also remain comfortably in compliance with bank financial covenants, Moody's said.

The company may be required to purchase all or a portion of its 0% convertible notes, with total face value of $1.4 billion, beginning May 9, 2003. However, the company may at its option, choose to pay in cash and/or stock.

S&P revises AMD outlook

Standard & Poor's affirmed the ratings of Advanced Micro Devices Inc., but revised the outlook to negative from stable.

The negative outlook is because weak sales and cash flows are likely to place substantial pressures on liquidity and financial flexibility. S&P anticipates that operating cash flows will also be substantially negative.

If the company cannot stabilize its operating performance over the next few quarters, ratings could be lowered, S&P said.

AMD had $1.7 billion of total debt outstanding as of June 30.

Ratings reflect challenging market conditions and its dwindling liquidity.

Cash balances at June 30 were $1.1 billion, having declined $175 million in June on a $100 million operating loss.

AMD has a $200 million revolving credit agreement, of which $75 million was in use on June 30 that expires in July 2003 and is secured by working capital, .

AMD's Dresden, Germany-based subsidiary has $558 million of bank debt outstanding, guaranteed by German governmental agencies. The company is expected to remain in compliance with the terms of the guarantees but if not it would trigger a cross-default of the domestic revolving facility.

Fitch cuts Duke Energy

Fitch Ratings downgraded the ratings of the Duke Energy Corp. and subsidiaries, including senior unsecured debt to A from A+ and preferreds to A- from A.

The outlook remains negative due to continued uncertainties in merchant energy markets and the on-going investigations by FERC and the SEC, Fitch said.

The downgrade primarily reflects the credit impact of management's recent announcement that profits in 2002 and 2003 will be well below previous expectations.

Given the revised earnings forecast, credit protection measures will be weaker than previously expected, but consistent with the new ratings, Fitch said.

The lower income forecast is offset, in part, by the planned reductions in capital expenditures of about $7 billion during the 2002-2004 period. Internally generated cash, including a modest amount of non-core asset sales, is expected to be sufficient to fund the revised capital expenditures in 2003 and 2004.

Management also delivered on its commitment to issue $1 billion of common stock. Proceeds were used to repay an equivalent amount of commercial paper issued to fund a portion of the Westcoast Energy acquisition in March 2002.

Duke's liquidity position is relatively strong. Duke Energy and Duke Capital recently renewed their bank credit facilities that total about $3.4 billion. About $1.7 billion is currently available under the various credit agreements.

The company also has temporary committed credit facilities with financial institutions totaling $1 billion that provide an additional liquidity cushion to meet debt maturities of about $1.3 billion in 2003. Duke is targeting $1 billion of asset sales in 2003 that if successful will be used to retire debt.

S&P rates Compal convertibles BBB-

Standard & Poor's assigned a BBB- rating to Compal Electronics Inc.'s $300 million zero coupon convertible bonds due 2007.

S&P cuts Swiss Re

Standard & Poor's downgraded Swiss Reinsurance Co. and removed it from CreditWatch with negative implications.

Ratings lowered include Swiss Re America Holding Corp.'s $1 billion convertible bonds due 2021 to AA- from AA, Life Re Capital Trust II's $136.6 million adjustable conversion-rate equity security units (ACES) to A+ from AA- and Pearl Holding Ltd.'s €1 billion 2% convertible bonds due 2010, cut to AA+ from AAA.

S&P cuts some Telewest ratings

Standard & Poor's downgraded some ratings of Telewest Communications plc and its subsidiaries and removed them from CreditWatch with negative implications.

Ratings lowered include Telewest's $300 million 9.625% senior debentures due 2006 and $1.536 billion 11% senior discount debentures due 2007, both cut to D from C, and Telewest Communications Networks Ltd.'s £250 million senior secured bank loan due 2008 and £2 billion senior secured bank loan due 2007, cut to C from CCC-.

Ratings confirmed include Telewest's $350 million 11.25% senior notes due 2008, £300 million convertible notes due 2007, £325 million 9.875% senior discount notes due 2009, £180 million 9.875% notes due 2010, $450 million senior discount notes due 2010 and $350 million 9.875% senior notes due 2010 and Telewest Finance (Jersey) Ltd.'s $500 million 6% convertible bonds due 2005, all at C.

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