S&P puts Titan on positive watch

Standard & Poor's put The Titan Corp. on CreditWatch positive including its $200 million senior subordinated notes due 2011 at B and $100 million revolving credit facility, $350 million term loan due 2009 at BB- and $50 million revolving credit facility due 2009 at BB-.

S&P said the watch placement follows the announced acquisition of Titan by Lockheed Martin Corp. (BBB/Stable).

Titan and Lockheed Martin will commence an offer to exchange Titan's existing 8% senior subordinated notes due 2011, which will have substantially identical terms to the existing notes, except that the new notes will be registered under the Securities Act and will be guaranteed by Lockheed Martin. At the closing of the merger and issuance of the new notes, S&P will equalize Titan's ratings to that of its new parent.

Moody's puts Titan on upgrade review

Moody's Investors Service put Titan Corp.'s ratings on review for possible upgrade including its secured term loan and secured revolving credit facility at Ba3 and senior subordinated notes at B2.

The review follows the announcement that Lockheed Martin Corp. will acquire Titan.

Moody's confirmed Lockheed's long-term debt at Baa2 with a stable outlook.

Moody's said its review of Titan's ratings will focus on the impact that the transaction would have on Titan's credit strength, including the potential for Lockheed to legally assume or guarantee Titan's existing credit facility and/or senior subordinated notes.

However, absent of outright guaranty or legal assumption of Titan's debt by Lockheed, Moody's will evaluate Titan's credit rating on a stand-alone basis.

Fitch says Aquila unchanged

Fitch Ratings said Aquila Inc.'s announcement that it has reached an agreement to sell its Canadian utility operations for approximately $990 million, including the assumption of debt, is in line with the rating agency's expectations. Fitch currently rates Aquila's senior secured debt at B+ and senior unsecured debt at B-. The outlook is negative.

Fitch said its ratings incorporate expectations of asset sales and the consequent improvements in leverage.

Fitch noted that the sale of the Canadian utility operations is in line with Aquila's strategic plan to return the company to a domestic regulated utility and restore credit quality. Earlier in the year, Aquila completed the sale of its Australian assets.

However, Fitch said Aquila continues to experience negative cash flows from unprofitable merchant tolling agreements and natural gas pre-pay obligations, as well as a high debt burden relative to operating EBITDA.

Improvement in the outlook and ratings will depend on reducing the cash flow drag from the residual merchant contracts and demonstrating the stand-alone cash profitability of the U.S. utilities, Fitch added.

S&P says Semco sale favorable

Standard & Poor's said Semco Energy Inc.'s ratings are unchanged including the corporate credit at BB with a negative outlook after the company said it entered into a definitive agreement to sell Alaska Pipeline Co. for $95 million.

However, progress toward this asset sale is considered favorable for Semco's credit quality, because of the company's need to reduce debt in a timely manner, S&P said. The announcement has already been factored into current ratings.

The debt-to-capital covenant and the fixed-charge covenant in Semco's bank credit facility pressure the company to execute its debt-reduction plan by April 1, 2004, to avoid piercing the 65% debt-to-capital maximum and the 1.5x fixed-charge minimum, S&P said. Completion of this asset sale at the agreed-on price would significantly alleviate near-term pressure and is an important ingredient for credit stability at the current rating level.

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