Moody's revises TXU outlook

Moody's Investors Service revised the outlook on TXU Corp. (Baa3) and TXU Gas (Baa2) to negative from stable in response to deterioration in the credit profile of TXU Europe (Baa1) and pressure on the credit profile.

The ratings for TXU Europe remain on review for potential downgrade.

TXU Corp. has limited the amount of equity support it is willing to provide to TXU Europe to $700 million, Moody's noted.

The negative outlook, however, reflects Moody's concerns that depressed wholesale power markets may cause further ratings pressure in Europe or elsewhere and that TXU Gas has not been performing commensurate with its rating category.

Further deterioration at TXU Gas would cause Moody's to place those ratings on review for potential downgrade.

Volatility in other subsidiary businesses would cause Moody's to place TXU Corp. securities on review for potential downgrade.

A return to a stable outlook will be premised on such factors as return to normality in wholesale markets.

Fitch cuts TXU unit to junk

Fitch Ratings lowered the senior unsecured rating of TXU Europe Ltd., a subsidiary of TXU Corp. (BBB/stable) to BB from BBB-. The outlook is negative.

Liquidity is threatened by revised cash flow guidance from TXE, as wholesale conditions in the U.K. market continue to create an adverse environment, as well as a number of credit rating triggers, Fitch said.

Fitch noted that, as at close of business on Thursday, TXE maintained ratings equivalent to BBB+ from the two other rating agencies, although one has the credit on the equivalent of negative watch and the other carrying a negative outlook on it.

S&P cuts Manpower

Standard & Poor's lowered the ratings of Manpower Inc., including the 0% convertible due 2021 from BBB to BBB-, reflecting lackluster operating performance, competitive pricing pressure, depressed interest coverage and the expectation of a weak cyclical rebound in profitability.

Debt levels rose significantly in 2000 and 2001 as acquisitions more than consumed free cash flow, S&P said. In addition, unfavorable currency fluctuations have recently added to reported U.S. debt balances as about 45% of the company's debt is denominated in euros.

Interest coverage is depressed as a result of weak profitability and higher fixed charges resulting from acquisitions and new office openings. EBITDA plus rent expense over interest plus rent expense declined to 2.2x in the 12 months ended June 30 from 3.0x in 2000.

Liquidity is somewhat weak for the rating, S&P added.

The debt to EBITDA bank debt covenant test steps down to 3.25x on March 31, 2003, from 3.75x in 2002, while the debt to EBITDA ratio was 3.52x as of June 30.

The $243 million convertible gives holders a put option on the first, third (Aug. 17, 2004), fifth, 10th and 15th anniversaries. The first option date passed on Aug. 17, 2002.

S&P expects that if the debentures are put, Manpower will fund the obligation with borrowings under its credit facility since it may not be advantageous to exercise its option to issue common stock.

The $200 million accounts receivables securitization facility maturing July 2003 requires an investment-grade credit rating, but there were no borrowings outstanding as of June 30. Long-term debt maturities are minimal until the €150 million notes mature in 2005.

The company needs to stabilize credit measures while effectively managing its business through the economic cycle, S&P said. Profitability remains sensitive to the uncertain health of the French market and competitive pricing pressures in the U.S.

Moody's rates United Rental liquidity SGL-3

Moody's assigned an SGL-3 rating to United Rentals Inc., reflecting the modest cushion under bank covenants and the annual renewal requirement of its $250 million accounts receivable securitization facility.

It also reflects the expectation that operational cash flow, combined with the some $400 million available under its committed revolving credit facility, should be sufficient to fund financial commitments and capital spending needs over the next 12 months, Moody's said.

S&P revises FelCor outlook

Standard & Poor's revised the outlook on FelCor Lodging Trust Inc. to negative from stable, reflecting weaker-than-expected performance given a more moderate lodging industry recovery than previously expected. The ratings were affirmed, including the convertible trust preferreds at B-.

FelCor's debt leverage was previously weak for the rating and the time period under which credit measures are expected to recover has now been lengthened, S&P said.

Ratings for FelCor reflect high debt leverage for the rating as a result of the sluggish economy and the terrorist attacks of Sept. 11, 2001. Offsetting these factors are its large base of owned hotels, its fairly geographically diverse portfolio, and its ownership of primarily full-service properties that are concentrated in the upscale and mid-scale segments, S&P said.

Liquidity is adequate with $152 million in cash and cash equivalents at the end of second quarter and nothing drawn under its $615 million credit facility, which matures in October 2004.

Ratings could be lowered if the lodging environment does not strengthen over the intermediate term, allowing FelCor's credit measures to improve. The potential for improvement could be affected by external events, such as changes in the global political landscape, S&P added.

S&P cuts Conseco to D

Standard & Poor's downgraded Conseco, Inc.'s ratings to D. Affected securities include Conseco's $200 million 10.5% senior notes due 2004, $250 million 6.8% notes due 2005, $450 million 8.5% senior notes due 2002, $550 million 9% senior notes due 2006, $400 million 10.75% senior notes due 2008, $0.991 million 8.5% notes due 2003 guaranteed by CIHC, Inc., $150.783 million 6.8% notes due 2007 guaranteed by CIHC, Inc., $399.2 million 9% notes due 2008 guaranteed by CIHC, Inc., $362.433 million 10.75% notes due 2009 guaranteed by CIHC, Inc., Conseco Financing Trust I's $275 million Trust Originated Preferred Securities (TOPrS), Conseco Financing Trust II's $325 million 8.7% Capital Trust Preferred Stock (TruPS), Conseco Financing Trust III's $300 million 8.796% capital securities, Conseco Financing Trust IV's $500 million Feline Prides, Conseco Financing Trust V's $500 million 8.7% Trust Originated Preferred Securities (TOPrS), Conseco Financing Trust VI's $200 million trust originated preferred securities (TOPrS) and Conseco Financing Trust VII's $300 million Trust Originated Preferred Securities (TOPrS), all cut to D from CC.

S&P said the action follows the resignation of chief executive officer Gary Wendt.

S&P said it believes Wendt's resignation is a prelude to an ultimate bankruptcy filing.

Moody's keeps Sierra Pacific on review

Moody's Investors Service said Sierra Pacific Resources and its utility subsidiaries Nevada Power

Co. and Sierra Pacific Power Co. remain on review for possible downgrade including Sierra Pacific Resource's senior unsecured debt at B2 and the senior secured debt of both subsidiaries at Ba2.

But Moody's noted that the company has "weathered some very difficult times" in the months since the adverse decisions of the Public Utility Commission of Nevada in the deferred energy rate cases concluded in the spring of this year.

Since then, the utilities were able to fully draw on their respective bank credit facilities, after providing general and refunding mortgage bond security to the banks, to repay all maturing commercial paper balances in full, Moody's noted.

In addition, the utilities' current suppliers are still forbearing on demands for collateral and Duke Energy Trading and Marketing has filled much of the utilities' supply voids, Moody's said. Furthermore, Nevada Power's current suppliers either formally or in a de facto way accepted delayed payments throughout the summer months.

Moody's added that both Nevada Power and Sierra Pacific Power were able to meet summer peak customer demands for power while building up cash.

Having weathered the critical summer period, the utilities are now actively pursuing all available options to add to liquidity, improve access to the capital markets, meet maturing long-term debt obligations, and address the Nov. 28, 2002 expiration of the utilities' secured bank credit facilities, Moody's said.

S&P cuts MeriStar

Standard & Poor's downgraded MeriStar Hospitality Corp. and revised the outlook to negative. Ratings lowered include MeriStar Hospitality Corp.'s $205 million 8.75% senior subordinated notes due 2007 and $150 million 4.75% convertible subordinated notes due 2004, both cut to CCC+ from B-, and MeriStar Hospitality Operating Partnership, LP's $300 million term loan A, $200 million term loan B, $150 million revolving credit facility due 2003, $300 million 9% tranche 1 senior unsecured notes due 2008 and $400 million 9.125% tranche 2 senior unsecured notes due 2011, all cut to B from B+.

S&P said the action is in response to MeriStar's recently announced lowered earnings guidance, which underscores S&P's expectation for a modest lodging industry recovery, MeriStar's weak credit measures for the rating and more limited liquidity position than many in its peer group.

MeriStar recently announced its revised third-quarter 2002 EBITDA guidance of $38.5 million-$39.5 million, S&P noted. This is 12%-17% lower than management's prior guidance, and represents a 14% decline from the third quarter 2001. Revenue-per-available room (RevPAR) for the third quarter is expected to decline around 5% year-over-year.

The company's guidance points to increased margin pressure, probably as a result of increased price competition and a larger proportion of discount leisure travelers in its customer mix, S&P added. Margins will likely remain under pressure until demand from transient business travelers recovers.

MeriStar's credit measures are weak for its rating. Based on management's revised guidance, MeriStar will end the third quarter with debt to EBITDA in the high 7 times area and EBITDA coverage of interest in the high 1x range, S&P said. Based on its expectation of a more moderate average industry lodging RevPAR recovery for 2003 in the low single digits, S&P expects MeriStar's leverage will likely remain in the mid to high 6x range over the next two years.

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