Moody's puts Vivendi Universal on upgrade review

Moody's Investors Service put Vivendi Universal SA on review for upgrade including its senior unsecured debt at B1.

Moody's said the review was prompted by the announcement that Vivendi Universal has entered into a definitive agreement with General Electric to merge Vivendi Universal's Vivendi Universal Entertainment subsidiary with General Electric's NBC unit to form NBC Universal.

The transaction is expected to result in substantial debt reduction from an upfront cash payment of around $3.3 billion at closing and from the de-consolidation of debt at the Vivendi Universal Entertainment level.

The review also takes into account the steady progress Vivendi Universal's management has made in reorganizing the company's operations and re-establishing access to financial markets, Moody's added.

Moody's noted that the scope of any possible future improvement in Vivendi Universal's ratings will also crucially depend on a better understanding of the company's medium-term strategy.

While the pace of Vivendi Universal's the company's disposal programme has slowed down over recent months with the key Elektrim disposal on hold for the time being, Moody's nevertheless believes that Vivendi Universal should be able to make upcoming debt repayments over the next couple of quarters and to fund the potential acquisition of a 16% stake in Maroc Telecom under a put the Kingdom of Morocco has been in a position to exercise since September of this year.

Liquidity has been aided by the cancellation of the early redemption option of the Vinci Exchangeable bond (now due in 2006) and most recently with the placement of a €605 million bond exchangeable into Vivendi Universal stake in Spanish pay-TV operator Sogecable, Moody's added.

Moody's also expects that Vivendi Universal's core lending banks will remain supportive of the group and that it will be able to access borrowing capacity under its key syndicated lending facilities as needed.

S&P upgrades Vivendi Universal senior unsecured debt, expects further one-notch upgrade

Standard & Poor's upgraded Vivendi Universal SA's senior unsecured debt to BB from B+. All long-term ratings of Vivendi Universal and Vivendi Universal Entertainment LLLP remain on CreditWatch positive and S&P said it will likely raise them one notch on the closing of the merger between Vivendi Universal's 86%-owned U.S.-based media subsidiary Vivendi Universal Entertainment and General Electric Co.'s wholly owned media subsidiary NBC.

S&P said the upgrade to Vivendi Universal's senior unsecured debt reflects the significantly improved position of the company's unsecured debt holders as a result of the merger transaction.

S&P said the actions follow the announcement that Vivendi Universal and GE have signed a definitive agreement for the merger of Vivendi Universal Entertainment and NBC.

Vivendi Universal will receive at least $3.3 billion in cash and will transfer about $1.67 billion of Vivendi Universal Entertainment's debt to the new entity as part of the transaction.

The transaction will significantly improve Vivendi Universal's credit profile, to the extent that the group's post-transaction credit metrics (whether calculated on a proportionate or dividend basis) will most likely warrant a higher rating, S&P said.

S&P rates Boise Cascade notes BB+, on watch

Standard & Poor's assigned a BB+ rating to Boise Cascade Corp.'s proposed $500 million senior unsecured notes and placed the rating on CreditWatch with negative implications along with its existing ratings which are already on watch including its senior unsecured debt at BB+.

S&P said the watch is pending Boise Cascade's planned acquisition of OfficeMax Inc. for $1.154 billion.

If the transaction is completed as currently structured, S&P will lower its corporate credit rating and senior unsecured debt rating on Boise Cascade to BB from BB+. The outlook would be negative.

S&P said it believes expansion into the increasingly competitive office superstore market is a risk for the company.

The company should be able to achieve some synergies, particularly from leveraging its greater purchasing power and eliminating overlapping distribution facilities, but S&P said it has concerns about the timing and extent of such benefits. In addition, despite some experience in the office products retail business outside the U.S., the greater size and scope of this expansion into the superstore retail market poses substantial integration and business risks.

OfficeMax has improved its performance over the past few years, but most operating and credit measures still lag well behind those of its larger competitors, Staples Inc. and Office Depot Inc.

In addition, although Boise expects to finance the transaction using 60% equity and 40% cash, S&P believes the transaction will create a more highly leveraged capital structure, when adjusting debt for OfficeMax's substantial operating leases (about $1.8 billion on a debt-equivalent basis). Boise's total debt at June 30, 2003, including operating leases and accounts receivable sold, was $2.2 billion.

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