S&P rates new HCC convert A

Standard & Poor's assigned an A rating to HCC Insurance Holdings Inc.'s new $125 million of 1.30% convertible notes due 2023, based on a strong business profile, strong operating performance, very strong capitalization and good financial flexibility. The outlook is stable.

Although HCC's strong premium growth in the last two years is more actively utilizing operating capital at the insurance subsidiaries, S&P expects strong profits at these operations.

Given HCC's appetite for acquisitions, S&P believes financial leverage is likely to increase but not exceed 25% in the short term and expects it to decline in the medium term.

Moody's keeps Vivendi at B1

Moody's Investors Service said that its ratings for Vivendi Universal SA will remain unchanged for the time being at B1 for senior unsecured debt with a negative outlook, due to continued reliance, in the absence of free cash flow, on substantial asset sales to make scheduled debt payments over the next 12 months.

However, the successful implementation of the refinancing package announced yesterday, including a timely refinancing of debt at its Vivendi Universal Entertainment subsidiary, could have more positive rating implications.

Vivendi plans to issue €1 billion in high yield notes and, on the back of that, enter into a new €2.5 billion bank facility. Funds raised will refinance existing bank debt, replace existing facilities and provide additional liquidity.

Subject to evaluation of the indentures, Moody's expects to assign a B1 rating to the new notes.

If achieved as planned, the refinancing, which amongst other things is contingent on the successful signing of a $700 million film securitization at Vivendi Universal Entertainment currently expected by the end of March, would create significant additional financial flexibility.

In particular, a successful refinancing would allow Vivendi Universal to fine tune the timing of asset sales contemplated and help towards achieving the best possible proceed. This could well have more positive rating implications.

S&P rates Vivendi bonds B+, credit facility BB

Standard & Poor's assigned a B+ rating to Vivendi Universal SA's planned €1 billion of bonds and a BB rating to its new €2.5 billion syndicated credit facility due 2006. S&P also upgraded Vivendi's €3 billion multi-currency revolving credit facility 2007 to BB from B+. The corporate credit rating remains at BB and the outlook is still stable.

S&P said the rating on the high-yield bond reflects the issue's subordination to Vivendi's credit lines, which are secured by the group's assets.

The upgrade on the €3 billion credit facility reflects S&P's belief that this facility now ranks pari passu with all other secured bank lines and benefits from mandatory prepayment features broadly similar to those of the new €2.5 billion credit line.

S&P added that it believes Vivendi's planned refinancing will significantly improve the company's tight liquidity, which has been the group's primary credit risk over the past year.

Upon completion of these refinancing steps and following repayment of all existing syndicated and bilateral loans due to expire in 2003/2004, Vivendi will benefit from cash balances exceeding €1 billion and an undrawn revolving line of €1.5 billion (as part of the new €2.5 billion syndicated line), S&P said. This should be sufficient to meet its debt obligations well into 2004, even if management's disposal plan cannot be achieved as anticipated.

S&P added that the ratings assume Vivendi will continue to actively reduce debt and further improve liquidity through asset disposals in 2003. The new management's track record of timely and significant asset disposals offers a material degree of downside protection.

Fitch rates new HCC convert A-

Fitch Ratings assigned an A- rating to HCC Insurance Holdings Inc.'s recent offering of $125 million of 1.3% senior convertible notes due April 2023. The outlook is stable.

The rating is based on a strong capital position, conservative investment profile, adequate loss reserves and favorable historical underwriting performance.

Another factor is that HCC has traditionally utilized significant amounts of reinsurance to manage underwriting risk. While this strategy allows it to effectively manage net loss exposures relative to capital and mitigate undue risk concentrations, it also creates significant reinsurance recoverable balances and a requirement to carefully manage credit exposures to reinsurers.

Moody's ups Mediacom outlook

Moody's confirmed the ratings for Mediacom Communications Corp., including the 5.25% convertible notes due 2006 at Caa1, but revised the outlook to stable from negative.

The outlook revision reflects a belief that the ratings are no longer likely to be lowered over the next 12 to 18 months.

Specifically, it incorporates the successful integration of the former AT&T Broadband properties, better-than-expected operating performance and maintenance of a good liquidity position.

With the expected growth in operating cash flow and the attainment of positive free cash flow, Moody's believes the company will begin to accelerate a deleveraging trend that will further enhance financial flexibility and reduce financial leverage to pre-AT&T acquisition levels.

A positive outlook may be warranted if the company is able to successfully complete its rebuild program and transition to a positive free cash flow generating position later this year, and evidence of subscriber and/or margin erosion remain absent over the interim period.

Debt/EBITDA leverage of 7.9x on a trailing basis and EBITDA/Interest coverage of 2.1x have shown some improvement over the past year but are expected to now experience more noteworthy strengthening over the next couple of years, particularly beginning in 2004 as the transition to positive net free cash flow is realized for the full year, Moody's said.

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