S&P keeps Tyco on developing watch

Standard & Poor's ratings on Tyco International Ltd. and its industrial affiliates remain on watch with developing implications, with the rating agency noting Tyco has begun the process of selling its plastics business with proceeds expected to total about $3 billion. Ratings could be lowered if liquidity does not improve during the next several months.

In addition, Tyco recently filed an SEC Form 10 which outlines a plan to spin off its wholly-owned subsidiary, The CIT Group Inc., to existing shareholders. Other methods of disposing of its interest in CIT are also possible. In any event, S&P believes Tyco management is working toward a full separation of Tyco and CIT.

If 100% of CIT is spun off expeditiously with no cash proceeds to Tyco, Tyco's ratings would likely be raised one notch. Even though this would represent the loss of a valuable asset without any direct benefit to Tyco debtholders, it would eliminate the risk to Tyco associated with CIT's refinancing profile.

If Tyco were to sell 100% of CIT for cash, its long-term ratings would likely be raised even further. It is assumed that a cash transaction, together with expected free cash generation, would provide sufficient liquidity for Tyco to repay debt coming due during the next two years and to fully fund the possible put of its two convertible debt issues in 2003.

The possible rating upgrade presumes that Tyco will be able to restore its bank line availability, S&P noted.

Underlying business fundamentals are substantially unchanged, with healthcare and fire and flow control performing well.

Moody's revises VNU outlook to negative

Moody's revised the outlook for VNU NV's debt ratings (senior at Baa1) to negative from stable, reflecting Moody's belief that VNU might not make any significant progress in reducing its elevated debt levels - €4.2 billion at yearend 2001 on a net basis - in the near term.

The company's recently published results for 2001 show a sharp deterioration in the performance of its business information division and directories business also showed some impact from a more difficult business enviornment with profits flat relative to 2000, Moody's said.

Consequently there is a good chance that overall debt levels will remain fairly static and that relative measures of indebtedness will not show meaningful improvements.

Moody's rates the VNU 1.75% convertible eurobonds due 2006 at Baa1 and the 1.75% convertible subordinated eurobonds due 2004 at Baa2

Fitch revises PerkinElmer outlook to negative

Fitch Ratings revised the outlook for PerkinElmer to negative from stable, but affirmed the senior unsecured debt rating at BBB+, including that for the $500 million of 0%senior convertibles due 2020, and commercial paper debt rating at F2. Fitch said it anticipates a decline in the PerkinElmer credit rating unless there is further reduction in debt load, while tempering acquisition expenditures, in the near to intermediate term.

Leverage, determined by debt-to-EBITDA, is anticipated to remain at about 3 times, with improvement expected in conjunction with the reduction of the Packard Biosciences debentures called on March 1, 2002.

PerkinElmer has undergone an organizational change since 1998, to a commercially driven enterprise focused on high growth technology areas, from a government services supplier, accomplished through acquiring higher-growth, higher-margin opportunities.

Fitch's concern centers around the generation and use of cash flows given the loss in revenues from the divested businesses and the uncertainty in revenue generation from acquired companies and technologies. Exacerbating the loss of revenues from divestitures, PerkinElmer announced on March 1 a reduction in guidance for the first quarter and for the year 2002 on lower-than-expected revenues and earnings.

The current rating accounts for the slowdown in demand, adversely effecting some 35% of total company revenues. It also reflects the advantage of revenue diversification and the benefit of continued efforts to increase operating margins. The negative outlook reflects near-term risks that the company may experience further erosion in demand that may place downward pressure on current credit protection measures.

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