Moody's cuts Carnival converts to A2

Moody's Investors Service downgraded the long-term ratings of Carnival Corp., including senior unsecured debt and the convertibles to A3 from A2, and kept them on review for possible further downgrade, to reflect its expected merger with P&O Princess Cruises plc.

P&O's ratings are on review for possible upgrade.

The downgrade of Carnival's ratings reflects Moody's view that the merger will result in increased pro forma leverage.

Also, Moody's expects that continued company and industry-wide capacity expansion will continue to pressure earnings and cash flow at a time when net revenue yields and margins are already challenged by new capacity, a soft economy, concerns related to terrorism and the war in Iraq plus cost increases.

Carnival's net borrowing needs could increase if booking volumes fail to keep pace with capacity expansion, as well, Moody's said.

S&P puts Rite Aid on positive watch

Standard & Poor's placed the ratings on Rite Aid Corp. and Rite Aid Lease Management Co. on positive watch, including the convertibles at B-.

The action reflects improving operating performance over the last few years and balance sheet strengthening as a result of the proposed $2.0 billion credit facility. The new capital structure lengthens significant maturities to 2008.

Fitch rates Cox Enterprises notes BBB

Fitch Ratings assigned a BBB rating to the new senior notes due 2008 of Cox Enterprises Inc. The outlook is stable.

Credit metrics are solid for the current rating following strong earnings growth in 2002 and reductions in debt from $3.1 billion at yearend 2001 to $2.5 billion at year-end 2002, Fitch said.

S&P rates Cox Enterprises notes BBB

Standard & Poor's assigned a BBB rating to Cox Enterprises Inc.'s new senior unsecured notes due 2008.

The ratings are supported by a well-diversified portfolio of media businesses with good operating margins, offset by high debt and an aggressive acquisition and growth orientation.

Consolidated leverage decreased in 2002 due to improving EBITDA and the early 2002 monetization of Sprint PCS Group, AT&T Corp., and AT&T Wireless Services Inc. shares that were not earmarked by various equity-linked financings.

Consolidated debt to EBITDA is in the mid 3x area, excluding the Sprint PCS-linked convertibles and prepaid forward contracts that appear as debt on the balance sheet. Including those, leverage is above 4x.

The outlook is stable, as free cash flow should continue to bolster credit measures and provide good financial cushion in the event of potential operating softness, S&P said.

Moody's cuts WPP ratings to Baa2

Moody's Investors Service downgraded the ratings of WPP Group plc, including the Young & Rubicam Inc. $287.5 million of 3% convertible subordinated notes due 2005 to Baa2 from Baa1.

The downgrade reflects that given the backdrop of still weak business fundamentals and limited visibility for media services companies combined with WPP's stated policy of using free cash flows to enhance shareholder value, the company is unlikely to improve relatively high debt in the near term, Moody's said.

The outlook is stable, reflecting the expectation that a further deterioration of WPP's profit levels during the current financial year would be moderate and that the company will manage its debt in line with its stated intention to avoid a further increase.

S&P puts Loews on negative watch

Standard & Poor's placed the ratings of Loews Corp. on negative watch, including the Diamond Offshore Drilling Inc. exchangeable at A+, following the announcement that it intends to purchase Texas Gas Transmission Corp. from The Williams Cos. Inc. for $1.05 billion, including the assumption of debt.

The watch also reflects concerns about the increased level of risk in the U.S. cigarette industry, via its Lorillard Tobacco ownership.

Separately, however, S&P put Texas Gas ratings (B+) on positive watch, reflecting its separation from Williams and its new affiliation with the financially stronger Loews, as well as a strong business profile at Texas Gas, S&P said.

Fitch rates D.R. Horton notes BB+

Fitch Ratings assigned a BB+ rating to D.R. Horton Inc.'s new $200 million of 6.875% senior notes due 2013. The outlook is stable.

The issue will be ranked on a pari passu basis with all other senior unsecured debt but has more favorable rates and attractive maturity relative to the debt it would replace. Proceeds will be used to call the $148.5 million outstanding of 10% senior notes due 2006 and to repay debt outstanding under its revolving credit facility.

Fitch remains comfortable with D.R. Horton's stated debt to capital target of 49% or less by the end of fiscal year 2003.

The homebuilding debt-to-capital ratio pretty consistently declined from 61.0% at the end of 1998 to 52.1% at the end of fiscal 2002. Homebuilding debt net of unrestricted cash divided by total capital was 51.5% at fiscal first quarter 2003. The debt-to-EBITDA ratio remains somewhat high relative to its peers.

However, absent major acquisitions and given high cash flow trends, D.R. Horton's leverage ratios are likely to decline.

Moody's rates D.R. Horton notes Ba1

Moody's Investors Service assigned a Ba1 rating to the new $200 million issue of 6.875% senior notes due 2013 of D.R. Horton Inc. and confirmed its existing ratings. The outlook is stable.

The ratings acknowledge progress in meeting conservative capital structure projections, with the debt/capitalization ratio of 52.3% at fiscal yearend 2002 representing the lowest level in many years.

At the same time, the ratings reflect a higher than average business risk profile given its appetite for acquisitions, greater debt leverage than its peers, capacity under its credit agreement that could lead to substantial additional debt and the cyclical nature of the homebuilding industry, Moody's said.

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