Fitch upgrades Allmerica

Fitch Ratings upgraded Allmerica Financial Corp. one notch including raising its senior debt to BB+ and Allmerica Financing Trust's capital securities to BB-. Allmerica Global Funding LLC's $2 billion global note program was confirmed at BB. The outlook is stable. The rating is based on public information.

Fitch said the upgrade reflects its belief that the company's credit-profile has stabilized significantly over the last year. Fitch estimates the company's current cash basis interest coverage at the holding company level, at 1.6 times.

Although Fitch does not expect Allmerica Financial to take dividends out of its property/casualty companies in 2003, cash basis interest coverage is approximately 4.8x if ordinary dividends currently available from its lead property/casualty subsidiary are included.

Fitch estimates operating earnings-based interest coverage generated solely by Allmerica Financial's property/casualty operation to be in a range of 3x-4x on a run-rate basis.

Partially offsetting these positives are the companies' relatively high operating leverage, especially in light of Allmerica Financial's future dividend requirements, and the adverse impact peer rating agency downgrades have had on their ability to attract new profitable business.

The ratings also reflect some uncertainty around a disclosure Allmerica Financial made during its third quarter earnings conference call that it was reviewing its property/casualty subsidiaries' reserve adequacy. Fitch anticipates that the review will be completed in the fourth quarter 2003 and will result in a reserve charge for prior-accident year development. However, Fitch believes that the charge will be manageable in the context of the companies' current capital positions and rating levels.

S&P rates DNO notes B-

Standard & Poor's assigned a B- rating to DNO ASA's proposed $175 million senior unsecured notes due 2010. The outlook is stable.

DNO's ratings reflect the company's challenging position as a small E&P company and its heavy reliance on financial debt to pursue its growth strategy, S&P said.

These weaknesses are tempered by DNO's potential to increase crude oil production and its strategy of focusing on the development of its less risky North Sea fields and reducing operating costs, S&P added.

DNO's below-average business profile reflects the company's small proved reserves base of 49.5 million barrels of oil equivalent (boe) at June 30, 2003 (94% of which is oil), and its exposure to country risk in the Republic of Yemen, where 11% of reserves were located at June 30, 2003.

The business profile also factors in the likelihood that DNO will need to incur substantial capital expenditures in the near future, in particular for its North Sea operations, to be able to grow production while maintaining a reasonable reserve life; at year-end 2002, reserve life was 7.8 years, but only 3.0 years on a proved developed basis, S&P noted.

Recent profitability measures have been strong for the rating. At the current rating, S&P would expect DNO's lease-adjusted EBITDA interest coverage to average 2.5x and lease-adjusted EBIT interest coverage to average 1.0x over the business cycle. Cash flow generation is in line with S&P's minimum target for the rating of FFO to gross debt of more than 10%.

Moody's cuts Xignux notes

Moody's Investors Service confirmed Xignux, SA de CV's senior implied rating at B1 and downgraded its $126 million senior unsecured notes due 2004 to B2 from B1. The outlook is stable.

Moody's said the senior implied rating reflects Xignux's leading position in key sectors of the Mexican economy, joint ventures with large international companies, solid business relationships in the NAFTA market, recent favorable performance trends and successful cost cutting initiatives.

The ratings are constrained by a tough competitive environment in all of the company's business lines, moderate free cash flow relative to the high debt levels and exposure to commodity price fluctuations.

The senior unsecured note rating reflects the structural subordination of the issue to the existing debt at certain majority owned consolidated subsidiaries that do not provide guarantees for holding company debt. The combined debt of the holding company and the guarantors currently represents around 75% of the consolidated debt, but the combined EBITDA of the guarantors only represents around 32% of consolidated EBITDA.

The stable outlook anticipates that Xignux will be able to accomplish a refinancing of its senior notes due 2004 in the near term, that Xignux's operating performance and free cash flow generation will gradually improve over the intermediate term and that the free cash flow will facilitate further debt reduction, Moody's said.

Moody's puts Nichirei on upgrade review

Moody's Investors Service put Nichirei Corp.'s Ba2 senior unsecured debt ratings under review for possible upgrade.

Moody's said the action reflects its view that Nichirei's cash flow and credit profile are likely to improve despite a challenging and highly competitive market environment.

S&P rates Metrobank notes B-

Standard & Poor's assigned a B- rating to Metropolitan Bank & Trust Co.'s $200 million subordinated debt due 2013. The outlook is stable.

As the Philippines' largest commercial bank, Metrobank commands a strong domestic banking franchise with about 15% share of the system's loans and deposits, S&P said. This, in turn, supports its good liquidity and funding position.

However, its asset quality in 2002 is still weak by international standards. This is evident from its ratio of nonperforming assets to gross loans at 27.4%, compared with 27.8% in 2001. Nevertheless, the NPA ratio compares favorably against the industry average of 32%.

Reflecting the difficult operating environment, Metrobank's proportion of real and other property-owned assets increased by about 11%. Loan-loss reserve coverage remains weak at about 20.7%. Loan growth in 2002 was modest at 4.9%, reflecting the muted loan demand in the system and the bank's efforts to strengthen loan quality, S&P said.

S&P rates Equitable PCI Bank notes CCC+

Standard & Poor's assigned a CCC+ rating to Equitable PCI Bank's $200 million subordinated debt due 2013. The outlook is stable.

S&P said Equitable has recovered from the reputation risks it faced in 2000, when it was involved in the presidential impeachment investigations that culminated in major deposit withdrawals by customers, causing the bank to require emergency liquidity assistance from the central bank.

It has currently strengthened its market franchise as the third-largest commercial bank in the country, with market leadership in the credit card segment, and is among the top three players in the overseas remittance business, S&P said.

Its recent approval to sell insurance products via its insurance affiliate at the bank branches would further boost its aim to diversify its product base and its revenue sources.

Asset quality in 2002 improved slightly, partly due to higher loan growth of about 13%, as well as a slight decline in nonperforming assets. NPAs were 25% of gross loans, compared with 30% in 2001. Nevertheless, the NPA ratio is still weak by international standards. Loan-loss reserve coverage at 40% remains weak, although increased from 35% a year ago. As economic conditions remain uncertain, further provisioning could be required as asset quality pressures persist, S&P said.

S&P cuts Health Care Trust No. 1

Standard & Poor's downgraded Health Care Trust No. 1's asset-backed notes to BB from BBB-.

S&P said the action follows downgrade on Mayne Group Ltd. and reflects the role of Mayne in this transaction.

S&P upgrades Ryland

Standard & Poor's upgraded The Ryland Group Inc. including raising $100 million 8% senior unsecured notes due 2006, $150 million 5.375% senior unsecured notes due 2008 and $150 million 9.75% senior unsecured notes due 2010 to BBB- from BB+ and $150 million 9.125% senior subordinated notes due 2011 to BB+ from BB-. The outlook is stable.

S&P said the upgrade acknowledges a materially improved financial profile that complements one of the most conservative operating strategies in the homebuilding industry.

This well-diversified homebuilder has maintained a cautious organic growth strategy and disciplined focus on affordably priced homes while improving margins, generating strong returns, and reducing leverage levels, S&P said.

Longer-term demographic trends should continue to drive demand for Ryland's affordably priced homes, while the homebuilder's geographically diversified operating platform should help to insulate the overall earnings stream from potential swings in demand in individual markets.

Furthermore, Ryland is expected to continue to grow its homebuilding operations in a comparatively conservative and disciplined manner, which limits the likelihood of negative event risk to the credit profile, S&P said.

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