S&P revises TXU outlook

Standard & Poor's revised the outlook to negative from stable for TXU Corp. and subsidiaries but affirmed its ratings, including the mandatory convertibles at BBB.

Dallas-based TXU has about $18.7 billion in debt outstanding.

The change primarily reflects that significantly lower earnings in Europe, which represents about one-third of global income, will make it difficult to strengthen the consolidated financial profile to a level appropriate for the ratings, S&P said.

Management is, however, continuing to demonstrate a commitment to credit quality by executing a debt reduction plan, using proceeds from asset sales and the issuance of equity, S&P added.

Liquidity needs are satisfied through access to the commercial paper market, the ability to sell receivables and bank facilities.

As of June 30, TXU and its subsidiaries were in compliance with all applicable covenants.

TXU also has good access to the capital markets, as evidenced by the recent debt refinancings and sales of equity, S&P said.

S&P notes Duke stock sale

Standard & Poor's noted that Duke Energy Inc. (A/stable) announced plans to sell 52 million shares of common stock for proceeds of $1 billion at Tuesday's closing price of $19.24 per share, to pay down commercial paper that had financed a portion of its Westcoast Energy Inc. acquisition.

Duke Energy had indicated that it would complete the equity financing by year-end 2002 in order to bolster its balance sheet, that was already factored into its ratings.

S&P cuts Fleming ratings

Standard & Poor's lowered the ratings of Fleming Cos. Inc., including the 5.25% convertible subordinated notes due 2009 from B+ to B, and placed the ratings on negative watch, due to lowered expectations for earnings and credit protection measures.

The watch reflects uncertainties related to the divestiture of its retail division, including the timing and amount of asset sale proceeds plus the impact of lost wholesale volume, S&P said.

Although application of proceeds for debt reduction is expected to mitigate the impact of lower cash flow, that will be a challenge, the rating agency added.

Liquidity remains adequate, with sufficient room under its $550 million revolving credit facility if needed. Although the company will need to obtain amendments from its banks for the sale of the retail operations and may seek additional covenant cushion, S&P believes the banks will be amenable.

Fleming has no debt maturities until 2007.

Fitch rates D.R. Horton

Fitch Ratings initiated coverage of D.R. Horton, Inc., assigning a BB+ rating to the senior unsecured debt and BB- to senior subordinated debt. The outlook is stable.

Ratings are based on above average growth during the recent economic expansion, its business model, steady capital structure and diversity, Fitch said.

Risk factors include the inherent although somewhat tempered cyclicality of the homebuilding industry.

Debt-to-capital declined from 61.0% at the end of 1998 to 56.0% at present. Debt-to-EBITDA remains somewhat high relative to its peers, but absent major acquisitions and given high cash flow trends, leverage ratios are likely to decline, Fitch said.

D.R. Horton maintains an $805 million revolving credit facility, which matures in January 2006, with $550 million was available at the end of second quarter. The company has $150 million in long term debt maturing in 2004 and $200 million maturing in 2005.

S&P puts Cendant unit on watch

Standard & Poor's placed the long-term ratings of Cendant Corp.'s subsidiary, PHH Corp., on negative watch following Cendant's announcement that it will reduce earnings by $175 million in third quarter 2002 due to a non-cash write-down of the carrying value of its mortgage servicing rights assets.

S&P said the ratings would not be lowered by more than one notch to BBB+.

S&P puts Cummins on watch

Standard & Poor's placed the ratings of Cummins Inc. on negative watch, including the convertible trust preferreds at BB, as a result of declining power generation sales and truck demand

Power generation sales have declined by about 15% for the six-month period ended June 30 from a year ago and are expected to remain depressed near term, S&P said.

Cummins has recently experienced a modest improvement in heavy-duty truck engine sales, reflecting the current pre-buy in the industry, but S&P expects the market to dramatically decline in fourth quarter and into 2003.

As a result of weak operating results, credit protection measures are sub-par for the current rating.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.