Fitch rates new Cendant convertible at BBB+

Fitch rated Cendant Corp.'s $1 billion 3.875% convertible senior debentures due 2011 at BBB+. The company's senior debt and commercial paper ratings remain on watch negative pending review of Cendant's operations post-Sept. 11, Fitch added. The immediate aftermath on Cendant's operations has not been as negative as originally anticipated by Fitch.

Proceeds from the new offering will be used to repay Cendant's $550 million of 3% convertible subordinated notes due February 2002 at which time Fitch will withdraw its BBB subordinated debt rating. The remaining $450 million of proceeds will be used to prepay a portion of the principal securities class action litigation settlement in the first quarter of 2002. With the prepayment, the litigation settlement liability will be reduced to approximately $1 billion down from the $2.85 billion original judgement.

Importantly, Fitch said, the length of the downturn in the travel industry and any recovery will dictate any rating changes. Fitch will continue to monitor key drivers, such as vacancy rates at hotels, the number of airline flights and load factors, willingness of consumers to take vacations and car rental usage, over the next several months. Mitigating the expected negative impact on cash flow are: a sizable cash position and an adequate liquidity position, diversified operations that provide continuing cash flow; and recent acquisitions that are still expected to be accretive, Fitch said.

Moody's cuts Newell Rubbermaid converts to Baa1 from A3

Moody's Investors Service downgraded Newell Rubbermaid's convertible subordinated debentures due December 2027 to Baa1 from A3, the Newell Financial Trust convertible quarterly income preferred securities guaranteed by Newell Rubbermaid to Baa1 from A3 and its long-term senior rating for the company to A3 from A2, along with other rating cuts.

The action is based on challenges the company faces in implementing a new strategy and turnaround plan within a soft economic environment and the likelihood that debt protection measures will remain depressed over the medium term, Moody's said. The new ratings also recognize the strength of Newell in service quality, its product diversity and the strong market positions of many of its products. The rating outlook is negative, Moody's said, and further deterioration in debt protection measures could lead to pressure on the ratings.

Fitch rates new Xerox convertible at B+

Fitch on Wednesday assigned a B+ rating to Xerox Corp.'s $900 million Rule 144A convertible trust preferred securities due 2021 and said the company's and its subsidiaries' BB senior unsecured debt rating is affirmed. The rating outlook is stable, Fitch said, reflecting Xerox's improved liquidity situation, which provides some cushion for operational shortfalls as the company continues to execute on its turnaround strategy.

Fitch said it recognizes the company's improved liquidity, progress made in asset dispositions and its $1 billion cost cutting program, its strong, technologically competitive product line and business position, its continued effort to improve working capital management, and the commitment to continue its cost cutting program beyond the initial $1 billion. The ratings also consider the company's strained credit protection measures, refinancing risk of its $7 billion revolver due October 2002, the ongoing Securities and Exchange Commission investigation into Xerox's Mexican accounting issues and other accounting matters, and overall weaker economic conditions. Although the company's financial flexibility has improved with forecasted flat to down revenues, it is crucial that Xerox executes its cost cutting programs in order to return the core operations to profitability.

S&P rates ResMed convertible at B-

Standard & Poor's on Wednesday assigned its B+ corporate credit rating to ResMed Inc. and assigned a B- rating to ResMed's $180 million convertible subordinated issue. The outlook is stable.

The speculative-grade ratings for ResMed Inc. reflect the niche medical equipment supplier's fast growth, as it capitalizes on the emerging market for sleep apnea treatment, offset by its still limited size and resources, and uncertain financial policy. The possibility of acquisitions, as the company seeks to accelerate its growth, adds further uncertainty. While ResMed has cash and investments of over $100 million, the financial position could change quickly if the company pursues an aggressive acquisition strategy in order to accelerate growth. Recently ResMed acquired Medizin Technologie GmbH (MAP), the OSA market leader in Germany for $70 million. S&P said it believes the company's acquisitive growth strategy could potentially challenge management.

Fitch still sees liquidity problems for Enron, ratings remain on watch

Fitch said Wednesday that its ratings for Enron Corp. remain on watch, evolving, as liquidity concerns about the company persist even in light of the Dynegy merger. Fitch's BBB- senior unsecured debt, BB subordinated debt, B+ preferred stock and F3 commercial paper are on watch.

Since Nov. 9, following the announcement of the possible Dynegy merger transaction, several important negative developments have occurred, Fitch said. At that time it was expected that the significant cash infusion and positives associated with the merger would stabilize the company's liquidity situation. In fact there continues to be liquidity pressures. Most importantly, Fitch believes that there have been significant cash collateral calls from wholesale trading customers well in excess of previous expectations. Additional concerns include the surprise $690 million debt acceleration and other potential near-term debt maturities, which would require additional cash outlays. The company has less flexibility to deal with these continuing issues as well as possible off balance sheet debt accelerations, negotiations with banks including the extension beyond the recently negotiated mid-December 2001 maturity of the $690 million repayment and the major bank line refinancing needs in early 2002.

In addition, the present situation is pressuring some of the perceived fundamental values of the company, Fitch said. While it is unclear how much weaker the wholesale trading business profile is, it is likely that counterparties will continue to closely monitor and limit their exposure to Enron. In addition, the company's ability to favorably negotiate and realize inherent value of many planned asset sales is substantially weaker in the present crisis mode.

Dynegy has recommitted its support for pursuing the Enron merger, subject to completion of its confirmatory due diligence. However, in light of recent developments Dynegy's position regarding the merger must be considered less certain. The unanticipated deterioration, the surprise liquidity developments and the potential negative impact on the combined company's ratings from these worse dynamics at a minimum suggests a strong renegotiation possibility or a possible discontinuance under the MAC clause out.

More equity and cash may be needed to stabilize Enron's credit profile. It is probable the lower stock price reflects this reality as well as potential stockholder equity dilution. If Dynegy steps away entirely from the merger, Enron's credit situation seems untenable with a bankruptcy filing highly possible. Our present BBB- rating rests on the merger possibility and continued support of the lending banks, without which Fitch would consider lowering the rating to the B category to reflect Enron's already compromised credit profile. At this point Fitch is not overly concerned about additional increased liquidity pressures or merger outs from our rating actions or other rating agencies' potential actions as significant negotiation is occurring across all creditor fronts already.

S&P rates new Portugal Telecom exchangeable A

Standard & Poor's assigned an A rating to Portugal Telecom International Finance BV's €550 million of 2% exchangeable bonds due December 2006.

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