Moody's puts Aquila on review

Moody's Investors Service placed the ratings of Aquila Inc. under review for possible downgrade, including the Ba2 rating on its senior unsecured debt.

This rating action reflects weak financial results and Moody's belief that the current negotiations with bank lenders may result in a significant amount of secured debt in the company's capital structure.

The company received a waiver under its bank agreement until April for a defaulted interest coverage covenant.

Significant charges related to the shuttering of the company's trading business and other operations resulted in quarterly losses which will be carried-through in a rolling covenant calculation. The company has projected that the negative impact of the losses will affect the covenant calculation until December 2003.

In its third quarter earnings conference call, Aquila announced plans to reduce the size of its revolver in line with its changed business profile, Moody's said.

As a condition of granting the waiver of the covenant default the bank group required Aquila to seek regulatory approval to grant security - an indication of the intent to request collateral.

Moody's believes the chances are better than not that Aquila will have to grant some form of security in order to satisfy the lenders.

In addition to the possible creation of a secured class of creditors, the review will also focus on continuing asset sales and debt reduction efforts.

Further downgrade of the company's rating could lead to additional collateral calls. The company's ongoing liquidity position depends significantly upon the timing of the receipt of proceeds from asset sales, Moody's added.

Fitch rates new Duke Realty notes

Fitch Ratings assigned a BBB+ rating to the recent offering of $175 million of 5.25% senior notes due 2010 by Duke Realty L.P., the operating partnership of Duke Realty Corp.

Also, Fitch affirmed the ratings at BBB+ for $1.525 billion outstanding senior unsecured notes due 2003 through 2028 and BBB for $440 million of outstanding preferreds, including the $135 million of 7.25% convertible preferreds.

The outlook is stable.

Fitch rates new Cendant notes

Fitch Ratings assigned a BBB+ rating to Cendant Corp.'s $2 billion senior notes offering - $800 million 6.25% notes due 2008 and $1.2 billion 7.375% notes due 2013. The outlook is negative.

The refinancing is viewed as a positive development by Fitch since it extends the maturities for Cendant debt by terming out the draw on the revolver and refinancing debt that is due or putable to the company this year.

The ratings reflect low capital expenditure requirements and maintenance of adequate liquidity near-term.

The outlook reflect a high historical pace of acquisitions and additional leverage, Fitch said.

Cendant has indicated that going forward it will refrain from making significant acquisitions so that it can focus on integrating the companies it has acquired, and use some free cash flow for debt reduction.

Fitch views CMS actions positively

Fitch Ratings said recent actions by CMS Energy Corp., specifically the announced sale of the CMS Panhandle Companies for $1.828 billion, will have positive credit implications for the company.

Fitch currently rates CMS' senior unsecured debt at B+ on Rating Watch Negative.

Resolution of the Rating Watch is dependent on the timely release of re-audited financial restatements, the successful refinancing of bank facilities and the conclusion of pending regulatory investigations, Fitch said. CMS expects to release re-audited financial statements and repay or refinance outstanding bank facilities by March 31, 2003. If bank facilities at Consumers Energy are not successfully refinanced, Fitch foresees the need for $630 million of additional funding from asset sales or other financing sources in 2003, and approximately $800 million of maturities in 2004.

CMS' ratings were placed on Rating Watch Negative on July 17, 2002, following concerns regarding CMS' weak liquidity position, high parent debt levels and limited financial flexibility.

The sale of the Panhandle Companies will serve to bolster CMS' near-term liquidity levels and will help the company to meet approximately $1.3 billion of debt and bank facility maturities in 2003. Fitch said. Additionally, consolidated leverage and coverage ratios should improve over prior estimates as a result of associated debt reduction from the sale, although CMS will lose a relatively stable dividend source.

S&P confirms Empresas ICA

Standard & Poor's confirmed Empresas ICA Sociedad Controladora SA de CV including its $96.3 million 5% convertible subordinated debentures due 2004 at CC and removed it from CreditWatch with negative implications. The outlook is negative.

S&P said the confirmation follows Empresas ICA's announcement that it refinanced loans amounting to 372 million Mexican pesos with proceeds from a 10-year loan signed with Banco Inbursa SA for MXP1.18 billion (about $120 million).

The affirmation also reflects ICA's announcement that it has repurchased approximately $71 million, face value, of its subordinated bond leaving the outstanding amount at $96.3 million.

S&P added that the ratings reflect liquidity concerns and the company's weak operating performance. During the third quarter 2002, the recovery of provisions related to the delivery and acceptance of several industrial construction projects was offset by the cancellation of accounts receivable and the creation of provisions related to the light rail and San Juan Coliseum projects in Puerto Rico.

ICA's financial performance remains weak as seen in its key financial ratios, S&P added. During the first nine months of 2002, ICA posted an EBIDTA interest coverage, total debt to EBITDA, and FFO to total debt ratio of 1.3x, 10.4x, and -5.4%, respectively. Nevertheless, the company was able to reduce its total debt by around $80 million during 2002, through asset sales, and continues its efforts to improve its operating margin.

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