S&P cuts Avaya to junk

Standard & Poor's cut Avaya Inc.'s senior unsecured debt rating one notch to BB+ from BBB- but affirmed its corporate credit ratings. The outlook is negative, S&P said, for the Basking Ridge, N.J.-based communications equipment maker . Avaya faces stressed business conditions, leading to substantially depressed profitability and cash flows, S&P said, and the ratings could be lowered in the next few quarters if operating conditions or financial flexibility worsens.

S&P cuts Charter outlook to negative

Standard & Poor's lowered its outlook on Charter Communications Inc. to negative from stable and confirmed the company's ratings including its corporate credit at BB, affecting $16 billion of debt.

S&P said its action is in response to the delay in improvement of Charter's financial parameters.

Charter's pro forma average consolidated debt to full year EBITDA (earnings before interest, taxation, depreciation and amortization) for 2001 and year-end debt to annualized fourth quarter EBITDA were both about 8.1 times, S&P said. The maximum ratio appropriate for Charter's BB rating is 7.9 times.

The rating agency added that it does not expect the measures to return to earlier levels until the latter part of 2002 at the earliest.

However despite the delay in balance sheet improvement, Charter continues to perform well, S&P added.

S&P rates PartnerRe shelf, senior debt at A+

Standard & Poor's rated PartnerRe Ltd.'s $600 million shelf registration filed Dec. 14. The preliminary senior debt is rated A+, preliminary subordinated debt at A and preliminary preferred stock at A-. S&P said the ratings are based on PartnerRe's very strong capital adequacy and strong business renewals for 2002, though 2001 operating results were weak because of $400 million of net charges from the U.S. terrorist events of Sept. 11. Following the $400 million of a new mandatory convertible preferred and trust preferred in November, capital adequacy has been restored to the rating range, S&P said, and management has committed to maintain debt leverage within the rating tolerance of not more than 25% debt to capital and not more than 35% debt plus preferred stock to capital.

Moody's puts Markel unit on review for possible downgrade

Moody's Investors Service placed the Baa3 senior debt rating of Markel International Ltd. (formerly Terra Nova (UK) Holding Ltd.) on review for possible downgrade following the Feb. 5 announcement by Markel Corp., the company's U.S.-based parent, that it has incurred charges relating to the operations of Markel International that Moody's believes indicates continued weakness at these subsidiaries. The review for downgrade does not affect the ratings of Markel Corp. (senior debt at Baa3, insurance financial strength at A3), given Moody's view that the U.S. operations are inherently stronger, both from an operational and balance sheet perspective, than those of Markel International. Moody's said the review will focus on future business prospects of Markel International and potential for continued poor operating performance.

The rating agency expects to conclude the review with either a confirmation of the rating or one notch downgrade. Moody's further noted that the rating of Markel International is strongly influenced by Moody's rating opinion of the parent Markel's other financial obligations, given cross-default provisions within the debt covenants. While this has the impact of causing the default probability of the two company's securities to be the same, Moody's believes that the severity of loss in the event of a default would be more severe for the Markel International bonds.

S&P rates Duke Capital new notes at A

Standard & Poor's assigned an A rating to Duke Capital Corp.'s proposed $750 million senior unsecured debt offering to be issued in two tranches: $500 million due 2013 and $250 million due 2032. At Sept. 30, Duke Capital (A+/stable/A-1) and parent Duke Energy Corp.'s (A+/stable/A-1) debt totaled about $10 billion and $13 billion, respectively. The outlook on Duke Capital and energy provider Duke Energy ratings is stable, S&P said, reflecting the agency's view that Duke Energy will achieve financial performance commensurate with the ratings for the foreseeable future.

The ratings on Duke Capital and Duke Energy reflect a consolidated credit assessment methodology resulting in the same corporate credit rating (risk of default) for the companies, S&P said. The ratings on Duke Energy reflect the expectation of a solid operating performance to support projected funds from operations interest coverage exceeding 5.5 times, and debt not exceeding 42% of total capital, by 2003.

S&P rates Saint-Gobain convertibles A

Standard & Poor's assigned an A rating to Compagnie de Saint-Gobain SA's €800 million 2.5% convertible bonds due 2007.

S&P ugprades some Hercules notes

Standard & Poor's upgraded some of Hercules Inc.'s notes and put the company on CreditWatch with positive implications. It had previously been on CreditWatch with developing implications.

Ratings affected include Hercules' $125 million 6.625% senior secured notes due 2003 and $100 million 6.6% notes due 2027, both raised to BB from BB-; its $900 million revolving credit facility due 2003, its $1.25 billion term loan A due 2003 and its $375 million term loan D due 2005, confirmed at BB; its $400 million 11.125% senior notes due 2007, confirmed at B+; Hercules Trust I's $350 million 9.42% trust originated preferred securities confirmed at B; and Hercules Trust II's $350 million preferred securities confirmed at B.

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