S&P cuts Duke Energy

Standard & Poor's cut the senior debt ratings of Duke Energy Corp. to BBB+ with a negative outlook, noting stability from regulated businesses is offset by the riskier business of merchant generation, trading and marketing, international operations and real-estate development ventures.

Over the past six months Duke Energy has endeavored to improve its business profile and reduce operating risk, terminating proprietary trading and marketing operations, shutting down merchant energy finance and establishing collateral limits for the remaining trading operations.

S&P expects Duke Energy will effectively unwind its remaining proprietary trading positions in a timely manner without expending additional cash.

Duke Energy is attempting to strengthen its financial profile through asset sales, the proceeds of which are targeted to reduce debt by about $1.8 billion in 2003 and reducing adjusted debt levels from about 52% at March 31 to the mid-40% level over the next few years.

Furthermore, adjusted funds from operations to average total debt is expected to exceed 20%, and adjusted FFO to interest and preferred dividend coverage is expected to reach 4x during the next 12 to 18 months.

Credit-protection measures are adequate for the rating at the current business position of a weak 5 on a scale of 1 (low risk) to 10 (high risk), S&P said.

Liquidity is adequate in the form of credit facilities totaling $5.1 billion and about $1.3 billion of cash on hand as of May. The credit facilities have about $1.4 billion outstanding, leaving $3.7 billion available for debt maturities of about $600 million in 2003.

Moody's rates Chubb issue A1

Moody's Investors Service assigned an A1 rating to the $460 million of senior notes due 2006 that will be issued with The Chubb Corp.'s mandatory convertible. The outlook is stable.

The ratings reflect leadership in the high net worth personal lines and executive protection insurance markets, a commitment to underwriting discipline and strong customer service capabilities.

Moody's also cited a favorable outlook for internal capital generation through business currently being written and the solid financial profile, given strong capitalization, reserves and relatively moderate financial leverage.

These strengths are tempered somewhat by incremental concerns in a number of areas, including volatility in operating performance, exposures to catastrophe-related claim losses, declining margins on historically profitable executive protection coverages and asbestos liabilities.

S&P puts Arris on negative watch

Standard & Poor's placed the B- subordinated debt rating of Arris Group on negative watch, following the company's pre-announced shortfall in revenues for the quarter ending June 30.

The cut in projected revenue for the quarter, now expected to be $100-$105 million versus the previous forecast of $130-$140 million, follows a significant sequential decline in revenues in the March quarter to $91 million from $122 million, S&P said.

The shortfalls reflect significant declines in shipments of voice ports and other equipment due to delays and cutbacks in the rollout of voice services by cable system operators. Arris' key customers, such as Comcast and Cox Communications, have slowed their deployment of telephony services to their cable-subscriber customer bases due to capital expenditure constraints and, in Comcast's case, in order to focus on higher spending priorities such as the upgrade of the recently acquired AT&T cable systems.

Fitch rates Tech Data convertible BB

Fitch Ratings initiated coverage of Tech Data Corp. and assigned a BB rating to its convertible subordinated notes, with a stable outlook.

The ratings reflect adequate credit protection measures, a leading position in the competitive wholesale technology distribution business, strong supplier relationships and worldwide revenue base.

Also considered are the distribution industry's thin operating margins and Tech Data's weakened liquidity position.

Credit concerns also include competitive pricing actions within the company's markets and the lack of demand for information technology spending which has had a resultant negative effect on Tech Data's revenues and operating margins, Fitch said.

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