Moody's rates new Hartford issue at A2

Moody's Investors Service assigned an A2 rating to the $300 million of senior notes being issued by Hartford Financial Services Group Inc. in conjunction with the mandatory convertible.

The ratings reflect significant market presence, diversified earnings and cash flows, a high-quality investment portfolio and conservative underwriting standards.

Positive credit factors are tempered by intense competition, significant financial leverage and the potential for adverse reserve development. Moody's said it continues to be concerned with the general trends in asbestos settlements and the current legal environment.

While the statutory surplus at in property and casualty operations has diminished over the past several years reflecting the privatization of Hartford Life and significant dividends to the parent, a portion of the proceeds from the new issue will strengthen the existing capital base, Moody's noted. Hartford is also selling 6.5 million common shares.

The outlook is stable, reflecting Hartford's commitment to maintaining its capital strength in the event of a significant unforeseen loss or adverse development that would otherwise weaken its capital position.

Fitch confirms Providian

Fitch Ratings confirmed the B senior debt rating of Providian Financial Corp., reflecting progress in its restructuring, particularly the sale of non-core assets, which should allow management to focus on rebuilding its credit card franchise. The outlook is stable.

Along with asset sales, there has been a virtually complete transformation of the senior management ranks, with seasoned industry executives assuming key responsibilities, Fitch said.

Notwithstanding these developments, Fitch believes that meaningful execution risk remains in repositioning the company, particularly under more difficult economic and industry conditions.

Positively, Fitch recognizes the strong liquidity position of the regulated banks and the changeover in senior management.

Concerns center on Providian's ability to regain access to the securitization markets and be competitive in the credit card segment. Fitch believes liquidity could ultimately be strained if the company is unable to restore access to the securitization markets.

Moreover, Providian's strategy to move away from the deep sub-prime market, if successful, should ultimately lead to more stable earnings and asset quality measures over time, Fitch added.

Fitch cuts Capital One

Fitch Ratings lowered the long-term rating on Capital One Financial Corp. and its bank subsidiaries to BBB from BBB+ and the convertible trust preferred to BBB- from BBB. The outlook is now negative.

The downgrade reflects concerns with respect to fallout from the recently signed informal memorandum of understanding between Capital One's bank and thrift subsidiaries and regulators to address capital levels, reserve levels, finance charge and fee reserves, as well as policies, procedures, systems and controls, Fitch said.

The ratings also reflect Fitch's concerns about Capital One's stated growth expectations over the next year.

With regulators suggesting the company will need to modify its enterprise risk management functions, Fitch said it views this time as appropriate to scale back absolute growth to more modest levels, particularly with respect to sub-prime lending, a primary area of concern for the bank regulators.

Fitch cuts EDS to A+

Fitch Ratings downgraded Electronic Data Systems Corp.'s senior unsecured rating to A+ from AA- and changed the outlook to stable from negative.

The downgrade reflects continued weakness in the IT services industry, an increasingly competitive landscape and exposure to the telecom and airline industries, Fitch said.

The outlook reflects EDS's improving free cash flow which provides some cushion for additional customer disruptions at the current rating level, long-standing market position, geographic and industry diversity of its revenue base and the overall quality of its customer base.

Given the long-term increasing demand for IT services and the company's market leadership position, Fitch anticipates that EDS will continue to be successful in securing new contracts, albeit at a lower rate than historical levels.

Moody's ups Hilton outlook

Moody's Investors Service confirmed Hilton's Ba1 senior unsecured debt ratings, including the 5% convertible due 2006 at Ba2, and changed the rating outlook to stable from negative.

The new outlook reflects Moody's opinion that, despite continued weak industry conditions, there is sufficient cushion for soft performance in Hilton's existing rating, given progress in reducing debt and an expectation that it will continue modest reductions in debt levels.

Moody's cuts Titanium convert

Moody's Investors Service lowered Titanium Metals Corp.'s ratings, including the $201 million of 6.625% convertible trust preferred securities due 2026 to Caa2 from B3.

The downgrades reflect a worsening outlook for the commercial aerospace industry and the likely impact on the company's titanium shipments, productivity, profitability, cash flow and liquidity, Moody's said.

The outlook is negative, reflecting adverse market and financial conditions. The ratings could be lowered further should financial flexibility become severely restricted by either a higher than expected cash burn rate or loss of access to adequate lines of credit, the rating agency added.

S&P rates Penn Treaty American convertibles CC

Standard & Poor's assigned a CC rating to Penn Treaty American Corp.'s $74.75 million 6.25% convertible subordinated notes due Oct. 15, 2008 which will be offered in an exchange offer to holders of the company's 6.25% convertible subordinated notes due Dec. 1, 2003, which are also rated CC.

Although the exchange offer will help reduce Penn Treaty's current liquidity pressures, there is significant uncertainty concerning the business position of the company's subsidiaries, including Penn Treaty Network America Insurance Co., as they attempt to reestablish their position in the long-term care insurance market after having previously suspended new sales, coupled with a high level of financial leverage and a low level of interest coverage, S&P said.

Penn Treaty has recently implemented several steps of its plan to reestablish its market position, most notably obtaining approval to underwrite new long-term care insurance business in Florida, which has historically accounted for about 25% of sales volume, S&P said. In addition, Centre Solutions (Bermuda) Ltd. (Centre), a subsidiary of Zurich Financial Services Group, recently exercised its option to reinsure a portion of long-term care insurance policies issued after Jan. 1, 2002, which will aid Penn Treaty in managing the statutory capital strain typically associated with new business production.

S&P rates Hartford convertible A

Standard & Poor's assigned an A rating to The Hartford Financial Services Group Inc.'s planned $300 million offering of convertible notes due 2008.

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