Fitch sees combined Enron, Dynegy at mid BBB

Fitch said it anticipates rating the combination of Enron Corp. and Dynegy Inc. in the mid-BBB range. But it added that that view assumes "the successful execution of (the combined company's) interim plans to deleverage its capital structure and the completion of the merger."

If the merger terminates, Fitch said Enron would be downgraded to "highly speculative grade."

Fitch said that uncertainties remain; Dynegy will "likely assume many of the difficulties which continue to plague Enron including the need to sell underperforming emerging market assets, the ongoing SEC investigations of certain Enron sponsored partnerships, and potential litigation arising from several shareholder suits filed against Enron. While Enron management is actively working to reduce debt and exit problem businesses, it is possible that not all outstanding issues will be resolved within the transaction approval timeframe."

If the merger is unwound, Fitch said it does not expect to change Dynegy's current long-term ratings.

The rating agency said positives of the merger include: "improved management credibility through Dynegy's assumption of senior executive positions and board of directors control; the reduction of leverage at the new company from ChevronTexaco's equity commitment; the aggressive downsizing and exiting of non-core operations; potential cost savings through the merger, conservatively estimated at $500 million annually; and the market strength of the merged company, particularly as it relates to Enron's and Dynegy Holdings' North American wholesale marketing and trading franchises."

Fitch revised its Rating Watch on Enron to evolving from negative. Evolving means the ratings may be raised, lowered, or maintained. It also put Dynegy's ratings on Rating Watch Negative.

Ratings affected include Enron's BBB- senior unsecured debt, its BB subordinated debt, its B+ preferred stock and F3 commercial paper; and Dynegy Holdings Inc.'s BBB+ senior notes, Dynegy Capital Trust I's BBB trust preferred securities.

Moody's cuts Enron debt, keeps on review for possible further downgrade

Moody's on Friday downgraded the senior unsecured debt ratings of Enron Corp. to Baa3 from Baa2 and the company's rating for commercial paper to Not Prime from Prime-2. Enron's long-term debt ratings remain under review for further downgrade. Moody's actions reflect the company's reduced financial flexibility as a result of a substantial loss of investor confidence. Enron drew down its bank credit facilities in order to shore up near term liquidity, but faces significant debt maturities over the near term, as well as the potential for increased margin requirements from counterparties of its wholesale trading operation. In addition, uncertainty surrounding the firm's contingent obligations creates increased risk for debtholders.

However, the rating agency concludes that the company may not be able to retain investment grade characteristics. Moody's review will focus on Enron's ability to further improve its liquidity and capital position. The rating agency would view a substantial near term injection of equity capital as a stabilizing event. Among the downgrades, Moody's cut the guaranteed senior notes to Baa3 from Baa1, senior unsecured notes to Baa3 from Baa2 and senior subordinated debt to Ba1 from Baa3. Enron shares added 22c to $8.63.

S&P lifts Beckman Coulter out of junk

Standard & Poor's upgraded Beckman Coulter, Inc., lifting its ratings out of junk territory.

Among the actions, the rating agency raised the company's $550 mil unsecured revolving credit facility due 2002 to BBB from BB+, and its $240 million of 7.45% senior notes due 2008, its $160 million of 7.1% notes due 2003, and its $200 million zero-coupon convertible senior notes due 2021 to BBB from BB+.

S&P rates upcoming Sierra Pacific convertibles at BBB-

Standard & Poor's on Friday assigned its BBB- rating to the Sierra Pacific Resources proposed $300 million premium income equity securities offering. The ratings reflect the substantial weakening of the financial measures of Sierra Pacific Power Co. and Nevada Power Co., which has resulted from the inability to fully recover elevated fuel and purchased-power costs in a timely fashion, S&P said. The deterioration in the consolidated profile of the entity is directly tied to SPR's exposure to the significant cost increases being experienced throughout the western U.S. energy market, S&P said.

The outlook is negative, S&P added, noting challenges that the company faces as it attempts to repair its financial profile. Some of the hurdles the company must overcome include recovering the deferred revenues in a timely manner, managing its purchased-power needs, and continuing to receive financial support from regulators and politicians. Clearly, the need to improve financial performance to levels commensurate with the rating category and effectively manage its regulatory and consumer advocacy challenges are paramount to supporting the current ratings, S&P said. Sierra Pacific shares dropped 33c to $14.19.

S&P downgrades American Tower

Standard & Poor's downgraded American Tower Corp. and its units. Among the ratings lowered are the corporate credit, cut to B+ from BB-, and the senior unsecured debt, cut to B- from B. The outlook is stable.

S&P said the downgrade follows American Tower's third-quarter 2001 operating results, which showed that the company's "core tower leasing business continues to perform well but that its networks services and Verestar business units remain weaker than previously expected. As a result of reduced cash flow levels from these two units, AMT will not achieve credit metrics over the medium term supportive of the BB- corporate credit rating."

S&P added: "On a positive note, AMT's aggressive growth is moderating significantly, as new tower builds and acquisition activity are being curtailed. The company is significantly restructuring Verestar, cutting costs in the rest of the company to reduce its overall cost structure and improve profitability, and making enhancements to its IT systems. Debt levels are expected to peak in 2002, and, as long as tenant lease-up activity remains healthy, the company should be able to grow into its capital structure over the next two years."

S&P rates Chesapeake Energy convertibles CCC+

Standard & Poor's rated Chesapeake Energy Corp.'s recent offering of $150 million of 6.75% cumulative convertible preferred stock at CCC+.

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