S&P raises Alcatel outlook

Standard & Poor's raised its outlook on Alcatel to stable from negative and confirmed its ratings including its corporate credit and senior unsecured debt at B+.

S&P said the action follows Alcatel's second quarter results.

Alcatel's ongoing restructuring program is mitigating the severe market contraction affecting the global telecoms equipment industry and offsets any short-term liquidity risk, S&P said.

At June 30, 2003, Alcatel had gross debt of €6.52 billion, including bond obligations of €6.04 billion.

In the face of continuing challenging market conditions, Alcatel has managed to reduce materially its cost base. This has resulted in positive operating income before restructuring expenses in the second quarter of 2003. With slower rates of sales decline expected in the second half of 2003 and continuation of its rigorous cost-cutting program, Alcatel should be in a position to become profitable for the full year 2003, before restructuring costs, and to continue reducing negative free operating cash flow (€403 million in the first half of 2003), S&P added.

The latter, coupled with Alcatel's adequate liquidity profile, should help the company to sustain its business and technological positions and offsets any short-term liquidity risks.

S&P says DigitalNet unchanged

Standard & Poor's said DigitalNet Inc.'s ratings are unchanged including its corporate credit at B+ with a positive outlook following the company's filing for an $86 million initial public offering.

Proceeds will be used to pay off about $48 million in debt and for general corporate purposes.

Although the transaction, if completed, will improve DigitalNet's financial profile, the company already had a moderate debt burden for its rating, S&P said.

DigitalNet's ratings reflect its niche focus, partly offset by moderate but predictable earnings and cash flow.

S&P rates Apogent's loan BBB-

Standard & Poor's rated Apogent Technologies Inc.'s $500 million unsecured revolving credit facility due July 29, 2008 at BBB-. The rating outlook is stable.

The facility replaced one that was set to expire in 2005.

Ratings reflect the company's leading position in several business segments, offset by its sizable debt burden, S&P said.

Although the company faces a likely cash requirement of $300 million in 2004, the first put option date for its senior convertible contingent debt securities, Cash on hand, bank line availability and ongoing cash generation are expected to provide ample capacity to repurchase that instrument.

On an ongoing basis, funds from operations to lease-adjusted debt is expected to average about 20%, and EBIT coverage of interest is expected to average at least 4x. Total debt to capital is projected to be in the 50%-60% range, S&P said.

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