Moody's rates AmerUs mandatory Baa3

Moody's Investors Service assigned a Baa3 rating, with a negative outlook, to AmerUs Group Co.'s $100 million mandatory convertible.

Financial leverage is expected to decrease from 27.9% to below 25%, based on attributing 50% equity and 50% debt to the convertible, assuming the company uses most of the proceeds to repay bank debt.

Fixed charge coverage is expected to be 2.34x for 2003 on a pro-forma basis, which compares favorably with peer companies, Moody's said.

While the offering is viewed favorably under the scenario that AmerUs Group repays the bank debt, thus increasing financial flexibility somewhat, the negative outlook on the senior debt of the holding company and the A3 insurance financial strength ratings of the life subsidiaries remains in place.

Among AmerUs' strengths, Moody's cited a growing presence in the individual fixed annuity market and the profitable, growing block of in-force individual life insurance. Ratings also reflect multiple distribution channels and relatively low exposure to commercial mortgage and real estate assets.

Moody's also noted steps to improve statutory profitability and capital position by restructuring product line-up and field compensation to accelerate recovery of new business statutory strain and by moderating new sales in annuities and funding agreements.

Offsetting these strengths, however, are the operating companies' relatively low statutory capitalization, significant investment losses in 2002, modest statutory operating profitability and significant growth in funding agreements, Moody's said.

S&P puts EDS on negative watch

Standard & Poor's, after a preliminary assessment, placed the short-term corporate credit and commercial paper ratings of Electronic Data Systems Corp. on negative watch on the possibility that long-term ratings may be lowered two notches to BBB from A-, rather than one notch as previously expected.

S&P put the long-term senior unsecured ratings on negative watch May 8 because of weak operational performance, slippage in the U.S. Navy and Marine Corp contract, and the "comprehensive strategic and operating review" of the company by EDS management.

Ratings had been based on the expectation that the deployment and cash flow schedule for the Navy and Marine contract would remain on track.

In addition, first-quarter operating margins were 5%, narrowed from 11% a year earlier, reflecting delivery issues in outsourcing, market pressures in the consulting sector, declines in higher margin discretionary IT services spending and the new General Motors Corp. sector agreements, S&P said.

S&P ups LifePoint bank loan to BB

Standard & Poor's raised the senior secured bank loan rating on LifePoint Hospitals Inc. to BB from BB- and affirmed its BB- corporate credit rating. The outlook is positive.

The upgrade for the senior secured bank loan reflects the growth in assets and cash flow, S&P said.

The speculative-grade ratings reflect limited size and potential for operating vulnerability due to industry risks. It also reflects the likely continuation of significant acquisition activity, which may hurt the future financial profile.

LifePoint has improved cash flow by acquisitions without weakening credit-protection measures. Improving performance, highlighted by an operating margin that has increased to about 23% in 2002 from 18% in 2000, helped improve cash coverage of interest to 11.6x in 2002 from 6.4x in 2001.

Liquidity at March 31 consisted of $40 million cash and cash equivalents and $176 million available on its $200 million revolving credit facility due 2006. The convertible, its only debt outstanding, are due 2009.

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