Moody's confirms El Paso ratings on debt reduction plan

Moody's Investors Service confirmed the debt ratings of El Paso Corp. and its subsidiaries and affirmed their rating outlook as stable in response to the company's announced debt reduction plan. For El Paso, the ratings affirms were: Baa2 senior unsecured debt, Baa3 subordinated, (P)Baa2 senior unsecured shelf, (P)Baa3 subordinate shelf, (P)Baa3 preferred shelf and P-2 commercial paper.

Although there is execution risk, Moody's said its ratings anticipate that a substantial part of the initiatives will be completed by end of the first quarter 2002 as planned. El Paso's plan aggressively addresses its rising financial leverage risk. The company's rapid growth, which includes the equity-financed acquisitions of Sonat Inc. in 1999 and Coastal Corp. early this year, has resulted in rising debt levels, including off-balance sheet financings. The company plans to raise $2.25 billion from asset sales, and will use the proceeds for debt repayment. Moody's said El Paso has a deep and diverse portfolio of assets that could be sold.

Furthermore, El Paso plans to raise at least $1.3 billion from retained earnings and public equity offerings. The result from all these combined sources will be to reduce the company's adjusted book leverage - including share trust and minority interest financings that Moody's considers to have debt characteristics - from the high 60% range to the low 50% level. Moody's noted that El Paso's book equity is understated, because the Sonat and Coastal acquisitions were accounted for under the pooling method.

El Paso currently has $4 billion of financings, both on- and off-balance sheet, that contain rating triggers. About $2 billion of it is associated with share trust financings that are accounted for as off-balance sheet, and which Moody's includes in its leverage analysis, and the rest is associated with certain financings that are treated as minority interest on the balance sheet but that Moody's believes have debt attributes. El Paso's plan to eliminate or renegotiate certain of those rating triggers stabilizes its credit quality, because such rating triggers could worsen a company's liquidity or financial position at a time when its credit is faltering

El Paso's near-term liquidity position is sufficient, Moody's said. Its core businesses - regulated pipelines, E&P, field services, merchant energy activities - generate ample cash that should be able to meet substantially all its needs, Moody's said.

The Baa2 senior unsecured ratings for about $230 million of debt at PG&E Gas Transmission remain under review for possible downgrade, Moody's said. El Paso does not guarantee this debt, though it is currently housed at a consolidated subsidiary. The review reflects the continuing possibility that the debt may be transferred to an affiliate that may be rated lower, namely El Paso Energy Partners LP (rated Ba2 issuer rating, positive outlook), Moody's said.

Fitch says Enron bankruptcy does not threaten banks' survival

The bankruptcy filing by one-time energy trading giant Enron Corp. does not threaten the survival of big U.S. and European banks, Fitch said Wednesday. "The exposures revealed are not in themselves a threat to the future of any of the large U.S. or European banks, nor indeed likely to lead to negative rating actions," Fitch said. "The apparently manageable proportions of the ... exposures partly reflect an active syndicate power and energy loan market, which has enabled underwriting banks to manage and reduce their exposures in the secondary market." Fitch said the full impact of the Enron bankruptcy on the world economy is not yet clear and that banks' ratings may eventually face downward pressure. Among the banks with exposure are Enron's lead bankers, Citigroup Inc. and J.P. Morgan Chase & Co. The latter, Fitch noted, sued Enron on Tuesday for $2.1 billion to protect some money it loaned to the company.

S&P downgrades NTL

Standard & Poor's downgraded NTL Inc.

Ratings affected include: NTL Communications Corp.'s corporate credit rating, cut to B- with a negative outlook from B+ with a stable outlook; its notes, senior notes and bonds, cut to CCC from B-; its convertible subordinated notes, cut to CCC from CCC+; NTL Communications Ltd.'s bank loan, cut to B from BB-; NTL Inc.'s exchangeable preferred stock, cut to CCC- from CCC, and its subordinated convertible notes, cut to CCC from CCC+; NTL Business Ltd.'s bank loan, cut to B from BB-; NTL Triangle Ltd.'s $300 million 11.2% senior discount debentures 2007, cut to CCC from B-; Diamond Cable Communications plc's senior discount notes cut to CCC from B-; and Diamond Holdings plc's notes, cut to CCC from B-.

S&P rates new Interpublic convertibles BBB+

Standard & Poor's assigned a BBB+ rating to the new convertible senior notes of Interpublic Group of Cos., Inc.

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