S&P downgrades MeriStar, Host, Felcor

Standard & Poor's downgraded MeriStar, Host Marriott and FelCor. All were taken off CreditWatch with negative implications. Among the ratings affected were the following:

--MeriStar Hospitality Corp. $150 million 8.75% senior subordinated notes due 2007, $125 million 4.75% convertible subordinated notes due 2004 and $55 million 8.75% senior subordinated notes due 2007 all downgraded to B- from B; MeriStar Hospitality Operating Partnership, LP bank facilities, $300 million 9% tranche 1 senior unsecured notes due 2008, $200 million 9.125% tranche 2 senior unsecured notes due 2011 and $250 million 10.5% senior unsecured notes due 2009 all downgraded to B+ from BB-;

--Host Marriott Corp. $100 million 10% cumulative redeemable preferred stock, $100 million 10% class B cumulative redeemable preferred stock and $130 million 10% class C cumulative redeemable preferred stock due 2006,all downgraded to B- from B; Host Marriott Financial Trust $400 million 6.75% convertible quarterly income preferred securities (QUIPS) due 2026 downgraded to B- from B; Host Marriott LP $500 million 7.875% senior notes 2005, $1.2 billion 7.875% senior notes 2008, $775 million revolving credit facility due 2003, $500 million 8.45% senior notes due 2008, $250 million 9.25% senior unsecured notes due 2007, $300 million 8.375% senior notes due 2006, and $450 million 9.5% senior notes due 2007 all downgraded to BB- from BB;

--FelCor Lodging LP $175 million 7.375% senior notes due 2004, $125 million 7.625% senior notes due 2007, $400 million 9.5% senior unsecured notes due 2008, and $600 million 8.5% senior notes due 2011 all downgraded to BB- from BB; FelCor Lodging Trust Inc. $150 million cumulative convertible preferred stock and $125 million 9% cumulative preferred stock both downgraded to B- from B and $250 million term loan downgraded to BB- from BB.

S&P rates XL Capital Finance new notes at A+

Standard & Poor's on Tuesday assigned an A+ senior debt rating to XL Capital Finance plc's issue of $600 million notes due 2012, guaranteed by XL Capital Ltd. At the same time, S&P affirmed the A+ counterparty credit rating on XL and said the outlook is stable.

The rating is based on XL's extremely strong capital adequacy, very strong market position and diversified earnings stream as well as the strong financial leverage of XL and its insurance and reinsurance subsidiaries, S&P said. Partially offsetting these strengths, S&P added, are XL's prospective execution risk and capital management as acquisition and operational restructuring strategies remain active.

Regarding the outlook, S&P said it believes XL's financial leverage will return to about 20% and that coverage ratios will remain well within the reasonable range for the assigned rating category. XL is expected to maintain an extremely strong level of capitalization, supported by a strong, diversified earnings stream. Barring the potential negative effects of continuous restructuring or large loss events, S&P expects XL and its insurance and reinsurance subsidiaries' combined ratio to be about 98% for 2002.

Fitch rates new XL Capital Finance notes at A+

Fitch has assigned an A+ rating to XL Capital Finance (Europe) plc's offering of $600 million of 6.5% senior notes due in 2012. XL XL Capital has a Fitch senior debt rating of A+ and the rating outlook is stable.

The rating reflects XL's position within the global insurance and reinsurance markets, history of favorable underwriting and earnings performance, strong interest coverage and operating cash flow, and adequate capital position, Fitch said. Fitch believes that in the aftermath of the events of September 11, the property/casualty insurance market will be characterized by rapidly rising prices, diminished capacity and a flight to quality. Fitch also believes XL's capital position, underwriting franchise and financial strength, positions it to significantly benefit from improving insurance market conditions. Operating results are expected to return to previous historical levels in 2002, barring any other unusual large catastrophic events.

Moody's cuts UnitedGlobalCom debt, confirms convertible preferreds at C

Moody's Investors Service on Tuesday lowered the debt to Ca from Caa3 and confirmed the C ratings for the two 7% convertible preferred issues of UnitedGlobalCom and its subsidiaries, concluding its review that began in October. Moody's also withdrew the ratings for the company's shelf registration, the senior unsecured discount notes due 2009 that were recently redeemed, and the subsidiary bank loans to VTR GlobalCom and Austar United Communications, the former of which needs to be refinanced imminently and the latter of which remains under technical default. The rating outlook remains negative.

The downgrades reflect the recently announced tender offer for UnitedGlobalCom's remaining debt, along with Moody's expectation of a similar offer for UAP's debt under a best-case scenario for bondholders, at severely distressed levels, and our related expectation that more significant credit losses are likely to be realized for these classes of debt than previously anticipated.

Moody's had previously downgraded the company's debt and preferred stock ratings, which were already deemed to be fully out-of-the-money from a recovery perspective, in October 2001, driven then principally by the diminished credit profile of UnitedGlobalCom's majority-owned subsidiary United Pan-Europe Communications, the underlying value of which had historically been the primary support for the UnitedGlobalCom ratings. United Pan-Europe Communications' ratings were subsequently lowered again in November, with that entity's senior implied and senior unsecured ratings being reduced to Caa3 and Ca, respectively.

Fitch says AES Gener not affected by Chivor default

Fitch said it views the recent payment default by Chivor S.A., an asset of AES Gener S.A., on a bullet maturity of an international syndicated bank loan as credit neutral to AES Gener. The bank loan is non-recourse to AES Gener and potential covenant violations with AES Gener and its other assets appear manageable at this time.

Late last month, Chivor S.A. was unable to refinance an international syndicated bank loan in the Colombian local bank and capital markets on time due to market conditions and timing. Fitch said Chivor is currently seeking to negotiate an extension of its existing debt, primarily the bank loan of US$336 million, to provide the company with ample time to re-launch and/or seek alternative financing options. Despite the missed payment, Chivor continues to generate positive cash flow and has a solid business position; cash flow is currently more than sufficient to service interest expense.

Chivor is expected to be sold, or transferred, to an AES affiliate at fair market value after the debt negotiation and as part of AES Gener's medium-term plan. AES Gener is rated higher than its parent, AES Corp., but to minimize associated credit risk the company has developed a structure to insulate AES Gener's credit quality from that of AES Corp., Fitch said.

Moody's rates Korea Telecom 0.25% convertibles at Baa2

Moody's Investors Service on Tuesday assigned a Baa2 rating to Korea Telecom's $1.32 billion 0.25% unsecured convertible notes due 2007. The rating outlook is positive. Korea Telecom's Baa2 ratings reflect its leading position in the Korean telecommunication market. The company is also active in broadband business, and wireless business through KT Freetel. The ratings also incorporate Korea Telecom's financial profile, Moody's said.

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