Moody's rates new Acxiom convertible at Ba1

Moody's Investors Service on Tuesday assigned a Ba3 rating to Acxiom Corp.'s proposed $150 million convertible subordinated notes due 2009 and assigned a rating of Ba1 to the company's $175 million amended and restated guaranteed senior secured bank revolving credit facility due 2004. The outlook is stable. Moody's also raised Acxiom's $115 million 5.25% convertible subordinated notes due 2003, originally issued by May & Speh Inc., to Ba3 from B1.

Moody's said the ratings take into account Acxiom's established franchise in the business infrastructure of customer data integration, reliable revenue streams from having a high proportion of multi-year service contracts and the heightened predictability of future revenues, among several other factors. These elements are tempered by year-over-year declines in revenues, the near-term uncertainty over the company's prospects and the sizable capital requirements associated with information technology management activities, among several other factors, Moody's said.

A ratings upgrade could be considered upon resumption of the solid annual revenue growth that preceded the company's fiscal year ended March 31, 2001, and significant reduction in both the company's debt leverage and the leveraged balance sheet capitalization. After disappointing performance in both fiscal fourth quarter and fiscal first quarter, Moody's said, if the company's recovery in EBITDA generation proves to be short-lived, the rating could be lowered. Overall, the stable outlook reflects Moody's expectation that the company will begin to reverse the recent year-over-year declines in quarterly revenues and gradually improve upon operating margins.

S&P rates new Axciom convertible at BB-

Standard & Poor's on Tuesday assigned a BB- rating to Acxiom Corp.'s $150 million convertible subordinated notes due 2009 and a BB+ rating to its $175 million senior secured revolving credit facility due 2005. S&P affirmed all other Acxiom ratings on the company and said the outlook is negative.

Acxiom is a relatively small participant in a growing and fragmented industry that may see the entrance of several, much larger competitors, S&P noted. Channel partnering and moderate acquisitions could continue, the rating agency said, primarily to expand participation in selected vertical markets, enhance distribution capability, and provide additional operational diversity.

For the nine months ended Dec. 31, revenues declined 16% to $641 million, and Acxiom reported a net loss of $45 million versus net income of $33 million in the same period last year. To offset current market weakness, the firm has implemented cost-reduction actions and has restored profitability for September and December quarters. Additionally, the company has generated good free cash flow from operations, which has allowed Acxiom to pay down more than $100 million in debt obligations during the last two quarters. Total debt to EBITDA is under 3 times, and EBITDA interest coverage is in the 5 times area.

The ratings will be lowered if Acxiom does not restore and maintain adequate profitability measures for the rating over the near term, S&P said.

S&P cuts Getronics long-term rating to BB+

Standard & Poor's on Tuesday lowered its long-term corporate credit ratings on Dutch information and technology service provider Getronics NV to BB+ from BBB-, and its subordinated debt ratings on the group including its €500 million 0.25% convertibles due 2005 to BB- from BB+, following the announcement of lower-than-expected operating margins. The outlook is stable.

S&P said the rating action primarily follows Getronics' failure to improve its subpar operating performance. In addition, although the conversion of about €300 million ($258 million) convertible debt into equity has had a positive impact on Getronics' debt protection measures, these are still below S&P's expectations for 2001. The ratings continue to be supported by the group's good positions in the European information and communication technology services markets, solid position in desktop management services, and good geographical spread, S&P added.

The conversion offer for Getronics' two convertible bonds has reduced the debt level by about €300 million and the interest payment by €9 million, resulting in a net debt-to-EBITDA ratio of about 2.7 times, which is adequate for the ratings, S&P said. EBITDA to net interest for 2001 is forecast at about 4.0 times and funds from operations to net debt at about 27%, both of which are acceptable for the ratings, but below S&P's previous expectations. The outlook reflects the expectation that Getronics will continue to improve operating performance and credit protection measures, while keeping a strict control over working capital. S&P said it remains cautious about prospects for the industry in 2002, and expects the group to reach EBITDA net interest coverage of 4 to 5 times and funds from operations to net debt of more than 25%. The ratings include limited leeway for debt-financed acquisitions, S&P noted.

S&P rates new Solectron senior notes at BB+

Standard & Poor's on Tuesday assigned a BB+ rating to Solectron Corp.'s $500 million senior unsecured note issue due 2009 and affirmed its other ratings. The outlook is negative, the rating agency said, noting that the ratings are based on weak operating performance, exposure to depressed communications equipment end markets and leveraged financial profile. These concerns are only partially offset by Solectron's top-tier position in the electronic manufacturing services industry, well-established customer relationships with leading original equipment manufacturers and favorable long-term growth trends towards outsourcing for larger EMS providers, S&P said.

Operating performance deteriorated throughout 2001 as weak end market demand, exacerbated by an aggressive acquisition strategy that increased Solectron's manufacturing capacity, resulted in low capacity utilization and unusually high inventory levels, S&P said. Operating margins for the first half of fiscal 2002 are likely to be less than one-third of those for the same period of fiscal 2001, the agency predicts, and profitability measures will be depressed over the near term. S&P believes the communications equipment end market, which comprises more than half of Solectron's sales, is likely to remain depressed for much of 2002. However, restructuring actions, to reduce headcount and manufacturing capacity by more than one-third, are expected to produce cumulative annualized cost savings exceeding $750 million and aid operating performance in the intermediate term, S&P said.

S&P cuts Devon Energy on Mitchell acquisition

In response to the completion of Devon Energy Corp.'s acquisition of Mitchell Energy & Development Corp., Standard & Poor's has lowered its long-term ratings on Devon to BBB from BBB+, and said the outlook for Devon is stable. S&P said the downgrade on Devon reflects significantly higher debt leverage resulting from these acquisitions and the prospect that leverage will remain elevated over the next two years. The ratings also reflect Devon's position as a very large independent oil and gas exploration and production company with substantial scale in its core operating areas as well as its emphasis on North American natural gas, a commodity with favorable long-term fundamentals.

The stable outlook reflects S&P's expectation that Devon will be able to readily fund its capital program from internal sources and that there will be no additional debt-financed acquisition activity of any measure until leverage is reduced considerably. The potential for an upgrade in Devon's ratings is very limited until the company issues a substantial amount of equity, S&P said.

Moody's confirms Lumenis

Moody's Investors Service confirmed Lumenis Ltd. (formerly ESC Medical Systems, Inc.), affecting $71 million of debt including the company's convertible subordinated notes at Caa1.

Moody's said its action reflects "the emerging benefits of the acquisition of Coherent Medical Group, including significantly greater scale, improved revenue diversity, and cost synergies, offset by somewhat limited near term financial flexibility."

The rating agency said Lumenis could be upgraded if it demonstrates internal cash flow generation and refinances upcoming debt maturities.

At this point, Moody's added, Lumenis' near-term financial flexibility is "somewhat limited, based on current balance sheet liabilities, combined with the company's unproven track record of generating positive cash flow."

S&P rates new GATX convertible BBB+

Standard & Poor's assigned a BBB+ rating to GATX Corp.'s new offering of $150 million convertible notes due 2007 issued via GATX Financial Corp.

S&P downgrades Avaya

Standard & Poor's downgraded Avaya Inc. and kept the outlook at negative.

Ratings lowered include its $943 million zero coupon LYONS due 2021, cut to BBB- from BBB.

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