Fitch lowers Teco Energy

Fitch Ratings downgraded the ratings of Teco Energy Inc., including the mandatory convertible to BBB- from BBB+. Also, the outlook was revised to stable from negative.

The downgrade reflects continued weakness in wholesale power markets and the expected negative impact on earnings and cash flow measures, Fitch said.

The new ratings assume no meaningful improvement in sparks spreads over the next few years and incorporate Teco's potential flexibility to delay or defer projects.

While much of Teco's equity and debt needs were met with significant issuance in the first half of the year, ongoing access to the capital and bank markets will be required.

In addition to an upcoming maturity of $200 million of senior notes, Teco has significant obligations related to the Union and Gila River projects, Fitch said.

Teco executed agreements with project financing banks in January 2002 to resume construction funding that had been halted as a result of Enron's bankruptcy. Teco's equity commitments include repayment of a $500 million equity bridge facility in four installments beginning in October 2002.

Teco also has provided a $154 million contingent letter of credit that could be drawn upon if necessary to complete the projects.

Offsetting the volatility of the independent power business is the strong performance of its regulated utility subsidiary as well as, the unregulated coal, natural gas and transport businesses, Fitch added. Regulated utility operations contributed 74% of EBITDA in 2001.

Fitch revises Goodyear outlook

Fitch Ratings has changed the outlook on the debt ratings of Goodyear Tire & Rubber Co. to negative from stable. The senior unsecured debt rating was maintained at BB+.

The change is driven by industry developments of late which will significantly challenge Goodyear's efforts to restore profitability in the periods going forward, Fitch said.

While Fitch recognizes the recently announced equity contribution of 11.3 million shares mitigates the situation to some extent, under-funded pensions will still likely require substantial funding contributions in the years ahead.

At June 30, Goodyear had ample liquidity with $713 million in cash plus $1.525 billion of undrawn bank commitments. The $775 million annual revolver piece of the bank commitment was recently renewed in August and continues to be on an unsecured basis.

Both the recently renewed annual revolver and the August 2005 $750 million commitment have financial covenants which Goodyear was compliant with as of June 30. Further erosion in profitability, however, risks tripping the interest coverage ratio, Fitch said.

S&P rates Allergan shelf

Standard & Poor's assigned preliminary A senior unsecured and A- subordinated debt ratings to Allergan Inc.'s $350 million shelf registration. The outlook is stable.

The investment-grade ratings are based on the company's solid position in specialty pharmaceutical markets, strong cash flows and moderate use of debt financing to fund growth, S&P said.

Near-term financial measures are expected to remain very strong, with funds from operations to total debt of roughly 60%, total debt to EBITDA at around 1.3x and EBITDA operating margins of over 25%.

As of June 28, Allergan had $855 million in on-hand cash and cash equivalents, which, along with a credit facility that provides up to $250 million in additional borrowing, provides significant liquidity.

The company has no significant debt maturities over the intermediate term but its 0% convertible subordinated notes (A-) face a $417 million put in November 2003.

Given significant on-hand cash, borrowing capacity under its credit facility and expected strong funds from operations, liquidity is expected to remain significant, S&P said.

Allergan maintains a sound financial policy and a sizable cash balance consistent with investment grade ratings and a stable outlook. S&P expects any share repurchases and capital investment undertaken will not compromise the historically strong financial position.

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