Fitch sees combined Enron, Dynegy at mid BBB

Fitch said it anticipates rating the combination of Enron Corp. and Dynegy Inc. in the mid-BBB range. But it added that that view assumes "the successful execution of (the combined company's) interim plans to deleverage its capital structure and the completion of the merger."

If the merger terminates, Fitch said Enron would be downgraded to "highly speculative grade."

Fitch said that uncertainties remain; Dynegy will "likely assume many of the difficulties which continue to plague Enron including the need to sell underperforming emerging market assets, the ongoing SEC investigations of certain Enron sponsored partnerships, and potential litigation arising from several shareholder suits filed against Enron. While Enron management is actively working to reduce debt and exit problem businesses, it is possible that not all outstanding issues will be resolved within the transaction approval timeframe."

If the merger is unwound, Fitch said it does not expect to change Dynegy's current long-term ratings.

The rating agency said positives of the merger include: "improved management credibility through Dynegy's assumption of senior executive positions and board of directors control; the reduction of leverage at the new company from ChevronTexaco's equity commitment; the aggressive downsizing and exiting of non-core operations; potential cost savings through the merger, conservatively estimated at $500 million annually; and the market strength of the merged company, particularly as it relates to Enron's and Dynegy Holdings' North American wholesale marketing and trading franchises."

Fitch revised its Rating Watch on Enron to evolving from negative. Evolving means the ratings may be raised, lowered, or maintained. It also put Dynegy's ratings on Rating Watch Negative.

Ratings affected include Enron's BBB- senior unsecured debt, its BB subordinated debt, its B+ preferred stock and F3 commercial paper; and Dynegy Holdings Inc.'s BBB+ senior notes, Dynegy Capital Trust I's BBB trust preferred securities.

Moody's cuts Enron debt, keeps on review for possible further downgrade

Moody's on Friday downgraded the senior unsecured debt ratings of Enron Corp. to Baa3 from Baa2 and the company's rating for commercial paper to Not Prime from Prime-2. Enron's long-term debt ratings remain under review for further downgrade. Moody's actions reflect the company's reduced financial flexibility as a result of a substantial loss of investor confidence. Enron drew down its bank credit facilities in order to shore up near term liquidity, but faces significant debt maturities over the near term, as well as the potential for increased margin requirements from counterparties of its wholesale trading operation. In addition, uncertainty surrounding the firm's contingent obligations creates increased risk for debtholders.

However, the rating agency concludes that the company may not be able to retain investment grade characteristics. Moody's review will focus on Enron's ability to further improve its liquidity and capital position. The rating agency would view a substantial near term injection of equity capital as a stabilizing event. Among the downgrades, Moody's cut the guaranteed senior notes to Baa3 from Baa1, senior unsecured notes to Baa3 from Baa2 and senior subordinated debt to Ba1 from Baa3. Enron shares added 22c to $8.63.

S&P lifts Beckman Coulter out of junk

Standard & Poor's upgraded Beckman Coulter, Inc., lifting its ratings out of junk territory.

Among the actions, the rating agency raised the company's $550 mil unsecured revolving credit facility due 2002 to BBB from BB+, and its $240 million of 7.45% senior notes due 2008, its $160 million of 7.1% notes due 2003, and its $200 million zero-coupon convertible senior notes due 2021 to BBB from BB+.

S&P downgrades American Tower

Standard & Poor's downgraded American Tower Corp. and its units. Among the ratings lowered are the corporate credit, cut to B+ from BB-, and the senior unsecured debt, cut to B- from B. The outlook is stable.

S&P said the downgrade follows American Tower's third-quarter 2001 operating results, which showed that the company's "core tower leasing business continues to perform well but that its networks services and Verestar business units remain weaker than previously expected. As a result of reduced cash flow levels from these two units, AMT will not achieve credit metrics over the medium term supportive of the BB- corporate credit rating."

S&P added: "On a positive note, AMT's aggressive growth is moderating significantly, as new tower builds and acquisition activity are being curtailed. The company is significantly restructuring Verestar, cutting costs in the rest of the company to reduce its overall cost structure and improve profitability, and making enhancements to its IT systems. Debt levels are expected to peak in 2002, and, as long as tenant lease-up activity remains healthy, the company should be able to grow into its capital structure over the next two years."

S&P cuts Condor Systems to D

Standard & Poor's downgraded Condor Systems Inc. to D. Ratings affected include the company's $100 million of 11 7/8% senior subordinated notes, previously rated CC and its $50 million senior secured credit facility, previously rated CCC-.

The action follows Condor's filing for Chapter 11, S&P said.

Moody's downgrades Asarco, outlook negative

Moody's Investors Service downgraded Asarco Inc., affecting $1 billion of debt. Ratings reduced include Asarco's guaranteed senior secured revolving credit facility, cut to Caa1 from B1, and its senior unsecured debentures and industrial revenue bond ratings, lowered to Ca from B3. The outlook is negative.

Moody's said the downgrades reflect its concerns about Asarco's ability to "meet its ongoing financial obligations in light of weak fundamentals for copper and the company's poor liquidity position. The company has announced that it is unable to meet an $84 million compulsory prepayment due under Asarco's $450 million revolving credit facility and will hold discussions with its bank lenders to resolve this immediate liquidity issue. Asarco also has a $50 million note maturing in December 2001."

Moody's also question the support likely to come from Asarco's parent, Grupo Mexico, SA de CV, given the group's overall weakened financial condition.

Moody's rates Vicar's upcoming notes B3, negative outlook

Moody's Investors Service rated the planned $150 million offering of eight-year senior subordinated notes by Vicar Operating Inc. at B3. It also confirmed the existing ratings of Vicar and its associated companies, including Vicar's secured bank facilities at B1. However Moody's cut the outlook on all the debt to negative from stable.

Moody's said the ratings reflect "continued high leverage and a higher level of cash interest obligations after the transactions; low cost of entry for competitors in the animal hospital arena; threat of consolidation of non-affiliated veterinary hospitals which could change the market for diagnostic services; the company's historic inability to leverage SG&A costs as it has grown; the potential for debt-financed acquisitions in the future; and the potential for margin improvements to be delayed in the near term due to the expansion of the company's East Coast 'hub' lab facility. The company believes that an expansion of this facility would result in margin improvements."

It added: "The ratings are supported by the company's leading position as the largest provider of veterinary diagnostic services and the largest manager of owned and franchised veterinary hospitals. VCA's size has resulted in steady improvements in purchasing and other direct operating costs as a percent of sales, and has created geographic diversity."

S&P cuts American Plumbing & Mechanical outlook to stable

Standard & Poor's cut its outlook on American Plumbing & Mechanical Inc. to stable from positive, affecting $167 million in debt. Ratings affected include the senior secured debt at BB- and the subordinated debt at B-.

S&P said the outlook revision follows the American Plumbing's announcement that it has "lowered its EBITDA guidance downward to $46 million - $47 million for 2001 (down from August guidance of $50 million, which was reduced from $58 million earlier in the year). The decline is due to weakening housing construction market, which is further intensifying pricing pressures and higher than expected labor and insurance costs."

S&P expects 2001 EBITDA to interest coverage to decline to about 2.5 times from 3.5x at Sept. 30, 2000.

It added: "Financial flexibility, which had been expected to modestly improve, will remain limited, with about $24 million of availability under the firm's $95 million bank credit facility."

S&P downgrades Avecia, outlook negative

Standard & Poor's downgraded Avecia Group plc. Ratings affected include the senior unsecured debt cut to B- from B. and the preference stock lowered to CCC+ from B-. All ratings were removed from CreditWatch, where they had been placed on Oct. 18, 2001. The outlook is negative.

S&P said its action followed third-quarter results that indicated "continued weakness in operating performance."

It added: "Avecia's earnings have been significantly affected throughout the year by weak demand and a de-stocking effect in the group's key end markets. This tough trading environment has delayed the expected improvement in Avecia's credit ratios, which were already weak for the rating category. Moreover, any significant recovery in the group's financial profile is unlikely to occur in the near term, given the difficult prospects for recovery in the industry."

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