S&P cuts KeySpan outlook

Standard & Poor's affirmed the ratings of KeySpan Corp. (A/A-1) but revised the outlook to negative from stable.

The ratings reflect KeySpan's stated intention to strengthen its financial profile via certain asset sales and related debt reduction after its 2000 acquisition activity.

The outlook revision, however, reflects increased business and financial risk relative to levels that S&P expected the company to achieve by this date.

Over the near term, S&P believes KeySpan's credit quality will allow it to adequately obtain necessary funding on an ongoing basis. The company had cash equivalents of roughly $170 million and the ability to borrow up to an additional $385 million under its commercial paper program as of Dec. 31

The negative outlook reflects the near-term challenge to bolster credit protection measures and/or reduce its business risk. Absent timely achievement of credit enhancing measures, an adverse rating action is likely.

Moody's puts Continental on review for downgrade

Moody's placed the ratings of Continental Airlines Inc. on review for possible downgrade, including the senior unsecured convertible notes at B2.

The review was prompted by the negative implications for already weak cash flow and increasingly constrained liquidity as a result of the recent unexpected deterioration in passenger demand and increased pricing competitiveness in the U.S. airline industry.

S&P confirms Aristocrat

Standard & Poor's confirmed Aristocrat Leisure Ltd. and removed it from CreditWatch with negative implications including its $130 million 5% convertible subordinated bonds due 2006 and A$200 million syndicated bank loan due 2005 at BBB-. The outlook is negative.

S&P said the negative outlook reflects its concern that Aristocrat's U.S. expansion could further weaken the company's financial profile, with pricing pressures and growing working capital requirements likely to affect margins, returns, and debt levels.

The rating on Aristocrat reflects its leading position in the Australian gaming equipment market, which generates strong free operating cash flow and helps fund the company's expansion into offshore markets, S&P said.

While Aristocrat has a demonstrated track record in developing video gaming systems and software in Australia, it faces significant challenges in pursuing its offshore growth ambitions, given the significantly larger competitors in the U.S. and Japan that have established supplier relationships, and the increasingly integrated nature of the industry globally, S&P added.

The acquisition of Casino Data Systems Inc. in 2001 and the substantial working capital requirements to fund the company's rapid growth in the U.S. and Japan have resulted in increased debt usage, with lease adjusted EBITDA interest coverage falling to 8x in 2002 from 14x in 2001, and FFO to debt declining to 25% from 35% in the same period, S&P said. Aristocrat's credit protection measures remain satisfactory, and underpin its above-average rating for the gaming industry.

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