Moody's downgrades Dean Holding

Moody's Investors Service downgraded the notes of Dean Holding - formerly Dean Foods Corp. - to junk and confirmed most ratings of Dean Foods Co., formerly Suiza Foods Corp., affecting $4 billion of debt. The outlook is positive.

Ratings affected include: Dean Holding Co. (previously Dean Foods Corp.) $100 million 6.75% senior unsecured notes due 2005, $250 million 8.15% senior unsecured notes due 2007, $200 million 6.63% senior unsecured notes due 2009 and $150 million 6.9% senior unsecured notes due 2017, all lowered to B1 from Baa2; Dean Foods Co. (formerly Suiza Foods Corp.) $2.7 billion senior secured credit facility, maturing 2007 to 2008, confirmed at Ba2 and Dean Capital Trust (formerly Suiza Capital Trust II) $600 million trust convertible preferred securities due 2028 confirmed at B2; and Dean Foods Co. (formerly Suiza Foods) senior implied rating lowered to Ba3 from Ba2. Ratings on the old Dean Foods' credit facility and commercial paper were withdrawn.

Moody's said its actions follow the completion of Suiza's acquisition of Dean Foods Corp.

Moody's said its ratings on the merged company are limited by its financial leverage, a balance sheet with a high level of intangibles and the company's aggressive long-term growth strategy, which has been driven by acquisitions.

In addition, the fluid milk sector is mature, has very limited underlying growth and is highly competitive, constraining operating margins and top line growth to relatively low levels, Moody's said. There is also integration risk from the merger.

However the combined company has large scale and reach, being the largest fluid milk processor in the nation and benefiting from geographic, customer and supply diversity.

S&P takes Hexcel off watch

Standard & Poor's removed Hexcel Corp. from CreditWatch with negative implications and confirmed the company's ratings. The outlook is negative.

Ratings affected include Hexcel's $100 million 7% convertible subordinated notes due 2003, $240 million 9.75% senior subordinated notes due 2009 and $100 million 9.75% senior subordinated notes due 2009, all confirmed at CCC+; and its $220 million senior credit facility, confirmed at B.

Moody's cuts Repsol long-term debt to Baa2

Moody's Investors Service downgraded the long-term senior unsecured debt of Repsol YPF SA and its guaranteed subsidiaries to Baa2 from Baa1 and the group's preferred stock to Ba1from Baa3, along with other downgrades. The outlook remains negative on all the debt, but Moody's affirmed Repsol's Prime-2 short-term rating.

The downgrade, Moody's said, takes into consideration Repsol's business concentration in Argentina, the potential impact that various Argentine Government measures may have on the company in the intermediate term and the overall financial strength of the group under various stress scenarios in 2002. While the financial impact of the Argentine economic crisis on Repsol remains difficult to quantify with any precision in the unstable and evolving situation in that country, Moody's said it believes that Repsol will likely retain a financial profile appropriate to its Baa2 senior unsecured debt rating. The negative outlook reflects, however, the ongoing uncertainties of the Argentine economic and political situation.

Moody;s upgrades Sovereign Bancorp

Moody's Investors Service raised the debt ratings of Sovereign Bancorp (senior upgraded to Ba2 from Ba3) and those of its subsidiaries, including the convertible trust preferreds to Ba3 from B2. Moody's said the upgrade was due to the fact that capital retention at Sovereign's operating thrift is expected to improve noticeably going forward, allowing the thrift to make larger dividends to its holding company, which currently is highly leveraged.

Capital retention improves because Sovereign has completed $333 million of payment obligations to FleetBoston which were related to its acquisition of FleetBoston branches, Moodys' said. With these payments behind it, the financial flexibility of both the thrift and the holding company are expected to improve considerably. The upgrade also reflects Moody's view that Sovereign's management will not negate this potential by executing another sizable acquisition financed with debt or hybrid securities.

Fitch affirms Cendant, cuts PHH unit

Fitch Ratings affirmed its BBB+ rating for Cendant Corp.'s senior unsecured debt, BBB for its subordinated debt and F2 for its commercial paper but for Cendant's subsidiary PHH Corp. it lowered the senior debt to BBB+ from A Fitch The current rating outlook is stable.

Cendant's ratings consider the diversity and stability of its core businesses, the company's leading position in most of its business lines, the resolution of the shareholder class action settlement and the expectation that complementary acquisitions will be successfully integrated. It also reflects the company's commitment to managing its businesses and acquisition strategy so that leverage, debt service and other important credit ratios remain within ranges that are satisfactory for existing credit ratings.

The action on PHH reflects an evolution in Fitch's perspective with respect to ratings distinctions between a parent company and its subsidiaries. Fitch has taken the position that due to the control typically exercised by a parent company over its subsidiaries and its subsidiaries' resources, timely interest and principal payments have, at best, similar risk profiles whether they are made at the parent company or subsidiary level. As a result, the action has equalized the ratings and the outlook of PHH with that of Cendant. This action is not reflective of the underlying credit quality of the PHH businesses.

S&P downgrades Cummins

Standard & Poor's downgraded Cummins Inc.

Ratings lowered include Cummins Capital Trust I's $200 million convertible preferred stock, cut to BB from BB+. The company's notes were reduced to BBB- from BBB.

Moody's downgrades KPNQwest

Moody's Investors Service downgraded KPNQwest NV multiple notches and said the outlook is negative. Ratings downgraded include KPNQwest's €340 million 7.125% eurobonds due 2009. €500 million 8.875% eurobonds due 2008 and $450 million 8.125% global bonds due 2009, all lowered to B3 from Ba1 and its senior implied rating to B1 from Ba1. Moody's also provisionally assigned a Ba3 rating to the company's proposed senior secured €500 million bank facility.

Moody's said its action is in response to the approval by the European Union of KPNQwest's acquisition of the Ebone and Central Europe businesses of Global TeleSystems, Inc.

Although further regulatory approval is needed, Moody's said its actions assume the acquisition will take place, most likely completing in early March 2002.

To finance the acquisition, KPNQwest is expected to use the new €500 million secured bank facility and issue a €210 million convertible bond.

Moody's said KPNQwest's existing unsecured bonds are lowered to two notches below the senior implied rating because they will be structurally subordinated at the holding company, behind the new bank facility, legacy operating leases and sizable trade creditors.

Moody's said KPNQwest has "a highly capable management team" which has had successes implementing its stand-alone business plan under very difficult market conditions.

However, the rating agency noted the risks associated with the integration process, which is designed to extract €600 million of expected synergies over four years, and the "very challenging" business plan, which depends on KPNQwest migrating its revenues from predominately wholesale to retail sales.

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