Moody's puts Rhodia on review

Moody's Investors Service put Rhodia on review for downgrade including its senior unsecured notes and medium-term notes at Ba2 and senior subordinated notes at Ba3.

Moody's said the review was prompted by Rhodia's announcement that its expects third quarter results to be materially below the company's earlier expectations and hence it will launch a new cost-savings and major divestiture program.

Moody's noted that the operating performance for the group in 2003 to date will also be considerably below the rating agency's expectations. Furthermore, as a result of this weak financial evolution Moody's expects Rhodia to have to renegotiate financial covenants under some of its debt facilities.

Moody's cuts RFS

Moody's Investors Service downgraded RFS Partnership LP's senior unsecured notes to B2 from

B1. The outlook is stable.

Moody's said the action concludes a rating review initiated in response to the recent acquisition of RFS Hotels, Inc., RFS Partnership's former parent company, by CNL Hospitality Properties, Inc.

The action reflects adverse change in the capital structure of RFS Partnership that has resulted in a diminution in the standing of the senior unsecured noteholders, Moody's said.

At the closing of the acquisition, CNL funded a substantial portion of the purchase price on a secured basis, utilizing available leverage capacity under the terms of RFS's senior notes. The $320 million in secured bridge financing, obtained by CNL, is collateralized by certain properties of RFS, and guaranteed by CNL. At Sept. 16, $189 million was drawn under this facility. CNL expects to obtain permanent CMBS financing to take out this facility during the fourth quarter.

As a result of this substantial amount of new secured financing, the financial leverage of RFS Partnership has increased materially, Moody's said. Secured debt as percent of total assets has risen from about 23% at the first quarter 2003 to about 34% pro forma for the merger and related financing.

Fitch rates MMK bonds BB-

Fitch assigned a BB- foreign currency senior unsecured rating to Magnitogorsk Metal and Steel Works and to MMK Finance's planned $300 million notes due 2008. The outlook is stable.

Positives in MMK's ratings are a good product mix and focus on value-added products, competitive domestic positions and its ability to exploit the potential of growing demand for steel in the Russian market, Fitch said. It also reflects MMK's financial track record combined with a conservative financial profile.

Negative factors include a dependence on external raw materials, which exposes the company to market-price fluctuations, as well as uncertainties surrounding the consolidation of the domestic steel industry following the privatization of the state's remaining 24% stake in MMK, as well as trends in the global steel industry.

The stable outlook reflects Fitch's view that the impact of future cost pressures is expected to be alleviated by the financial strength of the company."

Moody's upgrades Minolta, cuts Konica

Moody's upgraded the unsecured senior bonds of former Minolta Co., Ltd. to Ba1 from B1 and downgraded the unsecured senior bonds of former Konica Corp. to Ba1 from Baa3. The outlook is positive.

Moody's said the action reflects its view that the credit quality of the two companies has converged as a result of the establishment of Konica Minolta Holdings, Inc., in which resides all the existing debt of the former Konica and Minolta entities.

The office equipment business was the major profit generator for both companies and the combined group's new strategy is to continue concentrating on high-speed and/or color copiers/multi-function printers.

Moody's considers this strategy as reasonable because it focuses on a relatively niche but growing market where competition with larger peers is limited. Furthermore, copiers for this market consume more toner and paper than other machines, creating a major cash cow for the office equipment business.

The positive outlook reflects potential synergies which are expected if the consolidation is fully and successfully implemented as planned.

Moody's puts China Merchants Bank on upgrade review

Moody's Investors Service put China Merchants Bank on review for possible upgrade including its senior debt at Ba2.

Moody's said above-peer profitability and strong execution has allowed the bank to increase market share and franchise over the past few years.

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