S&P rates Schlumberger convert A+

Standard & Poor's assigned an A+ ratings to Schlumberger Ltd.'s $1.3 billion senior unsecured convertible debentures and confirmed its other ratings.

The outlook remains negative, reflecting concerns over the execution and timing of debt reduction, S&P said.

The ratings reflect Schlumberger's leading position in the international oilfield services industry and conservative financial policies, and the expectation that Schlumberger will make significant progress on debt reduction.

The company is targeting net debt of less than $4 billion by the end of 2003. Net debt is roughly $5.3 billion at March 31 and planned asset sales and business line dispositions are critical to the objective, S&P said.

Profitability and cash flow protection measures remain strong. EBIT and EBITDA interest coverage measures are expected to be around 4x and 9x, respectively, in the medium term. Funds from operations to net debt should be about 45%, improving as the debt-reduction plan is executed.

Liquidity is ample with roughly $1.5 billion of cash and short-term investments and liquid securities at March 31. Outstanding commercial paper is supported by various bank credit facilities, which are not subject to financial covenant tests.

Moody's cuts Mirant

Moody's Investors Service downgraded the ratings of Mirant Corp. and subsidiaries, including senior unsecured debt to Ca from Caa2.

The downgrade is in response to the company's offer to exchange up to $1.45 billion of existing unsecured bonds maturing prior to May 1, 2006, for new secured notes due July 15, 2008.

The bank debt restructuring and exchange offers could result in a total of up to $4.8 billion of new secured debt, thereby encumbering essentially all of Mirant's domestic assets and further subordinating senior unsecured bonds.

Since Mirant's international assets are already largely encumbered by existing secured debt at the asset level, Moody's believes there is minimal value remaining for senior unsecured obligations given current market conditions.

The outlook remains negative, pending further clarification on the ultimate resolution of current negotiations with Mirant's bank group and the proposed exchange offers. Successful completion of both could result in a change in the outlook to stable.

S&P ups Grey Wolf to BB-

Standard & Poor's raised the ratings of Grey Wolf Inc., including senior unsecured debt to BB-from B+ following a review of current and expected credit quality in light of the recent refinancing of its unsecured debt and present industry conditions for onshore drilling. The outlook is stable.

The recent redemption of $165 million of Grey Wolf's outstanding 8.875% notes due 2007 should save Grey Wolf about $9 million per year of interest expense. If, as anticipated, the remaining $85 million 8.875% notes are redeemed, total annual interest savings could be close to $14 million before accounting for transaction expenses, which would strengthen Grey Wolf's ability to weather cyclical downturns in drilling activity.

Although the significant cash position Grey Wolf has recently maintained will likely be reduced as a result of the refinancing of the notes, availability under its credit facility should provide adequate liquidity for a multiyear downturn, S&P said.

Debt leverage is aggressive in the low-50% range and total debt to EBITDA is a very high 6x but S&P believes that Grey Wolf could achieve EBITDA interest coverage of about 2.0x as opposed to below 1.5x without the refinancing.

Pro forma for the convertible notes and related redemption of $165 million of the 8.875% notes, the company will have about $73 million of cash on hand and $64 million available on its bank revolver with no significant debt maturities until 2007.

Moody's rates Grey Wolf convertible B1

Moody's Investors Service confirmed Grey Wolf Inc.'s ratings including its $250 million of 8.875% senior unsecured guaranteed notes due 2007 at B1 and rated its new convertible at B1. The outlook remains positive.

The ratings reflect an expected first half 2003 cash flow cycle bottom, firming sector rig utilization and dayrates, expected late 2003 to 2004 cash flow acceleration, adequate net leverage and liquidity for the rating assuming cash flow recovery as expected, and good asset coverage.

The outlook is sensitive to avoiding leveraged acquisitions and to a strong second half-2003 recovery in EBITDA and cash flow, Moody's said.

Also, the convertible note indenture does not limit new senior secured indebtedness. If secured borrowings become substantially greater than expected, the notes could be notched one rating level below the then-existing senior implied rating.

March 31 cash balances totaled $103 million, debt totaled $250 million and book equity totaled $216 million. EBITDA for 2002 totaled $41 million, interest expense was $24 million, and capital spending was $23 million.

Grey Wolf can probably curtail 2003 capital spending by avoiding material orders of new drilling pipe inventory until activity and cash flow picks up in 2004, Moody's said.

Pro-forma for the new notes, roughly $50 million of borrowings under the pending new secured facility and the redemption of the original $250 million of bonds, cash balances would be $37 million, debt would total $200 million and equity would be $208 million.

Moody's rates new SPX notes Ba3

Moody's Investors Service assigned a Ba3 rating to SPX Corp.'s new senior notes and confirmed its convertible notes at Ba3.

The ratings reflect a strong market position and increasing diversification, solid operating and financial performance through the economic downturn, substantial cash flow generation, good liquidity condition and strong management team, Moody's said.

However, the ratings are constrained by the company's still substantial debt load, significant goodwill and negative tangible net worth, continued weakness in some of its key end-markets, active stock repurchase program, and acquisitive growth strategy.

The outlook is positive, reflecting an expectation of continuing operational improvements, particularly if major end-markets experience a meaningful rebound.

Moody's ups U.S. Bancorp outlook

Moody's changed the ratings outlook to positive from stable for U.S. Bancorp and subsidiaries, to reflect expectations for continued healthy earnings growth and strong profitability.

Also, Moody's said U.S. Bancorp has successfully strengthened its franchises and lowered the risk profile of its loan portfolio. The outlook also acknowledges an excellent liquidity position and improved financial leverage.

The acquisition of NOVA, a leading merchant credit card processor, and the corporate trust business of State Street Corp. have boosted noninterest income and earnings stability.

U.S. Bancorp's asset quality remains weaker than that of many peers but reductions in exposure to more volatile industries through sales and attrition, improved loan portfolio balance and lower aggregate relationship exposures should continue improving asset quality, Moody's said.

S&P rates Getty Images new convert B

Standard & Poor's raised its corporate credit rating on Getty Images Inc. to BB- from B+ and assigned a B rating to its new convertible subordinated bonds due 2023. The outlook is stable.

The upgrade is based on steadily improving cash flow despite revenue pressure due to the weak operating conditions in its primary end markets, S&P said. The bond refinancing will modestly boost cash flow because the new notes substantially reduce the interest rate on outstanding debt.

Cash and short-term investments totaled $133 million and Getty's $85 million revolving bank credit facility was undrawn as of March 31. Its cushion relative to bank financial covenants remains comfortable.

Getty does not have any debt maturities until the bank facility expires in July 2005.

Discretionary cash flow has increased steadily since turning positive on a trailing 12-month basis in the June quarter of 2002. Cash flow should continue to benefit from capital expenditure requirements that are expected to be at about half of the amount spent in 2001.

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