S&P confirms Schlumberger ratings

Standard & Poor's confirmed its A+ corporate credit rating on Schlumberger Ltd. following the announced $1.5 billion sale of a majority of the SchlumbergerSema businesses to Atos Origin. The outlook remains negative.

The outlook reflects concern over execution and timing of Schlumberger's debt-reduction plan. S&P said it will revise the outlook to stable once there is better visibility that Schlumberger can achieve and maintain a financial profile commensurate with its current rating.

Schlumberger has ample liquidity with roughly $2 billion in cash and short-term investments, and S&P noted Schlumberger generated about $600 million of funds from operations less capital expenditures in the first half of 2003.

Fitch rates Lear at BBB-

Fitch Ratings initiated coverage of Lear Corp. and assigned a rating of BBB- to its senior unsecured debt. The outlook is stable.

The rating reflects Lear's demonstrated ability and willingness over the last several years to generate free cashflow from operations and using it to pay down debt. Operations benefit from a more flexible cost structure which affords relatively more stable cashflow from operations in the volume cyclical market it serves.

However, intense and relentless pricing pressures from OEM customers force ever greater productivity gains and limit margin expansion, Fitch said. Also, the vast majority of Lear's business is with the traditional Big Three automakers with large dependence on light truck production and while Lear has historically been largely UAW represented, the recently concluded UAW contract negotiation at the Big Three may increase the burden for suppliers.

Liquidity was very good at June 28 with some $1.9 billion of availability under several tranches of bank lines in addition to $103 million of cash on hand, Fitch added.

While the balance of 2003 looks weak for the automotive supplier industry with softer vehicle production rates, Lear's new program additions coupled with its demonstrated ability of productivity gains will allow for stable operating performance.

Fitch expects net cashflow generated to be largely used for on-going debt reduction, alternative applications like dividends and/or share repurchases could also be a possibility, depending on the ultimate capital structure.

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