Fitch rates Motorola senior debt at BBB

Fitch Ratings initiated coverage of Motorola Inc. and assigned a BBB rating to the senior unsecured debt and an F2 rating to the commercial paper program. The outlook is stable.

The ratings reflect strained credit protection measures and the expectation that leverage and interest coverage will improve but remain weak in 2002, weak operating performance of wireless infrastructure and semiconductor segments and anticipated weakness in China.

Also, there are execution risks surrounding the restructuring strategy, which includes significant changes to the organizational structure and headcount reductions. The ratings also incorporate extensive cost reduction programs and weakness in end markets, which make the timing of Motorola's return to profitability uncertain.

Motorola estimates it will have a net loss in 2002 as additional charges for restructuring occur.

With revenue and margin declines, resulting from reduced demand and pricing pressures, Motorola's credit protection measures continue to be pressured.

Leverage as measured by total gross debt to core EBITDA was greater than 5 times and interest coverage was less than 3 times at the end of 2001.

Based on latest 12 months results ending March 31, Fitch estimates that credit protection measures have remained consistent but should improve in the second half of 2002 as the company continues to realize cost savings associated with the various restructurings and overall general economic improvement.

Moody's cuts SEMCO convertibles

Moody's Investors Service downgraded the ratings of SEMCO Energy Inc., including the SEMCO Capital Trust II convertible growth PRIDES to Baa2 and the convertible income PRIDES to Baa3. The rating outlook is stable.

The downgrade reflects SEMCO's leverage in the 70% range, including trust preferreds, leases and a portion of the mandatory convertible PRIDES, which Moody's siad is in the high end of its peer group.

Moody's said it expect SEMCO's leverage to improve to the 60% range next year with the mandatory conversion of the PRIDES into equity but the company is expected to generate little free cash flow that could be used to further reduce debt.

There is refinancing risk over the next few years, including the potential for having to redeem $105 million of remarketable debt securities next year, Moody's added.

The company would have limited cushion under its various debt covenants if its earnings are reduced by extraordinarily warm weather or other reasons. SEMCO's asset base is small relative to its debt load.

S&P says Cendant acquisition of NRT has no impact on ratings

Standard & Poor's said the ratings on Cendant Corp. (BBB/negative) will not be affected by plans to acquire NRT Inc. from Apollo Management LP.

Parsippany, N.J.-based Cendant will fund the acquisition through the issuance of 12 million shares of Cendant common stock, valued at about $230 million, plus the assumption of $300 million in net debt.

Concurrently, NRT will acquire Arvida Realty Services, for $160 million in cash.

The transactions will increase Cendant's direct presence in the residential real estate brokerage industry, S&P noted. Cendant typically converts acquired brokerage offices to such Cendant brands as Coldwell Banker or ERA.

S&P expects the cash portion of the two transactions, about $460 million including debt that will be retired, will be met through Cendant's excess cash balances and that credit measures will not change materially.

S&P cuts Sempra Energy to A- from A

Standard & Poor's lowered the corporate credit rating on Sempra Energy to A- from A. The outlook is stable.

The downgrades reflect a substantial increase in contribution to earnings and cash flows from unregulated ventures such as energy trading, merchant generation and international operations in Mexico and South America.

While the unregulated businesses accounted for just 1% of earnings as recently as 1999, S&P said it now considers them core operations of Sempra Energy, given the rapid growth and the company's stated goal of an average 50% contribution to its earnings from unregulated ventures by 2004.

Sempra's consolidated cash flow interest and debt coverage levels, which stood at 3.8 times and 22.2%, respectively, as of yearend, no longer support the increased business risk of the enterprise at the level of the former ratings.

The stable outlook reflects consistent and predictable cash flow from utility operations and cash flows, but S&P said it expects Sempra's capital expenditure program will be adjusted to reflect actual cash flow.

Other factors that could influence credit quality include unfavorable regulatory developments in California, potential renegotiation of contracts, further acquisitions in trading and the addition of new merchant generation.

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