Moody's confirms GenCorp

Moody's Investors Service confirmed GenCorp Inc.'s $150 million convertible subordinated notes due 2007 at B1 and other ratings, and assigned a Ba2 ratings to its proposed $125 million senior secured tranche B term loan due 2007.

Despite a modest increase in leverage and decrease in coverage from the acquisition of General Dynamics Corp.'s space systems unit for $90 million, substantial book equity, enterprise value and market position support the ratings, Moody's said.

Moreover, the ratings take into account substantially improved results in first half, reflecting a restructuring implemented in 2001.

However, the ratings continue recognize that cash flow has been and is expected in the near term to remain weak. Ratings also reflect inadequate return on assets, after adjusting for pension income over the last several years, Moody's said.

Post acquisition, debt/total capital will increase to 54% from 45% in May, while total debt/EBITDAP rose from 3.4x to 3.6x, and senior debt/EBITDAP increased from 1.5x to 2.2x. EBITDAP coverage decreased from 6.3x interest in 2002 to pro forma 5.1x.

The outlook remains negative, primarily due to the continued thin profit margins, heightening vulnerability to adverse conditions. It also reflects concerns about possible unexpected adverse results in environmental litigation or proceedings against and increases in the amount or timing of environmental remediation and compliance costs, Moody's added.

Fitch rates new Hartford deal A+

Fitch Ratings assigned an A+ rating to Hartford Financial Services Group's new $300 million mandatory convertible. All other ratings were confirmed.

Hartford also sold $300 million of common equity. Thus, Fitch anticipates financial leverage, measured as debt as a percentage of total capital, will favorably drop a couple percentage points from about 27%-28% at mid-year.

At year-end Fitch said it expects consolidated debt-to-capital and trust preferred-to-capital ratios will remain below 20% and 15%, respectively. And, Fitch expects earnings coverage will be above 5x on a consolidated basis.

Fitch noted that it is conducting a comprehensive review of ratings on the North American life insurers, with the possibility of downgrades, which could impact Hartford's ratings.

S&P cuts Titanium ratings

Standard & Poor's lowered Titanium Metals Corp.'s 6.625% convertible trust preferreds due 2026 to CCC- from CCC following company news that titanium demand is expected to remain weak.

With the aerospace industry continuing to either defer or cancel orders, financial and liquidity position will continue to deteriorate.

The company's 2002 revenues are projected to be about $375 million, down from $487 million in 2001. Cash flow from operations is expected to be negative and likely remain negative in 2003.

As of June 30, the company had $90 million of availability under its U.S. revolving credit facility, $7.4 million in cash and almost $42 million available in European bank lines.

With a cash burn rate of around $20 million a year, there is sufficient liquidity for the medium term but at this pace payments on its convertible preferred stock may have to be deferred, as it has in the past, S&P said.

S&P expects operating performance to remain extremely weak over the next few years, given the outlook for the aerospace industry.

Although Titanium is taking steps to reduce its cost position by downsizing and reducing capacity, this may not be sufficient to mitigate the steep drop in demand or slow the liquidity drain.

Ratings could be lowered if the company fails to renew its U.S. bank facility which matures in February 2003 or if demand for titanium remains weak for a lengthy period, S&P added.

Moody's rates St. Paul shelf

Moody's assigned provisional ratings to The St. Paul Companies' recent universal shelf filing that increased capacity of existing shelf by $1billion to $1.683 billion.

Moody's assigned (P)A2 to senior unsecured, (P)A3 to subordinated debt/capital securities and (P)Baa1 to preferred stock ratings. For St. Paul Capital Trust II, prospective trust preferred securities were rated at (P)A3.

The outlook is stable.

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