Moody's rates Selective Baa2

Moody's Investors Service assigned a Baa2 rating to Selective Insurance Group Inc.'s new senior convertible note and confirmed the company's subordinated debt at Baa3. The outlook is stable.

Ratings reflect a solid franchise, conservative underwriting posture and financial discipline, Moody's said.

While recent earnings performance has been modest, Moody's believes the company should benefit from improving conditions in the commercial lines insurance sector.

However, the degree of earnings improvement may be dampened by continuing adverse regulatory and claim trends in the New Jersey personal auto market.

Following this transaction, interest coverage and financial leverage are expected to fall within a range reasonable for the current ratings, Moody's added.

S&P cuts EDS to A

Standard & Poor's lowered Electronic Data Systems Corp.'s ratings, including the 0% convertible due 2021 to A from A+ and the 7.625% mandatory to BBB from A-. The ratings also were put on negative watch.

The downgrade follows a sharp profit warning from EDS, S&P said

The watch reflects uncertainty as to the timing of the recovery, plus EDS' negotiations to buy the business technology operations of Procter & Gamble Co., which could further strain near-term profitability and cash flow, S&P said.

Fitch cuts EDS to A

Fitch Ratings downgraded Electronic Data Systems Corp.'s senior unsecured debt to A from A+ and changed the outlook to negative from stable, reflecting the profit warning and exposure to the telecom and airline industries.

The outlook also reflects lower-than-expected free cash flow for 2002 and uncertainty for 2003 and the possibility of continued credit erosion due to the prolonged downturn in IT spending, Fitch said.

Liquidity at June 30 remains strong and included $275 million of cash and $1,250 million of unused committed lines of credit.

Committed lines of credit include a $625 million 364-day revolver, recently renewed, and a $625 million 5-year revolver that expires in September 2004.

Total debt at the end of the second quarter was $4.6 billion consisting mainly of $1.8 billion of senior notes, $1.6 billion of mandatory convertibles and $780 million of 0% convertibles.

There are no significant maturities of debt until 2004 but there is a put on the 0% convertible on Oct. 10, 2003, payable in cash. Fitch expects EDS could satisfy this put with short-term borrowings.

Moody's confirms Loews

Moody's confirmed the ratings of Loews Corp., including the 3.125% exchangeables in to Diamond Offshore due 2007 at A3. The outlook is negative.

The confirmation reflects prospects for improved stability of earnings and capitalization at CNA Financial Corp. and the view that CNA is unlikely to require Loews to make a capital injection over the near-to-intermediate term, Moody's said.

The outlook reflects the fact that while CNA's operating performance is improving, the duration of such improvement has been brief.

Loews has previously demonstrated its willingness to support CNA and Moody's is concerned that Loews may be called upon to provide additional financial support to CNA beyond the near-to-intermediate term, which could lead to a downgrade, Moody's added.

S&P notes El Paso directive

Standard & Poor's said FERC's directive to El Paso Energy Corp. (BBB+/negative) to alter its pipeline allocation procedures to free up capacity on its system will not materially affect its credit quality.

El Paso's failure to settle the dispute with its shippers is not encouraging, S&P said, but the direct financial effect on the company is expected to be minimal.

Various proceedings at the FERC about El Paso's bidding practices and market power issues related to natural gas pipeline capacity in California remain a concern, but are not expected to significantly affect credit quality, S&P said.

Fitch affirms DTE Energy

Fitch Ratings confirmed the credit ratings of DTE Energy Co. The outlook is stable.

DTE's credit profile continues to be supported by the stable cash flow stream generated by its regulated utility businesses, Fitch said.

DTE's consolidated credit protection measures are generally consistent with the rating category, although the company continues to have moderately high consolidated leverage due to merger related debt.

At second quarter, the debt ratio was 56% of total capitalization.

Positively, liquidity is strong, with more than $1 billion in unused credit facilities at June 30.

Ratings incorporate an expectation that DTE will continue its cautious approach to managing non-regulated investments, Fitch said.

S&P cuts Loral

Standard & Poor's lowered Loral Space & Communications Ltd. ratings, including the convertible preferreds to C from CCC, based on concern about liquidity and weak customer demand in satellite businesses.

The two convertible issues remain on negative watch, following Loral's offer to exchange cash and common stock for the preferreds.

S&P considers the exchange offer, which represents a deep discount to the liquidation preference of the issue, tantamount to a default.

Subsequent to completion of the exchange, assuming no further unexpected developments, the corporate credit rating will likely be raised to CCC+, reflecting a still heavy debt burden and weak business conditions, S&P said.

Although successful completion of the exchange offer will improve Loral's balance sheet and modestly help cash flow by reducing dividend obligations, it could consume up to $22 million in cash if all preferreds are tendered.

Liquidity will remain strained, S&P said. At June 30, Loral had about $108 million in cash and $73 million in available bank credit.

Interest coverage is in the mid-1 times area. However, the company has been generating negative discretionary cash flow.

Debt maturities in the next 18 months consist of bank loan amortization of $52.5 million in the second half of 2002 and $65 million in 2003.

S&P cuts HealthSouth

Standard & Poor's lowered HealthSouth Corp.'s ratings, including the 3.25% convertible due 2004 to B+ from BB+. The ratings remain on negative watch.

The downgrade reflects the expectation of weaker cash flow from outpatient rehabilitation operations related to Medicare billing revisions and concern about the potential fall out from a just-announced SEC investigation of its activities.

The SEC probe adds risk to a credit profile that may become even more dependent on less-profitable rehabilitation services by virtue of the spin-off of its outpatient surgery division being considered.

S&P expects to continue to monitor strategies for coping with the challenges, developing details of the separation of the surgery centers and the possibility of the divestiture of other assets before taking further rating action.

S&P cuts Superior TeleCom

Standard & Poor's downgraded Superior TeleCom Inc. including cutting its $500 million term loan A due 2004, $425 million term loan B due 2005 and $225 million revolver due 2004 to SD from CCC. The subordinated debt continues at CC and the preferred stock at D.

S&P said the downgrade follows Superior TeleCom's announcement that it has amended its debt payments in order to reduce its burdensome 2003 principal amortization schedule.

The announced amendments will allow the company to reduce principal amortization and adjust financial covenants through 2003, sell its electrical wire business, defense electronics subsidiary DNE Systems Inc. and 51% interest in Superior Cables Ltd. to The Alpine Group Inc. (which owns 49% of Superior Telecom's equity) for $85 million plus an additional $30 million to $35 million in tax benefits in 2003 as well as a 20% equity warrant position in the electrical assets being sold.

S&P said it deems the restructuring of debt service tantamount to a default. S&P added that it expects to assign a rating to the restructured debt obligations soon.

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