Fitch puts YPF on positive watch

Fitch Ratings put YPF SA on Rating Watch Positive including its senior unsecured foreign and local currency ratings at B+.

Fitch said the action reflects the continued strength of YPF's financial flexibility and liquidity position despite the difficult Argentine sovereign environment of the past 18 months.

The watch also incorporates the benefits of YPF's ownership structure, solid operating performance and credit protection measures and proven hard currency-generating ability, Fitch said.

These factors, coupled with the company's cash flow and production diversification, mitigate exposure to Argentine transfer and convertibility risk, allowing YPF to be rated multiple notches above the sovereign's senior unsecured foreign currency rating.

Although YPF's debt is technically non-recourse to Repsol YPF SA, the assigned ratings assume a strong level of support by the parent company, reflecting YPF's importance in the overall group strategy. The acquisition of YPF resulted in a more balanced integrated business mix for Repsol YPF, correcting the historical bias towards downstream operations. As of year-end 2002, YPF accounted for close to half of Repsol YPF's earnings but only 13% of the group's consolidated leverage.

Repsol YPF's incentive to support YPF is further underscored by the existence of cross-default clauses in its bond documentation, which can be triggered if a principal subsidiary (such as YPF) defaulted on more than $20 million of obligations, Fitch noted.

S&P puts RFS on developing watch

Standard & Poor's put RFS Hotel Investors Inc. on CreditWatch Developing including its RFS Partnership LP's $125 million 9.75% senior unsecured notes due 2012 at B+.

S&P said the action follows the announcement that CNL Hospitality Properties, Inc., an unrated lodging REIT, has agreed to acquire RFS for approximately $383 million in cash plus the assumption of debt, for total consideration of approximately $687.6 million.

The developing implications reflect the absence of information on privately held CNL, S&P said.

At closing, CNL will also assume all outstanding RFS debt.

Moody's puts CE Casecnan on review

Moody's Investors Service put CE Casecnan Water and Energy Co. on review for downgrade including its senior secured notes at Ba2.

Moody's said the review is after NIA filed an Answer and Counterclaim on March 31 2003 and subsequently a Supplemental Counterclaim on April 23 to existing arbitration proceedings with CE, seeking to declare the project agreement void.

CE initiated arbitration against NIA in August 2002 concerning the non-reimbursement by NIA of taxes paid by CE during construction of the project. Further, in the absence of the project agreement being declared void, NIA is seeking to have the agreement reformed.

Moody's said the review will focus on the increasing political risk in the electricity sector in the Philippines, the risk that in consequence the entire sector is exposed to significant ongoing volatility and the likelihood of success of NIA in its counterclaims.

Moody's added that it is increasingly concerned that the unpredictability of actions by government-related agencies and consequent instability of contractual arrangements in this sector is becoming inconsistent with a rating approach that attaches significant benefit to offtake arrangements with those government supported entities.

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