Fitch rates Avnet BB

Fitch Ratings initiated coverage of Avnet, Inc. and assigned a BB rating to the company's senior unsecured debt. The outlook is stable.

Fitch said the ratings reflect concerns regarding Avnet's strained credit protection measures, high debt levels, lower but improved capacity utilization levels along with the pricing pressures and demand variability and lower growth characteristics of the technology distribution industry.

Also embedded into the ratings is reduced liquidity from the company's decision to cancel its bank facility due to the effects of rating triggers.

Positively, Fitch recognizes the company's stabilizing revenue stream, adequate liquidity and leading industry position. Profitability expansion is possible from ongoing cost cutting initiatives and the anticipated growth for semiconductors.

The stable outlook reflects Avnet's stabilizing revenue base and cash flows in an improving but still challenging demand environment. Avnet has flexibility within the current rating for moderate operational and industry shortfalls, even though minimal sequential quarterly revenue improvement is expected.

The company's operations have been negatively affected the last few years by the economic downturn and the cyclical declines of the semiconductor industry and overall information technology market. Total revenue in fiscal year 2003 ending June 27, 2003 was $9.0 billion, versus $8.9 billion in 2002 and $12.8 billion in 2001. Revenue levels have been stable for the past eight quarters in the $2.1-$2.3 billion range but with EBITDA margins at historically low levels of approximately 2.5%. Fitch believes the demand environment for IT, especially for Europe, remains uncertain but a moderate industry recovery is expected, especially for semiconductors.

As a result, Avnet's credit protection metrics have weakened substantially since fiscal year 2001 driven by lower profitability. Fitch estimates interest coverage (measured by EBITDA/interest incurred) was slightly more than 2 times as of June 30, 2003 which has improved moderately the last few quarters. Positively, the company's interest coverage could improve further in the next few quarters as a result of the company entering into interest rate swaps which should reduce annual interest expense by approximately $7 million starting in the December quarter.

Moody's rates Bank Rakyat notes B3

Moody's Investors Service assigned a B3 rating to Bank Rakyat Indonesia's proposed $150 million subordinated notes due 2013. The outlook is stable.

Moody's said the rating reflects the subordinated status of the notes, strong government support for the bank, as well as BRI's unique and profitable franchise.

Moody's said the prospect for strong institutional support - especially for the bank's local currency deposits - is incorporated into its rating rationale. Moody's view is based on the bank's vital role in serving a strategically and politically important economic segment which makes it systemically critical.

In addition, the rating also incorporates the bank's own capacity to service its debt obligations given moderate liquidity and an improving financial profile, including high recurring earnings potential, above average credit quality and a healthy regulatory capital base.

Fitch rates PMA notes BB+

Fitch Ratings assigned a BB+ rating to PMA Capital Corp.'s senior debt. The outlook is stable.

Fitch said the ratings reflect a solid position in an improving reinsurance and workers' compensation marketplace, adequate capitalization and financial flexibility, and improving operating results. Ratings also reflect recent disappointing operating performance, adverse reserve development, and a heavy use of reinsurance.

PMA Capital Corp. significantly improved its capital base and its financial flexibility through the issuance of $32.5 million in privately placed trust preferred securities in May 2003 and $57.5 million in senior notes issued in June 2003, Fitch noted. The proceeds from these issuances were used to pay off PMA Capital Corp.'s relatively restrictive credit facility as well as bolster the capital position of the group's operating subsidiaries.

Additional financing can be accessed through a universal shelf registration which PMA Capital Corp. filed for in 2002 that has $106.3 million available for issuance. Fitch believes that the organization's capital base and financial flexibility are sufficient to support the current or higher ratings.

Recent operating performance has improved both at the primary insurance subsidiaries as well as at PMA Capital as evidenced by an improvement in the combined ratio through the first half of 2003. Through the first six months of 2003, the combined ratio at the primary insurance subsidiaries further improved to 101.6%. The primary insurance subsidiaries posted a combined ratio of 103.2% in 2002 versus 105.5% in 2001. Similar experience has been seen at the reinsurance subsidiary. PMA Capital recorded combined ratios of 106.4% and 114.2% in 2002 and 2001, respectively. Through the first six months of 2003, the combined ratio at PMA Capital declined further to 98.5%, Fitch said.

Moody's rates MMK notes Ba3, raises outlook on Magnitogorsk

Moody's Investors Service assigned a Ba3 rating to MMK Finance SA's proposed $300 million guaranteed senior unsecured notes due 2008 and raised its outlook on OJSC Magnitogorsk Iron and Steel Works to positive from stable. Moody's confirmed Magnitogorsk's senior implied rating at Ba3.

Moody's said the outlook changed reflects a consistent improvement in Magnitogorsk's operating track record, particularly since Moody's initial rating; Magnitogorsk's strengthening financial performance, particularly in 2003 and expectation that adequate financial flexibility will be sustained throughout the cycle; expectation of Magnitogorsk's adherence to conservative financial policies going forward; and the overall strengthening of the macro economic fundamentals in Russia and the positive economic implications for the strategically important steel industry.

Following a $1.0 billion investment program over the last 5 years, Magnitogorsk has increased output levels by over 45% and has continued to improve operating yields; Moody's expects that output will now stabilize at 10.1 million tons, with further modernization investment directed to improving processes and downstream operations.

Magnitogorsk's internal cash flow generation has remained strong, sufficient to cover about 95% of past expenditures whilst maintaining total debt to EBITDA at less than 1.0 times; Moody's expects similar investment levels per annum going forward.

Although Magnitogorsk's current cash flows are buoyed by an overall improvement in the pricing environment and better product mix, Moody's said it believes that the modernization program will allow for increased cushion in a down cycle.

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