S&P rates Bowne convert B-

Standard & Poor's assigned a B- rating to Bowne & Co. Inc.'s new $75 million 5% convertible subordinated debentures. The outlook is stable.

The ratings reflect significant debt levels and moderate-size cash flow base, tempered by Bowne's leading market position in financial printing, diversified customer base and long-standing client relationships.

Also, Bowne's increasing focus on non-transactional financial print outsourcing and global solutions businesses is expected to help provide more stable revenues and cash flows, which would help to offset the variability of capital markets-related printing, S&P said.

EBITDA for the 12 months ended June 30 was approximately $47 million, compared to $60 million for the year ended Dec. 31. EBITDA coverage of interest is more than 2x and total debt to EBITDA over 5x for the 12 months ended June 30.

The company relies primarily on internally generated cash flow and availability under its $175 million revolving credit facility due 2005. At June 30, Bowne had approximately $60 million available under its revolving credit facility.

In the future, liquidity should continue to be adequate for debt service requirements and capital spending plans.

Moody's rates Inco notes Baa3

Moody's Investors Service assigned a Baa3 rating to Inco's $300 million debentures due 2015 and confirmed its senior unsecured debt at Baa3. The outlook is stable.

Moody's said the ratings reflect Inco's competitive cost profile, strong operating capability, long-lived reserves and leadership position in the nickel industry.

Focus on productivity, investment discipline and cost reduction has positioned Inco to better weather cyclical downturns in the nickel industry, Moody's said.

However, Inco's leverage to the price of nickel, the importance of fundamental conditions in the nickel market, the need to contain cost increases and the management of debt maturities relative to investment requirements remain critical factors in the rating.

The stable outlook reflects Moody's expectation that Inco will continue to manage its capital investment requirements within the overall context of maintaining a prudent capital structure. In addition, fundamentals in the nickel industry continue to show encouraging signs and supply and demand factors are in better balance than for other metals.

Although Inco's 2003 performance will be impacted due to the effects of the roughly three-month strike at its Sudbury operations, and the higher cost profile being experienced, Moody's expects Inco's earnings performance over the medium term to evidence positive trends.

Moody's confirms Market

Moody's Investors Service confirmed Markel Corp.'s ratings including its senior debt at Baa3. The outlook remains stable.

Moody's said the confirmation reflects Markel's strong position in U.S. specialty and excess and surplus property & casualty segments, its historical focus on underwriting results and reserve stability in its North American and excess and surplus segment.

Moody's noted that the company is reporting solid underwriting profit margins in current accident year results and believes that Markel is well positioned to take advantage of improved market conditions in the commercial lines sector. Markel has dedicated considerable amounts of capital and management focus to improve the balance sheet and operating platforms of its acquired businesses.

Moody's said it expects improved operating results from Markel's international segment, though we believe execution risks will persist considering the segment's historical patterns of earnings volatility. Moody's also believes that recent restructuring efforts may take time to materially improve the underwriting profitability of Markel's international businesses.

Offsetting factors also include the increasing degree of stress or risk being supported by Markel's capital base, Moody's said. The company's financial and double leverage are high relative to peers and the holding company's financial flexibility is somewhat constrained relative to peers due to its lower unencumbered dividend capacity coverage of annual interest expense.

The outlook for the ratings is stable reflecting Moody's expectations that the company will continue to report earnings and capital growth without material disruption.

S&P rates Duke Energy debt A-, BBB+

Standard & Poor's assigned an A- rating to Duke Energy Corp.'s $500 million first mortgage bonds due 2015 and a BBB+ rating to its $300 million senior notes dues 2008. The outlook is negative.

S&P said Duke Energy's ratings reflect a consolidated credit assessment of the company's regulated U.S. electric utility operations, Duke Power Co., and the regulated and nonregulated operations conducted by Duke Capital Corp., Duke Energy's wholly owned subsidiary.

Duke Energy's consolidated business profile is supported by the regulated electric and gas transmission and distribution business, which provide material stability to cash flow, S&P said. However, the stability provided by the regulated operations is offset by the riskier business profiles of the merchant generation, trading and marketing, international operations, and real-estate development ventures.

Over the past six months Duke Energy has endeavored to improve its consolidated business profile and reduce operating risk, S&P noted. As a result, the company has terminated its proprietary trading and marketing operations, shut down the merchant energy finance business and established certain outgoing collateral limits for the remaining trading operations.

S&P said it expects that Duke Energy will effectively unwind its remaining proprietary trading positions in a timely manner without expending additional cash.

While the international operations introduce further revenue and operating diversification, S&P said it views such operations as having a high business-risk profile due to credit risk of investments particularly in Latin America.

Duke Energy is attempting to strengthen its financial profile through asset sales, the proceeds of which are targeted to reduce debt by about $1.8 billion in 2003, reducing adjusted debt levels from about 52% as of March 31, 2003, to the mid-40% level over the next few years, S&P said. Furthermore, adjusted funds from operations to average total debt is expected to exceed 20%, and adjusted FFO to interest and preferred dividend coverage is expected to reach 4x during the next 12 to 18 months.

Fitch confirms Disney

Fitch Ratings confirmed The Walt Disney Co.'s senior unsecured ratings at BBB+ and commercial paper at F2. The outlook is negative.

Fitch said the confirmation recognizes that while key measures of cash-flow leverage are below levels consistent with the current rating, Fitch believes Disney's credit metrics will improve to be more representative of the BBB+ rating category as the company benefits from cyclical improvements in the domestic economy, a stronger advertising environment and from management's focus on strengthening the credit profile.

Credit metrics have been weak as a result of the increased leverage from the $5.2 billion Fox Family cable network acquisition in October 2001 and the fall off in the operating performance of key businesses, Fitch said.

The negative outlook recognizes that Disney's credit metrics are currently weak and reflects the expectation that if anticipated improvements to the company's credit profile are not realized in the intermediate term, the senior unsecured rating would be lowered, Fitch said.

The ratings also reflect improving results in the studio segment, which is expected to contribute meaningfully to the company's consolidated performance over the next several quarters, based on recent strength at the box office and a strong home video release schedule in fiscal 2004. Also, Fitch said it believes that several factors should combine to drive substantially higher revenues in the broadcasting and cable segment and contribute materially to consolidated EBITDA over the forecasted horizon. These factors include higher cable affiliate fees, the strong upfront market, the potential for good scatter and spot pricing, a potentially more favorable economic environment and the reentrance of political advertising.

An economic recovery should also help Disney's parks and resorts segment, which has been hampered by the effects of the weak economy and the fall-off in vacation travel, although cost pressures related to employee benefits are expected to partially offset potentially higher revenues, Fitch said.

With few remaining non-core assets available for disposition, debt reduction and improvement in credit metrics will rely primarily on improvements in Disney's operating cash flow. Fitch expects total debt/EBITDA leverage to remain above 3.5x in the near-term but to trend downwards as anticipated improvements in earnings and cash flow take hold. In addition to improvements in operating cash flow, capital expenditures, which declined from $1.8 billion in fiscal 2001 to approximately $1.1 billion in fiscal 2002, following the completion of major expansion projects at the parks and resorts business, are expected to remain under tight control. No significant acquisitions or share repurchases are planned.

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