(Bond rating story updated with more ratings news)
NEW YORK (TheStreet) -- Corporate, municipal and sovereign bonds don't get the same attention that the equities market does, despite being a significantly larger market and a crucial source of funding for public and private sectors around the world.
But as the economic rebound remains uncertain, the safe and stable returns that bonds can offer render them a potentially good investment story in the opinion of many investors.
As with other securities, the bond market -- also referred to as the credit, debt or fixed-income market -- requires caution. Money can be lost on bonds, so staying on top of the trends in inflation -- which doesn't bode well for bonds -- and interest rates, and keeping an eye on major corporate events is crucial.
According to a Fitch Ratings report, U.S. corporate credit market trends should remain on track in 2011 compared with last year, with modest economic growth, improving operating profiles and good liquidity offsetting some still-weak macroeconomic factors. This is particularly notable when considering debt securities offered by corporations.
Still, "the recent sharp and sustained increase in a basket of commodity prices represents a growing source of concern for fixed-income investors," according to a report by Fitch analysts.
Protein processors, ethanol producers and airlines remain the most sensitive of the commodity-sensitive sectors, while beverage producers and auto suppliers continue to be the least sensitive of the commodity-sensitive sectors, the report said. At the same time, these types of companies appear to be better-positioned to pass on higher commodity costs to customers than during the 2008 commodity price spike, the Fitch analysts noted.
Municipal, or "muni," bonds, which are debt securities offered by cities, states and counties, should have significant upside potential this year. Fitch said the credit quality of states will remain strong and that most of them will continue to have ratings of 'AA' to 'AAA.' That said, it's possible that
next year, Fitch cautioned.
The risk in sovereign bonds, or bonds offered by a country's government, vary depending on the country's development. Fitch noted that the contrast in economic and credit outlook between emerging markets and advanced economy sovereigns is becoming more pronounced, with emerging economies estimated to have growth at almost three times the rate of advanced economies and seen as having broadly improving public finances.
That said, on Feb. 7, UBS published a report cautioning that the safe-haven attributes of government bonds could be challenged in the coming decade. "We expect interest rates in advanced economies to rise amid structural deficits, growing debt burdens and the prospect of higher inflation," Kurt Reiman, head of thematic research for UBS Wealth Management Research Americas said in the report. "Erosion in the perceived credit quality of government bonds will challenge the notion that sovereign debt is a risk-free asset, leading to an increase in risk premiums."
Reiman expects Treasury securities, the sovereign debt of Japan and certain Eurozone countries, and their respective currencies, to come under growing pressure in the decade ahead -- though the possibility of actual sovereign defaults remain remote for most countries.
The ability of corporations, municipalities or countries to meet their debt obligations and the risk associated with their debt offerings are graded using credit ratings. For instance, those that receive credit ratings in the range of Aaa to Baa3 from Moody's are considered to be investment grade, while those that receive assessments in the range of Ba1 to C from the rating agency are considered to be high-yield, non-investment grade or "junk." Ratings definitions for Moody's and Standard & Poor's have been provided in the following pages. Fitch Ratings and S&P use the same ratings scale.
To stay on top of the positives and negatives of bond issuers and bond offerings, read on for the latest credit ratings upgrades, downgrades and statuses ...
Life Science Industry
Outlook Raised to Positive From Stable
Moody's revised its outlook for the U.S. life science industry to positive from stable.
"The revision reflects Moody's belief that the sector's operating profits will rise 5% to 7% over the next 12 to 18 months, driven by increased spending on scientific research and development and testing worldwide," said Moody's.
Moody's said much of the growing demand for the tools and equipment that life science companies make and distribute comes from industrial companies, which are benefiting the most from the global recovery.
Industrial companies account for about 25% of the life science sector's revenues.
Life science stocks were trading in mixed territory on Apr. 12.
was falling 0.5% to $74.85 and
was trading sideways at $48.69.
was up 0.3% to $33.68 and
was 0.9% lower at $20.48.
was rising 0.2% to $55.30 and
was increasing 0.5% to $40.21.
Moody's Investors Service has upgraded
corporate family and probability of default ratings to B1 from B2.
Moody's also upgraded the company's $140 million asset-backed revolving credit facility to Ba1 from Ba2 and its $330 million senior secured notes to B2 from B3.
Revlon's $800 million secured term-loan facility rating of Ba3 was affirmed.
The outlook is stable.
"The upgrade of Revlon's corporate family rating to B1 reflects the company's ability to sustain operating and financial momentum despite the ongoing challenges of the macroeconomic environment and intensified competitive environment."
New Rating for Proposed Debt Offering
Moody's Investors Service assigned a Baa3 rating to
proposed senior unsecured notes offering.
The proceeds of the proposed offering would be used for general corporate purposes including share repurchases.
Gap's previous ratings were withdrawn in March 2009; this is a new rating.
The rating outlook is stable.
"Moody's views Gap Inc.'s ability to grow earnings during the recession as a result of disciplined inventory management and an ongoing realignment of the store fleet as a favorable rating consideration," the rating agency said.
Second Downgrade in Less Than a Month
Moody's downgraded Portugal's long-term government bond ratings by one notch to Baa1 from A3 and placed the rating on review for possible downgrade.
"Moody's rating action was driven primarily by increased political, budgetary and economic uncertainty, which increase the risk that the government will be unable to achieve the ambitious deficit reduction targets set out in the update of its Stability and Growth Program for 2011 to 2014 and put its finances on a sustainable trajectory," the rating firm said.
Moody's said the limited downgrade reflects the notion that Portugal's eurozone partners would provide financial assistance if the country needed emergency financing before being able to tap into the European Financial Stability Facility, the eurozone's bailout fund. "Moody's believes the new government will likely approach the facility as a matter of urgency."
In late March, the Portuguese minority government collapsed after legislators rejected a key austerity package proposal.
On March 15, Moody's downgraded the Portuguese government's long-term debt rating by two notches to A3 and assigned a negative outlook.
Upgrade to Investment Grade
Moody's Investors Service has upgraded
( SLE) ratings to investment grade.
The ratings boost applies to the company's senior secured bank credit facilities, which have been hiked to Baa2 from Baa3. Moody's also withdrew the company's Ba1 Corporate Family Rating and Ba2 probability of default rating.
The rating outlook is stable.
The rating agency investment grade upgrade reflects Tupperware's stable operating performance and significant balance sheet deleveraging since the company's 2005 acquisition of
( SLE) direct selling business, "driven by its strong track record of product innovation and expansion into high potential emerging markets."
"Tupperware's favorable competitive position in attractive direct selling emerging markets is a key driver of its above average organic growth and should continue to drive strong profitability," said Moody's Vice President and Senior Credit Officer Janice Hofferber in a statement.
China's Banking System
Outlook stable over the next 12 to 18 months
Moody's said its outlook on China's banking system is stable over the next 12 to 18 months based on the view that the country's economy will remain strong.
The strength will provide banks with ongoing opportunities to generate strong earnings, Moody's said.
"In this context, the key credit issue facing the system is the extent to which credit expansion can slow to a sustainable level that checks inflationary pressures, while simultaneously accommodating the country's 7% to 8% real GDP (gross domestic product) growth target for 2011 to 2015," said Yvonne Zhang, a Moody's vice president and senior analyst, in a report.
"Following the huge stimulus and growth in liquidity evident in 2009 and early 2010, monetary policy is now being gradually tightened." Moody's rates 16 banks in China, which together account for about 73% of the system's total assets.
The Moody's report also said it expects a rise in the banks' non-performing loans, a trend that typically follows very strong loan growth.
The sectors of most concern to Moody's include real estate-related sectors and loans to local government financing vehicles. In particular, Moody's concern focuses on credits that originated in 2009 and early 2010 when monetary policy was at its most accommodative and lending standards among banks were apparently relatively loose.
"Nonetheless, in our base case scenario, we expect a manageable rise in NPLs rather than a sharp deterioration in asset quality."
Chinese bank and real estate American Depositary Receipts and stocks were trading in mixed territory, mostly down, on the afternoon of March 28.
Bank of China
was flat at $13.90,
China Construction Bank
was falling 3.2% to $18.25,
Industrial and Commercial Bank of China
was falling 0.9% to $16.23.
Xinyuan Real Estate
was down 0.4% to $2.35 and
China Housing & Land Development
( STD) was rising 3% to $2.24.
Downgrade to A- from A+
Fitch Ratings has downgraded Portugal's long term foreign and local currency issuer default ratings to A- from A+ and placed them on Rating Watch Negative.
"The downgrade reflects increased risks to policy implementation and fiscal financing in light of the Portuguese parliament's failure to pass fiscal consolidation measures and the resignation of the Prime Minister on 23 March," Douglas Renwick, Director in Fitch's Sovereign group, said in a note.
Fitch said last December when it downgraded Portugal to A+ with negative outlook that additional fiscal measures may be necessary to secure this year's ambitious deficit target of 4.6% of GDP (gross domestic product) in 2011.
"The failure to pass such measures yesterday and the ensuing policy uncertainty has weakened the credibility of Portugal's fiscal and structural reform program. It has therefore significantly increased the chances of Portugal requiring multilateral support in the near term, given its impaired ability to retain affordable market access," Renwick noted. The Fitch ratings definitions here are essentially the same as the ones provided in the Standard & Poor's key above.
Fitch thinks the risks to fiscal financing have increased since it last reviewed Portugal's rating on Dec. 23. Although the Portuguese government has raised EUR 12 billion in bonds and T-bills year-to-date and another EUR 1.3 billion in privately placed note, this compares with EUR 10.8 billion in T-bill redemptions year-to-date, a sizeable budget deficit and a further EUR 4.3 billion and EUR 4.9billion in bond redemptions in April and June, respectively, the Fitch analyst pointed out.
"Given the lack of improvement in financing conditions, Fitch no longer assumes Portugal can maintain affordable market access this year under its baseline scenario" Renwick added.
30 Spanish Banks
Downgrade by one notch or more
Moody's downgraded the senior debt and deposit ratings of 30 Spanish banks after the rating agency cut the country's government bond ratings two weeks before.
All 30 banks were downgraded by at least one notch, with 15 banks taken down two notches and five lowered three to four notches.
"It seems increasingly plausible that hard choices will need to be made at some point over the rating horizon, balancing the sovereign's incentive to support the banks with the need to protect its own balance sheet," Moody's said in the statement.
"It is, in Moody's view, increasingly likely that the sovereign will not be prepared to write all banks a blank check."
The rating agency left its views on the country's biggest banks,
( STD) and
Banco Bilbao Vizcaya Argentaria
unchanged with negative outlook.
The rating outlook for the North American and EMEA (Europe, the Middle East and Africa) chemicals industry has been raised to positive from stable by Moody's.
"Moody's expects the enduring economic expansion in emerging economies in Asia and Latin America to sustain the positive growth momentum in the U.S. and European chemicals industry in the short term," Moody's Vice President-Senior Credit Officer Elena Nadtotchi said in a report. "Moody's also expects price increases, particularly for more commoditized chemicals, to become a leading driver of growth in 2011."
"Moody's also expects price increases, particularly for more commoditized chemicals, to become a leading driver of growth in 2011."
In the rating agency's view, the limited availability of several commodities, such as propylene, butadiene, isoprene and paraxylene, along with recent capacity adjustments, should allow producers of commodity chemicals to pass on most of the cost increases in raw materials to customers.
In addition, Moody's believes that increasing natural gas prices will continue to lag rises in oil prices, and that the domestic supply of shale-based natural gas will remain plentiful. From a cost perspective, North American fertilizer producers will benefit from this enduring trend, Moody's said.
Chemicals companies were rising on March 17.
was rising 3.4% to $36.36,
was adding 2.5% to $52.81,
was advancing 3.4% to $95.29,
was popping 3.1% to $45.11,
was up 1.6% to $96.70,
was spiking 2.3% to $67.97 and
was gaining 3.4% to $88.45.
Portugal's long-term government bond ratings was downgraded to A3 from A1 and assigned a negative outlook by Moody's on uncertainty over how quickly the country's able to improve its competitiveness and reduce its trade imbalances.
"Should oil prices rise further and remain high for over a long period, external imbalances would worsen, given Portugal's dependence on imported energy," the Moody's report said.
This, as the government continues to rely heavily on external financing.
Moody's downgrade was also driven by concerns about the implementation risks surrounding the government's ambitious deficit reduction goals over the next two years; the possibility that the Portuguese government would have to intervene to provide capital to the country's banks and government-related issuers, hurting its balance sheet; and the challenges the government faces in obtaining funding in the capital markets without paying elevated yields.
Downgraded to Aa2 from Aa1/Negative
Spain's government bond ratings were downgraded one notch to Aa2 from Aa1 with negative outlook by Moody's on concerns about the country's ability to get into better financial shape.
Moody's said it was concerned that the eventual costs of bank restructuring in the country will be greater than what the government has been expecting and Spain's ability to achieve the required amount of improvement in general government finances "given the limits of central government control over the regional governments' finances as well as the background of only moderate economic growth in the short to medium term."
"The decision to assign a negative outlook to the rating reflects Moody's view that the risks to Spain's government finances remain skewed to the downside," Moody's added.
Moody's warned of more downgrades for Spain if there were indications that the country could miss its fiscal targets and bank restructuring costs in the country increased more than expected.
iShares MSCI Spain Index
was down 2.7% to $40.35 on March 10, while
tumbled 2.6% to $11.21 and
Banco Bilbao Vizcaya Argentaria
fell 3.4% to $11.55.
Downgraded to B1 from Ba1 /Negative
Greece's government bond ratings were lowered to B1 from Ba1 with negative outlook by Moody's, which said that "the fiscal consolidation measures and structural reforms that are needed to stabilize the country's debt metrics remain very ambitious and are subject to significant implementation risks."
This, despite "the progress that has been made to date," said Moody's.
Moody's also said that it was concerned that Greece continues to face considerable difficulties with revenue collection and that it may have to face debt restructuring.
The rating agency said the negative outlook on the B1 rating reflects Moody's worries about Greece's "very large" debt burden and "significant implementation risks in its structural reform package.
fell 3.8% to $1.78 on March 7.
AA+/Lowered to Negative
Spain's rating outlook has been revised to negative from stable and its long-term foreign and local currency issuer default ratings (IDRs) has been affirmed at AA+ by Fitch.
"In many respects, Spain has exceeded expectations in terms of fiscal consolidation and structural reform, notably with respect to state pensions and the labor market," Douglas Renwick, Director in Fitch's Sovereign group said. "However, the negative outlook reflects the downside risks to Spain's sovereign credit profile from a weak economic recovery, banking sector restructuring and fiscal consolidation, especially by regional governments."
The analyst warns that there could be a risk of increased volatility and stress on the European financial markets if the European Union leaders aren't able to agree on a planned response to the region's debt crisis during their summit March 24 to 25.
The affirmation of Spain's AA+ sovereign rating reflects its strong fundamentals. The country's account deficit fell to 4.5% of gross domestic product in 2010 as households and firms repaired their balance sheets.
Central European Distribution Corporation
B1 Corporate Family, Probability of Default and Senior Secured Notes Rating Could Face Downgrade
Central European Distribution Corporation
is on review for a downgrade by Moody's on its B1 corporate family rating and probability of default rating, and B1 ratingfor senior secured notes due in 2016.
"Today's rating action follows the significant deterioration in CEDC's operating performances during the fourth quarter of 2010 in addition to weak trading results during the first part of the year" Paolo Leschiutta, a Moody's vice president and senior analyst, noted in a report.
On March 1, CEDC reported an operating profit, before impairment and exceptional costs, of $116.7 million for the financial year ending Dec. 2010, representing a 29% fall from the $164.5 million reported a year earlier.
Moody's noted that the CEDC has until June to iron out certain loan negotiations with key banks. If the negotiations fall through, CEDC could end up with much bigger debt payment obligations on its hands, pressuring profitability.
Lithuania's newly-issued U.S. dollar-denominated senior unsecured bond has been assigned a Baa1 rating by Moody's, which is in line with the rating agency's government issuer rating for the country.
"Lithuania has a small economy that has displayed marked volatility in recent years because of the harsh effects of the global financial crisis. However, Moody's notes that a gradual recovery is underway and that medium-term growth prospects are reasonable as the economy resumes its path of convergence with fellow EU (European Union) members."
Moody's said the country's European Union membership is credit-positive as the agency would expect the EU to be supportive of Lithuania if it were to face severe financial difficulties.
Moody's also said it expects the Swedish banks that own the major Lithuanian banks and provided liquidity and capital support to their subsidiaries during the financial crisis -- preventing a serious systemic shock -- to "remain committed" to this type of support.
Colorado Drinking Water Bonds
Fitch Ratings has assigned an AAA rating to the Colorado Water Resources and Power Development Authority's $23.4 million drinking water revolving fund revenue bonds.
Fitch believes these series 2011A bonds will sell "competitively" on March 15.
The bond proceeds will be loaned to the city of Sterling, Colo. for drinking water facility improvements.
Fitch has also affirmed AAA ratings for the Authority's $354.9 million in outstanding senior lien clean water revenue bonds; $10.6 million in outstanding subordinate lien clean water revenue bonds; $117.1 million in outstanding wastewater revolving fund refunding revenue bonds; $142.5 million in outstanding senior lien drinking water revenue bonds; and $20.1 million in outstanding subordinate lien drinking water revenue bonds.
The rating outlook for all the bonds is stable.
Fitch Ratings said it doesn't think that the possible work stoppage for the National Football League (NFL) amid the possibility of a breakdown in labor talks between the NFL and NFL Players Association (NFLPA) will materially impact the ratings of affected broadcasters -- namely
The collective bargaining agreement between the NFL and the NFLPA is expected to expire at 11:59 p.m. Thursday. The NFL and NFLPA have had ongoing negotiations in Washington with a federal mediator during the last two weeks.
Fitch said potential outcomes of the negotiations include an extension of the existing labor agreement, a new agreement, an extension of the negotiation deadline if meaningful progress has been made during the negotiations; or the lock-out of the players by NFL owners.
Click to the next page for Fitch's ratings on the broadcasters.
Fitch has stable rating outlooks for:
Long-term Issuer Default Rating (IDR) at BBB
Senior unsecured at BBB
Long-term IDR at BBB
Senior unsecured at BBB
NBC Universal Media, LLC
IDR at BBB
Senior unsecured debt at BBB
IDR at BBB+
News America, Inc.
IDR at BBB+
Senior unsecured at BBB+
The Walt Disney Company
Senior unsecured debt A
IDR at A
Senior unsecured debt at A
Disney Enterprises, Inc.
IDR at A
Senior unsecured debt at A
Affirmation/Outlook revised to stable from negative
The rating outlook for aluminum producer
has been revised to stable from negative by Fitch Ratings on improved earnings and cash flow outlook.
Fitch expects Alcoa to have operating EBITDA (earnings before interest, taxes, depreciation and amortization) of more than $3 billion in 2011, and enough cash on hand and free cash flow to repay debt maturing over the next two years.
The rating agency also affirmed its BBB- issuer default rating based on Alcoa's improving earnings and cash flow generation.
However, improvements could be constrained over the next 12 to 18 months by ongoing weakness in the construction markets, a Fitch report said.
Alcoa had $1.5 billion in cash on hand, $9.20 billion in total debt and a fully-available $3.25 billion revolving credit facility maturing in Oct. 2, 2012, as of Dec. 31, 2010.
Automobile axle, brake and suspension parts supplier
( ARM) received a number of Fitch Ratings upgrades as the company continues to benefit from the divestiture of most of its light vehicle products division and a recovering economy.
"The Light Vehicle Systems business has weighed on ArvinMeritor's profitability in the past, and Fitch expects margins generally to be higher now that the company is firmly focused on its commercial truck and industrial end markets."
Fitch has raised the issuer default rating of ArvinMeritor to B from B-, secured credit facility rating to BB from BB- and senior unsecured rating to B- from CC. The upgrades apply to a $539 million secured revolving credit facility and $1.10 billion in unsecured notes.
Fitch has a stable rating outlook for ArvinMeritor.
Despite Fitch's generally positive view on the company's light vehicle divestment, the rating agency warns that ArvinMeritor still faces challenges in the form of the highly competitive and cyclical commercial truck and industrial markets.
Between 2006 and 2009, North American commercial truck production declined by 65%, and between 2008 and 2009, Western European commercial truck production declined 64%. "As such, going forward, there is likely to be a higher level of volatility in
operating profile through the cycle," a Fitch report said.
Affirmation/Outlook revised to positive from stable
The rating outlook for aircraft, defense and industrial products provider
and its financing arm Textron Financial has been revised to positive from stable by Fitch Ratings.
Textron Financial's ratings are linked to Textron's ratings.
The revision was based on progress in the financing arm's portfolio liquidation and debt reduction efforts and improved cash flow generation from the parent company's manufacturing operations.
Fitch also affirmed the issuer default and long-term debt ratings for Textron and Textron Financial at BB+.
"The significance of previous concerns about liquidity has diminished relative to the pace and size of the liquidation of Textron Financial's non-captive portfolio," a Fitch report said.
The division will keep the portion of the business that finances purchases of Textron products.
B2, Stable (Moody's)/B, Stable (Standard&Poor's)
Auto components supplier
corporate family and probability of default ratings have been raised to a stable outlook by Moody's.
The ratings were raised to B2 from B3.
Moody's said the corporate family upgrade reflects both the company's improving credit profile and the rating agency's expectation of increased commercial vehicle demand in the near-term.
Moody's has also raised its ratings on ArvinMeritor's senior unsecured notes to B3 from Caa1. The rating applies to about $1 billion of debt obligations.
Moody's said ArvinMeritor's sale of its Body Systems group in January will allow the company to focus on strengthening its commercial vehicle and industrial units.
In late January, Standard & Poor's raised ArvinMeritor's corporate credit rating to B from B- with stable outlook.
"The upgrade reflects our opinion that commercial-vehicle demand is recovering in North America and Western Europe, and we expect
to show higher sales and profitability in fiscal 2011," Standard & Poor credit analyst Lawrence Orlowski said in a report on Jan. 28.
Fitch Ratings has affirmed insurer
issuer default rating at A and the ratings on Arch's senior unsecured notes and preferred shares at A- and BBB, respectively. Fitch has also affirmed the A+ insurer financial strength ratings of the company's various subsidiaries.
Fitch has a stable rating outlook for Arch.
"Fitch's rationale for the affirmation of Arch Capital Group's ratings reflects the company's consistently strong profitability, low financial leverage and strong interest and preferred dividend coverage, and consistent favorable loss reserve development," the Fitch report said.
The ratings assessments factor in reduced underwriting opportunities tied to competitive conditions many of the
core businesses face.
Warner Music Group
Fitch lowered its rating outlook for
Warner Music Group
( WMG) to negative from stable, reflecting disappointing quarterly results, among other reasons.
Fitch noted that in the most recent quarter ending Dec. 31, 2010, Warner Music posted disappointing results, despite a robust release schedule.
However, the rating agency, in a report, noted that Warner Music's operating performance could receive a boost from the expected album releases of bands Green Day and REM in spring.
The Fitch report said that the lowered outlook also reflects the company's slowing digital revenue performance over the last two years; revenue growth has slowed to 6.4% in calendar year 2010 from 7.2% in calendar year 2009. In response, Fitch has reduced its outlook on
digital revenue growth to 5% from 10% and has become more cautious about the company and industry's ability to grow those revenues.
"Fitch has also become more concerned regarding the accelerating pace of declines in non-digital revenues," down 16% in calendar year 2010 and down 8% in calendar year 2009.
American Equity Investment Life Holding
Fitch Ratings has affirmed the issuer default rating of
American Equity Investment Life
at BB+ and the insurer financial strength ratings of its insurance operating subsidiaries at BBB+ with stable outlook.
At the same time, Fitch has assigned a BB rating to American Equity Investment's $200 million 3.5% senior convertible senior notes due 2015.
The insurance operating subsidiaries referred to include American Equity Investment Life Insurance Company and American Equity Investment Life Insurance Company of New York.
American Equity Investment's main strengths from a credit perspective are its high credit quality bond portfolio, improved operating situation and adequate capital levels, the Fitch report noted.
The report also cites a less risky operating environment for the company, largely due to the repeal of controversial Securities and Exchange Commission regulation SEC rule 151a affecting insurers, and the resolution of one of two class action lawsuits against
BB-/Stable (Standard & Poor's), Ba3/Positive (Moody's)
Standard & Poor's said its rating and outlook on
haven't been affected by the company's plans to authorize a $400 million share buyback program and 25 cents a share quarterly cash dividend.
Both announcements were made on Feb. 17.
The S&P report said Lear should be able to retain "substantial" cash balances despite the actions' liquidity-reducing impact and predicts the company will generate "significant" free cash flow in 2011 and 2012.
Moody's, on the other hand, said the pro-shareholder moves are "a negative credit development because it will adversely affect book equity growth and consume some of the company's liquidity."
However, the scale of the impact isn't big enough to change Moody's corporate family rating of Ba3 and positive rating outlook on
Fitch Ratings expects to rate
planned issuance of 10- and 30-year fixed-rate senior unsecured notes A given the company's diverse business portfolio, competitive businesses and "solid" free cash flow.
"Fitch expects any increase in leverage to be temporary," said the service in a report.
Fitch said proceeds from the issuance will be used to repay commercial paper, which totaled $747 million at Feb. 15 and for general corporate purposes.
Fitch's rating outlook for the company is stable.
In January, Dover said it bought rod-pump manufacturer Harbison-Fischer for $402.5 million. It's expected that at the end of the first quarter the company will complete its roughly $855 million acquisition of
Sound Solutions speaker business.
Fitch Ratings has affirmed issuer default and senior debt ratings for
Williams Partners L.P.
at BBB- after the former announced plans to spin-off its exploration and production business.
Williams Partners L.P. is a limited partnership formed by Williams Companies.
On Feb. 16, Williams Companies said that its plan would involve a two-step process -- the sale of up to 20% of its gas exploration and production business through an initial public offering in mid-2011, followed by a tax-free spinoff of its remaining interest in 2012.
"The affirmations ... reflect the very limited effect the separation of exploration and production will have on their operations and financial condition," the Fitch report said.
Fitch said it was affirming its rating for about $9.1 billion of outstanding, long-term debt.
Fitch's outlook for both Williams Companies and Williams Partners L.P. is stable.
Moody's assigned an A3 rating to the three-year and 10.5-year notes to be issued by
The rating outlook is stable.
Moody's said the ratings and stable outlook reflect the bottler's position in the Coca-Cola system as one of its key international bottlers following the spinoff from "old" CCE last October, with
The Coca-Cola Company's
acquisition of CCE's North American operations and most of old CCE's existing debt.
Coca-Cola Enterprises is the third-largest rated international Coca-Cola bottler, with sales of about $6.7 billion. It will serve many of The Coca-Cola Company's most important European markets including Belgium, France, Great Britain, Luxembourg, Monaco, the Netherlands, Norway and Sweden, where the Coca-Cola brand enjoys strong market positions, Moody's noted.
The rating agency added that
will also have an option to acquire Coke's ownership of bottling operations in Germany -- though this potential is not factored into the current rating and, if pursued, could result in a different rating than currently assigned.
Demerger Impact Manageable
Moody's said that if the proposed
( FBRWY) demerger of its Treasury Wines Estate wine business occurred, the impact would be manageable.
Foster's, rated Baa2 by Moody's, announced that it plans to seek shareholder approval to de-merge its wine business, Treasury Wines Estate.
The demerger will result in the creation of two independently listed entities -- including Foster's, which will become a pure beer business, Moody's said. The company expects the demerger to be completed in May.
"Should the de-merger of TWE obtain shareholder approval and proceed as planned, we consider its impact to be manageable within the ratings, given
strong financial profile," said Ian Lewis, a Moody's vice president and senior credit officer, in a report.
He said if the transaction is successfully closed, and assuming there are no material changes to the transaction, Moody's would likely affirm the Baa2 ratings.
BBB+ Affirmed, Stable
Fitch Ratings has affirmed its ratings on
issuer default rating, $900 million revolving credit facility and $1.9 billion of senior notes and debentures at 'BBB+'.
The rating outlook is stable.
"The ratings reflect Kohl's above-industry-average operating margins and leading market share gains, its convenient off-mall store format, strong inventory management and increased penetration of higher-margined private and exclusive brands," the Fitch report said.
Fitch said Kohl's has displaced
as the third-largest department store retailer in the U.S., with 2010 revenue of $18.9 billion.
"An ambitious organic store growth program has made Kohl's a rare growth story in the mature department store industry," the report noted.
currently has 1,089 stores in 49 states, from 732 units in 2005.
Baa2 Affirmed, Stable
Baa2 senior unsecured rating after the company announced that it will pursue a tax-free spin-off of its timeshare company to existing shareholders.
The rating outlook is stable.
"The affirmation of Marriott's ratings reflect our view that the proposed spinoff will have a positive impact on the company's business profile by eliminating a capital intensive lower-margin operation and exposure to consumer finance risks," Moody's analyst Peggy Holloway said in a report.
However, Moody's expects Marriott to increase capital and investment spending and restart share repurchase activity -- increasing debt levels.
That said, earnings growth should keep pace, resulting in stable credit ratios, Moody's said.
Baa2 rating reflects its large scale of operations, well-recognized brands, good diversification, the company's fee for service business model and low capital intensity, Moody's noted.
Baa3, Stable From Negative Outlook
Feb. 11, 2011
Baa3 long-term issuer rating has been affirmed by Moody's.
The rating agency has also changed its outlook for the issuer to stable from negative.
Moody's said the stabilization of the rating outlook reflects the stronger- than-expected recovery in Peugeot's operating performance and cash flow generation in 2010.
free cash flow generation continued to benefit from tight control of capital expenditures, working capital and the removal of the dividend payments, the rating agency explained in a report.
"Moody's gained further confidence that the company should be able to improve its operating performance and sustain the positive trajectory in its credit metrics and leverage in the next two years despite the weak prospects for light vehicle demand in Western Europe and in particular in France," the Moody's report said.
Ba1, Positive From Stable Outlook
Feb. 11, 2011
Ba1 corporate family rating has been affirmed by Moody's.
Moody's also changed its outlook for the issuer to positive from stable, in a report.
The rating agency explained that the change in outlook reflects stronger-than-expected recovery in Renault's financial metrics, which benefitted from the cash inflow of 3 billion euros -- resulting from the sale of its B-shares in AB Volvo and improvement in operating performance, and solid cash flow generation in 2010.
"Nonetheless there are risks to this scenario should the light vehicle demand in Western Europe, and in particular in France, be even weaker than currently expected or factors driving the weak operating profitability of the second half of 2010 not be corrected," the Moody's report said.
The Ba1 rating continues to be supported by
solid market positions in various regions, the successful introduction of its entry-level vehicle range and benefits of its alliance with
(Baa2/stable), said Moody's.
B1 from B2, Stable
Feb. 10, 2011
has received upgrades from Moody's.
Both Smithfield Foods' corporate family and probability of default ratings have been upgraded to B1 from B2 by Moody's.
The move was made to reflect the company's "material and permanent debt reduction."
This, as the company has demonstrated strong operating performance since the start of 2010. During the first two quarters of fiscal 2011, operating performance has been driven driven by strong pork industry fundamentals, commitment to deleveraging and benefits from pork restructuring plans initiated in Feb. 2009, the rating agency said.
"Smithfield's liquidity is expected to remain strong despite headwinds from high corn prices."
"Moreover, Moody's believes that as the current peak cycle performance wears off, the company will continue to reflect credit metrics consistent with a B1 corporate family rating."
Moody's noted that Smithfield repaid a large amount of long-term debt, or $900 million, during fiscal 2011. This lowered debt by about 30%.
Moody's has a stable rating outlook for
Feb. 10, 2011 (Standard & Poor's)/Feb. 11, 2011 (Moody's)
issuer rating and outlook haven't been affected by the automaker's announcement that it plans to reduce debt by $3 billion by redeeming trust preferred securities, Standard & Poor's said in report.
"We view the action as consistent with Ford's ongoing focus on debt reduction, which we consider a positive credit factor."
The automaker's cash balances were about $20.5 billion as of Dec. 31, 2010, which S&P believes provides sufficient flexibility to complete the redemption and maintain adequate liquidity.
On Feb. 1, S&P raised the corporate credit rating on Ford to BB- with positive outlook from B+ with positive outlook, reflecting improved business and financial risk profiles.
Moody's Investors Service said that it's Ba2 corporate family rating and positive outlook of Ford remains unchanged following the company's announcement.
"This transaction is consistent with
stated objective of deleveraging its balance sheet while maintaining sound liquidity," the Moody's report said.
Ba1 Affirmed, Negative
Feb. 9, 2011
and its subsidiaries' Ba1 corporate family rating has been confirmed by Moody's.
Moody's has also assigned Fiat a Ba1 probability of default rating.
Short-term ratings are not-prime and the outlook is negative, the Moody's report said.
Moody's said this rating action concludes the review for possible downgrade, which was initiated on Jul. 21, 2010, following the finalization of the de-merger of Fiat Industrial.
The rating agency said the rating confirmations were prompted by Fiat's better-than-anticipated operating performance, cash flow generation and lower level of net debt in 2010.
On a pro-forma basis, Fiat, post demerger, reported a trading profit margin in the industrial business of 2.9% compared with 2.1% in 2009 and positive free cash flow of around 400 million euros due to continued tight control of capital expenditures and working capital, Moody's noted.
The rating also reflects Fiat's business risk in connection with its pure focus on the highly cyclical auto industry -- including a 25% stake in
and the activities of auto components company
and engine blocks supplier
as well as of auto industry robotics supplier Comau and Fiat Powertrain Automotive; and Moody's view that
has an aging product portfolio in Europe.
Stable from Positive Outlook
Feb. 8, 2011
has strong ability to repay a newly-issued short-term debt, according to Moody's, but its long-term outlook on the company has been revised.
The rating agency changed its long-term rating outlook for the company to stable from positive, citing increased shareholder initiatives during 2010 -- including $637 million in share repurchases -- combined with some softness in fourth-quarter sales and higher-than-expected inventories resulting in credit weakness.
Still, the rating agency has assigned a Prime-2 rating to Hasbro's issuance of commercial paper under its new $500 million commercial paper program.
Moody's also confirmed the company's Baa2 long-term ratings. Obligations rated Baa by Moody's may have moderate credit risk and are considered medium grade. The "2" modifier indicates a mid-range ranking.
"Hasbro's Baa2 rating is based on its solid market position, portfolio of strong brands, broad geographic diversification, conservative balance sheet and strong credit metrics," said Moody's, while cautioning that these positives have been offset by the toy industry's "profound seasonality and inherent volatility due to fashion risk that not only reflects the sudden shifts in the popularity of certain toy products, but also includes the fluid demographics such as age compression that exist for certain toy categories."
Another constraint factored into the Baa2 long-term rating is the company's limited size -- roughly $4 billion in sales, modest organic growth potential, ongoing investments in TV programs, substantial reliance on entertainment releases, highly concentrated customer base and ongoing exposure to cost increases.
received an upgrade from Moody's on its senior unsecured ratings.
They've been lifted to Baa2 from Baa3 with stable outlook.
Moody's said rating action reflects Darden's strong position in the casual dining industry through six separate and unique restaurant concepts, three of which it said possess strong brand awareness.
"The ratings upgrade reflects the improvement in same store sales at both Olive Garden and LongHorn Steakhouse, and our view that operating metrics will continue to improve", said Bill Fahy, a senior analyst at Moody's.
The analyst also believes that
strong debt protection and brand image will be sustained through stronger operating performance and ongoing cost-saving plans, coupled with new product ideas. Fahy believes the company will continue to have good liquidity and maintain a strong credit profile.
Stability to continue
Moody's Investors Service said ratings stability will continue throughout 2011 for Australian corporations.
"We expect the hallmark of 2011 to be continued ratings stability as macro-economic conditions consolidate on 2010, and despite extensive flood damage in Queensland, which will likely lead to a low-level impact on GDP," said Ian Lewis, a Moody's vice president and senior credit officer.
Lewis added that austerity measures implemented during the last three years may gradually recede at a slightly faster pace than the year before, given the restoration of corporate confidence and pick-up in corporate growth initiatives.
Still, the credit officer warned that there are risks to this largely stable picture. "Of more concern to corporates at this juncture are, for example, the potential effects of cost inflation and subdued consumer spending."
Corporate profitability could also be eroded by increased labor competition.
iShares MSCI Australia Index Fund
, which receives a 9.2 rating out of ten by Marco Polo XTF, is one way for investors to gain exposure to Australia's corporate world. The ETF aims to provide returns corresponding with the price and yield performance of publicly traded securities in the Australian market. Shares of EWA were up 0.6% to $26.10 as of early afternoon trading Feb. 8.
Japan Railway Construction, Transport and Technology Agency
Japan Railway Construction, Transport and Technology Agency:
Japan Railway Construction, Transport and Technology Agency (JRTT) has received from Moody's Japan Aa2 ratings for various bonds.
Bonds issued include the JPY 15 billion Series 36 bonds, due 2016, and JPY 15 billion Series 37 bonds, due 2020.
The bonds aren't guaranteed by the Japanese government.
Moody's said the Aa2 rating reflects JRTT's intrinsic strength, low operating and refinancing risks -- owing to favorable legal and regulatory factors -- and the credit support Moody's believes the Japanese government would provide JRTT in stressful times.
JRTT's operations are versatile, ranging from constructing railway facilities and leasing them to railway companies, co-construction and ownership of ships, and providing financial support to shipbuilding research and development. It also removes legacy assets of the former Japan National Railways and builds Shinkansen Super Express railway facilities.
One way of investing in Japan is through the
CurrencyShares Japanese Yen Trust
ETF, which has an overall rating of 8.4 out of ten from ETF expert Marco Polo XTF. The objective of this ETF is to reflect the price of the Japanese Yen. As of Feb. 8, early afternoon, shares of the FXY were up 0.5% to $120.62.
: Moody's responded to Gymboree's announcement about amending an existing loan agreement and an expected fourth-quarter decline in earnings before interest, taxes, depreciation and amortization with calm.
Moody's said the company's announcement that it plans on amending its existing $820 million secured term loan and that it expects a fourth-quarter 2010 EBITDA decline of about $5 million to $8 million from the fourth-quarter of 2009 has no immediate impact on Gymboree's ratings and stable outlook.
Currently, Gymboree's corporate family and probability of default ratings are B2, and its secured term loan is rated B1, Moody's said.
The last rating action on
was on November 2, 2010 when the company received a first-time corporate family rating of B2.
Harman International Industries
Harman International Industries
: Moody's rated Harman International Industries' senior secured multi-currency revolving credit facility a Baa2.
In addition, the rating agency affirmed Harman's corporate family and probability of default ratings at Ba2, with stable outlook.
The Baa2 rating was assigned to the company's $550 million senior secured multi-currency revolving credit due Dec. 2015.
Moody's said that its Ba2 corporate family rating and stable rating outlook for Harman continues to factor in the company's improved operating performance as global automotive markets recover, combined with modest debt levels.
The rating agency said the ratings are supported by the
strong second-quarter performance.
has received a superior, Moody's Aaa rating on its proposed senior unsecured note offering for obtaining proceeds that may be used for stock buybacks and acquisitions.
Senior debt obligations are prioritized before other debt obligations if an issuer ever went bankrupt and unsecured debt obligations, though uncollateralized by an issuer's assets, can still be popular among investors given higher rates of return or because the issuer has good credit standing.
In an SEC filing (Securities and Exchange Commission) on Thursday, Microsoft said that it would use proceeds from the sale for general corporate purposes, which may include funding for working capital, capital expenditures, stock repurchases and acquisitions.
Moody's currently has a stable rating outlook for Microsoft because of the company's strong, global market position.
"The rating reflects the company's position as the world's largest software company with strong and defensible market positions throughout its diverse core product offerings, excellent liquidity, and modest financial leverage, even after considering the proposed debt offering," Moody's senior vice president Richard Lane explained in a report.
Microsoft has had cash and short-term investments of $41.2 billion as of Dec. 2010, according to the rating agency. Moody's said Microsoft should have free cash flow of about $19 billion in fiscal 2011.
Moody's cautioned that much of the company's cash is located offshore and would be subjected to taxes if repatriated to the U.S. permanently.
Last Sept. 22, Microsoft received an Aaa rating from Moody's on its $4.75 billion senior note issuance.
Moody's Investors Service placed
( SLE) Ba1 rating under review for a possible upgrade.
The action is based on the company's demonstrated and sustained operational improvements over the past several years despite a weak economy, its strong credit profile and conservative financial policies.
The ratings review will focus on management's strategy regarding growth both organically and through acquisitions, and the company's debt capital structure and maturity profile given all its debt matures in 2012.
repurchase of 15.4 million shares has no immediate impact on its Baa2 senior unsecured rating.
Moody's noted that the repurchased shares represent half of the remaining holdings that are being liquidated by
SB Holdings Capital
, a wholly owned subsidiary of
. GlaxoSmithKline said Feb. 2 it sold its entire stake in Quest Diagnostics for $1.7 billion.
Moody's last rating action on Quest was on Feb. 9, 2010 when the rating agency upgraded the company's senior unsecured rating to Baa2.
Moody's said it has assigned a Baa1 rating to
proposed issuance of $1.5 billion of senior unsecured notes.
Proceeds from the issuance will be used to repay short-term debt and for general corporate purposes.
Moody's said Johnson Control's Baa1 rating reflects the successful restructuring that the company has implemented in its automotive supply operations, and the continuing recovery in demand in its building efficiency and automotive end markets.
The rating agency added that the company also benefits from being the world's leading producer of lead acid batteries used in automobiles. Although tied to the automotive market, JCI's high-margin battery operations generate the vast majority of its revenues in the aftermarkets, providing an important degree of stability that can help mitigate the cyclicality inherent in the company's automotive and building efficiency businesses, Moody's noted.
Standard & Poor's assigned a BBB+ issue-level rating to JCI's proposed issuance of $1.5 billion in new senior notes, while revising its outlook on the company to stable from positive and affirming the 'BBB+/A-2' corporate credit and senior debt issue-level ratings.
"The outlook revision to stable reflects our view that JCI's credit measures for the 12 months ended Dec. 31, 2010 were somewhat weaker than we had expected; in combination with some acquisition related debt, we now believe that JCI's
funds from operation to total debt may take longer to reach our target of 60% than we previously estimated," said Standard & Poor's credit analyst Nancy Messer, in a report.
Moody's placed the Baa1 long-term rating of
( SLE) under review for possible downgrade following the company's announcement of its plan to divide into two separate, publicly-traded companies and to pay a $3 a share special dividend.
The rating review reflects Moody's belief that Sara Lee's planned spin off plan and special dividend will result in a weaker credit profile of the remaining Sara Lee businesses.
Moody's expects that Sara Lee's ratings will remain under review for possible downgrade until the spin off has substantively been completed, expected in early 2012.
Moody's has assigned an A2 rating to
proposed offering of $250 million of senior unsecured notes due 2021 and its $450 million offering of senior notes due 2041, with stable ratings outlook.
Moody's said Kimberly Clark's A2 rating reflects its strong market position in non-cyclical paper, health and hygiene-related consumer products. The company maintains a portfolio of established brands which provide a broad platform for new product innovation, Moody's said.
announcement that it will repurchase up to $1 billion in shares will not affect the company's ratings, including its Baa1 senior unsecured debt rating, Moody's said.
Considering Altria's ability to generate strong positive cash flows from its operations and assuming no subsequent meaningful debt-financed activities, Moody's believes that the company's leverage should remain below 2.0 tines debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) by the end of fiscal 2011.
Standard & Poor's said it has revised its outlook on
to positive from stable and affirmed its BB- corporate credit rating on the company.
"The outlook revision reflects GM's consistent operating performance in North America in 2010, which led us to revise our business risk assessment to fair from weak," said Standard & Poor's credit analyst Robert Schulz, in a report.
"We now believe there is at least a one-in-three chance that we could raise the corporate credit rating on GM during the next 12 months. "
Feb. 1, Jan. 28 (Standard & Poor's, Fitch Ratings)
Standard & Poor's said it raised its corporate credit rating on
and Ford Motor Credit to 'BB-' from 'B+'.
"The upgrade reflects our reassessment of Ford's business risk profile to fair from weak, and its financial risk profile to significant from aggressive," said Standard & Poor's credit analyst Robert Schulz, in a report.
Fitch Ratings has upgraded the issuer default ratings for Ford and Ford Motor Credit Company to 'BB' from 'BB-'. The rating outlook for both Ford and Ford Credit is positive, Fitch said.
"Ford's ratings reflect its continued strong financial performance and the substantial debt reduction accomplished in the fourth quarter, both of which outperformed Fitch's previous expectations," Fitch analyst Stephen Brown said in a report.
-- Written by Andrea Tse in New York.
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