Fitch cuts Interpublic converts to BBB from BBB+

Fitch downgraded The Interpublic Group of Cos. Inc.'s senior unsecured debt to BBB+ from A- and its convertible subordinated notes to BBB from BBB+, among other ratings. The rating outlook remains negative, Fitch said, reflecting the potential for additional rating actions if anticipated improvements in credit strength are not achieved in 2002.

The rating change, Fitch said, reflects the continuation of IPG's weak revenue trends and the expanded scale of restructuring activities necessary to effect a corporate-wide reorganization and to reduce costs in the current environment. This restructuring will require significant cash funding over the near term and result in weaker overall credit protection measures. Full-year debt/EBITDA in 2001 is now expected to be between 2.5 times and 3.0 times. Reflecting the general weakness in the advertising industry and the effects of certain client losses and excluding the effects of Sept. 11, worldwide revenues were down 2% through the nine months of 2001, trailing the performance of major competitors, and revenue comparisons in the fourth quarter are expected to be negative. Cost reductions to date have not kept pace with the weakening revenue trends resulting in a significant decline in operating cash flow.

Restructuring actions related to the reorganization of IPG's agencies, the integration of the True North Communications acquisition and general cost reduction initiatives have significantly exceeded previous guidance, Fitch noted. The company has recognized $646 million in restructuring charges through the third quarter of 2001, exceeding previous guidance of total restructuring charges approximating $500 million. The restructuring program involves cash costs of approximately $541 million, also exceeding previous guidance of $450 million, with most of the workforce reductions expected to be completed by the end of 2001. As a result of sizable restructuring funding and the reduced cash flow from the businesses, debt balances at the end of 2001 are now expected to approximate the level at the end of the third quarter. IPG had $3.1 billion of debt at Sept. 30, with trailing 12 month debt/EBITDA of approximately 2.6x and EBITDA/interest of approximately 7.3 times.

Given its weakening credit profile, Fitch said IPG is focusing on conserving cash and strengthening the balance sheet. Capital expenditures are being sharply cut back and share repurchases have ceased, with no plans for resumption. The announced restructuring and consolidation actions are projected to yield approximately $300 million in annualized operating cost reductions, with a sizable portion to be realized in 2002. These actions have the potential to stabilize and improve IPG's credit protection measures over the intermediate term.

Nevertheless, concerns remain about the timing and degree of recovery of client advertising and the ability of the company to smoothly effect the largest-ever realignment of its business amid the current market slowdown, Fitch said.

Moody's affirms Marathon Oil (USX) long-term

Moody's Investors Service on Wednesday confirmed the Baa1 senior long-term debt and Prime-2 commercial paper ratings of Marathon Oil Corp., following the separation of the former USX Corp. into Marathon Oil. Debt ratings confirmed included Marathon Oil debentures, senior notes, notes and medium term notes, rated Baa1, and commercial paper, rated Prime-2.

Marathon Oil's Baa1 senior long-term debt rating reflects its standalone credit quality as a smaller integrated oil company, Moody's said, and the Baa1 rating also reflects a relatively leveraged balance sheet within the integrated peer group and the competitive challenges the company faces post-separation.

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