/raid1/www/Hosts/bankrupt/TCREUR_Public/030626.mbx         T R O U B L E D   C O M P A N Y   R E P O R T E R

                           E U R O P E

            Thursday, June 26, 2003, Vol. 4, No. 125


                            Headlines


A U S T R I A

BURGENLAND AG: E.U. Commission to Scrutinize State Aid


F I N L A N D

IOCORE OYJ: Proposed Name Change Approved
METSO CORPORATION: Aims to Improve Results Through Efficiency
METSO CORPORATION: Moody's Downgrades Ratings to Baa3 from Baa2


F R A N C E

SUEZ SA: Unofficial Guidance Leaves Shares Heading South
VIVENDI UNIVERSAL: VUE Gets New US$920 Mln 5-Year Term Loan


G E R M A N Y

DAIMLERCHRYSLER AG: Plans to Reorganize Commercial Vehicles Unit
DEUTSCHE TELEKOM: Debt Ratings Outlook Changed to Positive
GERLING ALLGEMEINE: Credit Suisse Mulls Taking 9.9% Stake
GERLING KONZERN: S&P Hints Possible Upgrade After Unit's Sale
WESTLB: London Finance Unit Formally Closes Door to New Business


I T A L Y

FIAT SPA: Turnaround Plan to Include New Loan, Capital Hike


N E T H E R L A N D S

ROYAL KPN: S&P Upgrades Credit Rating to 'BBB+'


N O R W A Y

PAN FISH: Sells Pan Pelagic to Unit CEO for NKR70 Million


P O L A N D

DAEWOO-FSO: Denies Involvement in Tax Fraud


S W E D E N

SCANDINAVIAN AIRLINES: Inks Deal to Realize e-Booking Strategy


S W I T Z E R L A N D

ABB LTD.: Judge Fitzgerald Delays Exit from Creditor Protection
ABB LTD.: Confident Asbestos Settlement Will Pass Scrutiny
SWISS INTERNATIONAL: Replaces Faulty Year-old Business Plan
SWISSPORT GROUP: To Cut Jobs in Response to Swiss Downsizing


U N I T E D   K I N G D O M

CABLE & WIRELESS: Sells French Business to Tiscali Subsidiary
CONVERGENT COMMUNICATIONS: Demise Certain Sans Major Unit Sale
EQUITABLE LIFE: Evidence Shows Actual Shortfall Reached GBP3 Bln
INVENSYS PLC: Long-term Corporate Credit Rating Lowered to 'BB-'
KUJU PLC: Bad Debt Provisions Cause After Tax Loss

MARCONI CORPORATION: Grants Share Options to Executives
MEPC LTD.: Long-term Ratings Lowered to 'BB-' After Review
MMDH: Closed Due to Falling Advertising Market in Region
MMO2 PLC: German Unit Surpasses Targeted Subscriber Base
POOLE DEVELOPMENTS/DOLPHIN QUAY: In Administrative Receivership

PPL THERAPEUTICS: Shareholders OK New Share Nominal Value
SAFEWAY PLC: Regulator Sends 'Remedies Letters' to Bidders
SAFEWAY PLC: Wm Morrison Passive About Possible Merger
SAFEWAY PLC: Sainsbury Says Suggested 'Remedies' Not Surprising
SAFEWAY PLC: Failure to Bag Merger Won't Affect Biz, Says Tesco
SPORTINGBET PLC: Takes Steps to Meet Earn Out Obligations

* S&P Publishes Default Modeling Criteria for Securitizations
* S&P Says Corporate Defaults Drive CDO Rating Actions


                            *********


=============
A U S T R I A
=============


BURGENLAND AG: E.U. Commission to Scrutinize State Aid
------------------------------------------------------
The European Union Commission plans to investigate the state aid granted to
Austrian bank, Burgenland AG, to know whether the grant was provided
according to Union rules, Dow Jones said.

The Commission said in a statement the restructuring plan "must restore the
long-term viability of the bank," and it will determine "whether the
measures taken comply with E.U. [European Union] guidelines on state aid for
rescuing and restructuring firms in difficulty."

The regional government extended state guarantees in favor of Burgenland
after the bank discovered fraud in 1999.  This, the Commission seeks to end
in general as part of a far-reaching campaign to remove similar state
guarantees elsewhere in the European Union financial sector.

The bank was unavailable to specify the amounts involved or until when the
guarantees were applicable, according to the report.


=============
F I N L A N D
=============


IOCORE OYJ: Proposed Name Change Approved
-----------------------------------------
The change of Iocore Plc's name to Sentera plc was entered into the Trade
Register on June 23, 2003 and will be valid in the Helsinki Exchanges' HETI
system as of June 25, 2003.

The new trading code of the share will be SNR1V.  The change will be valid
in the Helsinki Exchanges' HETI system by June 26, 2003.  There will be no
after market trading II with the shares of Sentera plc on Thursday morning
June 26, 2003.

Identifiers:

New company name as of June 25, 2003:  Sentera plc
Trading code as of June 26, 2003:      SNR1V
ISIN code:                             FI0009008981

                     *****

The company said this month that for over six months now, it has been
implementing a development program for its European units, but due to the
adverse market conditions, overall operations have remained unprofitable.
It is currently analyzing the profit/loss and tax consequences of
discontinuing the French business and will post the reduction effects to the
profit/loss of the third quarter, which is from April 1 to June 30, 2003.


CONTACT:  IOCORE PLC
          Markku Toivanen, Deputy Chief Executive Office
          Phone: + 358 9 374 7800
          Home Page: http://www.iocore.fi


METSO CORPORATION: Aims to Improve Results Through Efficiency
-------------------------------------------------------------
Metso's market environment has continued to be uncertain, and the demand for
Metso's products has been weaker than anticipated.  With the present market
and competitive situation continuing, the measures taken so far to improve
the operational efficiency are not sufficient.  Metso has therefore decided
in all its business areas to accelerate measures to improve profitability
and to increase efficiency.

The measures target an approximately EUR100 million annual result
improvement, of which Metso Paper will account for EUR30 million to EUR40
million and Metso Minerals for EUR50 million to EUR60 million.  According to
preliminary estimates, the efficiency improvement program will result in a
nonrecurring cost of approximately EUR80 million.  Metso's business areas
will specify their plans for required measures by the end of August.

The nonrecurring cost related with the efficiency improvement program will
be booked in year 2003, and therefore the Corporation's result will be
significantly lower than in 2002.  Before possible nonrecurring cost related
to the efficiency program, the result for the second quarter in 2003 is
estimated to improve from the first quarter, but the result for January to
June 2003 will remain negative.

The measures to be taken in the Metso business areas will be reported as
soon as the plans are finalized.  Metso Paper has already initiated measures
to reduce the number of personnel in Finland and Sweden by 300.  Metso Paper
will now start negotiations with the personnel also in North America
targeting personnel reductions of approximately 300 persons.

Metso Corporation is a global supplier of process industry machinery and
systems, as well as know-how and aftermarket services.  The corporation's
core businesses are fiber and paper technology, rock and mineral processing,
and automation and control technology.  In 2002, the net sales of Metso
Corporation were EUR4.7 billion and the personnel totaled approximately
28,500.  Metso Corporation is listed on the Helsinki and New York Stock
Exchanges.

CONTACT:  METSO CORPORATION
          PO Box 1220
          Fabianinkatu 9A
          00101 Helsinki
          Finland
          Phone: +358 20 484 100
          Fax: +358 20 484 101
          Home Page: http://www.metso.com
          Contact:
          Olli Vaartimo, Executive Vice President & CFO
          Phone: +358 204 84 3010
          Eeva Makela, Investor Relations Manager
          Phone: +358 204 84 3253


METSO CORPORATION: Moody's Downgrades Ratings to Baa3 from Baa2
---------------------------------------------------------------
Moody's Investors Service has lowered the long-term ratings of Metso
Corporation to Baa3 from Baa2.  Ratings were also removed from credit review
and Metso's outlook was considered to be stable.

According to the rating agency, the securities affected by the downgrade,
which concludes the rating review initiated on May 13, 2003, include the
EUR1 billion Euro Medium-Term Note Program, the EUR500 million bonds due
2006 drawn under the program, and a US$200 million bond due 2007.

"The rating downgrade reflects: (i) the significant shortfall in operating
profitability and cash flows compared to expectations, (ii) continued weak
end-user markets, and (iii) Metso's slow pace in debt reduction compared to
budget," Moody's said.

"The stable outlook is based on Metso's capacity to generate free cash flows
in a stable market, and possibly asset disposals, to accelerate debt
reduction," it added.


CONTACT:  METSO CORPORATION
          Pekka Holtta
          Senior Vice President, Corporate Treasurer
          Phone: +358 204 84 3195

          Olli Vaartimo
          Executive Vice President and CFO

          Helena Aatinen
          Senior Vice President--Corporate Communications


===========
F R A N C E
===========


SUEZ SA: Unofficial Guidance Leaves Shares Heading South
--------------------------------------------------------
A BNP Paribas analyst cut his ratings on Suez SA Tuesday triggering a sharp
dive in the stock market, as investors took his research note as the
unofficial company guidance, Dow Jones Newswires said.

Citing the firm's earlier admission that it may take time to achieve cost
savings targets, James Grant said in a note to investors that Suez may incur
higher-than-expected financial charges this year.

"According to Suez, some of the expected cost savings will take more time to
come through and the full EUR500 million target won't be achieved this
year," Mr. Grant said

This cost-savings target is a key part of the company's sweeping
restructuring launched in January to reduce its burgeoning EUR26 billion
debt.  The company, however, has not provided official earnings forecast for
2003, leaving investors to take their cue from analysts like Mr. Grant.  He
sees Suez's 2003 net profit before exceptional items coming in between
EUR500 million and EUR600 million from an earlier forecast of EUR925
million.  He also downgraded his investment recommendation to under-perform
from neutral.

Aside from BNP Paribas, Dresdner Kleinwort Wasserstein also cut late Tuesday
its recommendation for Suez shares from hold and forecasted 2003 net profit
of EUR555 million, instead of EUR862 million, because of concerns over
adverse currency fluctuations and tough economic conditions.

A Suez spokesman, reached by Dow Jones Newswires, denied that the EUR500
million cost-savings is under threat: "The target remains EUR500 million for
2003... with more gains expected in the second half than in the first half
of the year."

Still, Dow Jones said the sharp downgrade from both BNP Paribas and Dresdner
Kleinwort renews concerns about the progress of the company's two-year
restructuring program.

In related development, Dow Jones said Suez has confirmed pulling out of
talks over a thirty-year EUR330 million-water treatment contract with the
municipality of Halifax, Canada.  Pollution problems that could jeopardize
profitability of the contract made the company drop out of negotiations.


VIVENDI UNIVERSAL: VUE Gets New US$920 Mln 5-Year Term Loan
-----------------------------------------------------------
Vivendi Universal announces that its U.S.-based subsidiary Vivendi Universal
Entertainment LLLP (VUE) has closed a new US$920 million 5-year Term Loan.
The proceeds of the facility will be used to refinance the outstanding
portion (after the successful film securization transaction by VUE, on March
31, 2003) of the $1.62 billion bridge loan put in place last year by VUE.
The facility is priced at Libor+275 bps and is rated Ba2 by Moody's and BB+
by Standard & Poor's.

The facility was significantly oversubscribed with more than 80 investors
participating in the loan.  The success of the transaction reflects
investors' confidence in VUE's management, assets and financial profile.
The margin was reduced to 275 bps over Libor from an initial pricing of 350
bps at the launch of the facility.

JPMorgan and Bank of America acted as Joint Bookrunners and Lead Arrangers
of the facility with Barclays as Syndication Agent.
The closing of this Term Loan represents another milestone in the funding
program of the Vivendi Group and further enhances its liquidity position.


=============
G E R M A N Y
=============


DAIMLERCHRYSLER AG: Plans to Reorganize Commercial Vehicles Unit
----------------------------------------------------------------
DaimlerChrysler AG plans to scale down business areas within its commercial
vehicles division as part of a restructuring effort to be decided by the
management on July.

According to Die Welt, DaimlerChrysler will reduce the number of business
areas within the division from six to four to improve synergies.  It also
plans to merge its Mercedez-Benz's truck business with the U.S. truck
business, which includes the brands Freightliner and Sterling, and
DaimlerChrysler's Powersystems business.

The firm warned this month it expects to incur an operating loss of
approximately EUR1 billion in the quarter ended June 30, 2003.  It said it
will only be slightly profitable for the full year 2003 -- that is, before
restructuring expenses.

DaimlerChrysler is suffering from intense price competition in the North
American automotive industry.  Rating agency Standard & Poor's said it could
lower its 'BBB+' ratings on the company within the next few quarters unless
"management pursues additional restructuring actions that will eventually
put Chrysler on a sounder competitive footing."

CONTACT:  DAIMLERCHRYSLER
          Elizabeth Wade
          Phone: +49/711-17-92197
          Fax: +49/711-17-95235
          E-mail: mail: Elizabeth.Wade@DaimlerChrysler.com

          Bjorn Scheib
          Phone: +49/711-17-95256
          Fax: +49/711-17-94109
          E-mail: Bjoern.Scheib@DaimlerChrysler.com

          Timothy S. Krause
          Phone: +1/248-512-2923
          Fax: +1/248-512-2912
          E-mail: tsk@DaimlerChrysler.com


DEUTSCHE TELEKOM: Debt Ratings Outlook Changed to Positive
----------------------------------------------------------
Moody's changed the outlook on Deutsche Telekom's Baa3 long-term debt
ratings from stable to positive on belief that its debt reduction program is
proceeding well as expected.

According to the rating agency, the reduction in costs and improvement in
operating performance are seen in the results of the past two quarters.  It
also noted the contribution of T-Mobile USA in reducing its continuing
negative cash flow.  As a result, Moody's moved the outlook on T-Mobile USA'
s Ba3 long-term debt rating to positive from negative.

Moody's expects Deutsche Telekom's total pensions adjusted debt of
approximately EUR87 billion at year-end 2002 to fall to circa EUR76 billion
by end of 2003.  It said it could potentially upgrade the rating if Deutsche
Telekom generates sustainable free cash flow of EUR6 billion or more, and
resist significant cash flow negative activity.  Moody's expects the company
to continue to focus on driving cost down, and probably resume dividend
payments, albeit at a conservative level.

The change in outlook also applies to Deutsche Telekom's subsidiary,
Deutsche Telekom Finance B.V.


GERLING ALLGEMEINE: Credit Suisse Mulls Taking 9.9% Stake
---------------------------------------------------------
Switzerland's second-biggest bank is exploring the possibility of taking a
9.9% stake in the property and casualty insurance arm of German insurer
Gerling.  A Bloomberg report, citing Financial Times Deutschland, sources
said Credit Suisse Group initiated close examination of Gerling Allgemeine's
business on Wednesday.

The possible transaction is expected to help Gerling Allgemeine meet credit
rating requirements.  It has to convince Standard & Poor's to upgrade its
rating from 'BB+' to 'BBB' within a few weeks if it were to renew insurance
contracts, according to the report.

Rudolf August Oetker, who is among the world's riches people according to
Forbes, might also be interested in a 10% stake, Financial Times Deutshland
said.  He is among the possible investors Gerling is possibly negotiating
with to secure the capital replenishment it badly needs.  Gerling declined
to comment, according to the report.


GERLING KONZERN: S&P Hints Possible Upgrade After Unit's Sale
-------------------------------------------------------------
Standard & Poor's Ratings Services said that the court ruling and subsequent
acceptance by the German regulator allowing the sale of the Gerling group's
reinsurance operations Gerling-Konzern Globale Ruckversicherungs-AG (GKG;
not rated) to private investor Dr. Achim Kann, will have no immediate effect
on the ratings on the Gerling group's primary insurance operations
Gerling-Konzern Allgemeine Versicherungs-AG (BB+/Watch Dev/--) and
Gerling-Konzern Lebensversicherungs-AG (BB+/Watch Dev/--).

Nevertheless, Standard & Poor's acknowledges that the successful completion
of the transaction will provide substantial balance-sheet relief to the
group and could potentially result in an upgrade.

In addition, the sale of GKG has improved the likelihood of securing new
potential investors.  Gerling's management is currently in negotiations with
a number of potential investors and is considering a new ownership
structure.  Once investors are identified, and depending on the structure of
the deal, this could also have a positive impact on the ratings.

Although a successful completion of the transaction will allow the Gerling
group to fully deconsolidate its reinsurance operations from 2003 onward,
the group, and in particular GKA, will remain exposed to GKG's ability to
pay outstanding claims on a timely basis.  However, GKA made a provision of
EUR112 million with regard to the GKG credit risk in 2002.  GKA booked
EUR1.1 billion reinsurance receivables from GKG in 2002.

As part of a review, Standard & Poor's will assess the legal protections in
place that could justify a segregation of the ratings on GKA and GKL.

In addition, the group is still awaiting approval from other regulators, in
particular in the U.K. and the U.S., before closing the sale of GKG.

Standard & Poor's will re-evaluate the financial strength of GKA and GKL in
light of recent developments, and expects to resolve the CreditWatch status
upon legal completion of the GKG sale, which is expected within the next two
weeks.


WESTLB: London Finance Unit Formally Closes Door to New Business
----------------------------------------------------------------
The principal finance unit of German bank WestLB run by Robin Saunders was
formally closed to new business Tuesday, according to the Telegraph.

This unit was responsible for the controversial refinancing of TV rental
business, BoxClever, which increased the bank's loss to EUR1.67 billion from
EUR1 billion (GBP700 million) in May.  The loss was due to a GBP350 million
writedown on the refinancing.  Aside from the loss, WestLB also earned the
ire of German regulator BaFin.

WestLB is considering the sale of the unit and has hired Goldman Sachs and
Citigroup to assess its value.  The investment banks are understood to have
told the bank that the unit's portfolio of businesses, including part of
BHS, Pubmaster, the Odeon cinema chain, the Whyte & Mackay distillery and
Mid Kent Water, were in good health.  They are also supposed to have valued
the businesses equity and debt towards the higher end of a GBP2.1 billion to
GBP3 billion range.

Following the decision of CEO Jurgen Sengera to leave, the bank decided to
retain Mrs. Saunders, easing the tension between the bank and executive.
She had been asked to stay and continue to run the unit pending the review's
outcome.  The decision to close the principal finance unit to new business
also fueled concerns that WestLB could fold up its operation entirely in the
City.


=========
I T A L Y
=========


FIAT SPA: Turnaround Plan to Include New Loan, Capital Hike
-----------------------------------------------------------
Fiat CEO Giuseppe Morchio will unveil a new EUR2 billion- syndicated loan
from banks as well as a EUR1.8 billion- capital increase to be completed as
early as July under the industrial group's rescue plan, according to Reuters
citing newspaper Il Sole 24 Ore.

Il Sole said the share issue would be underwritten by creditor banks, plus
Citicorp and Merrill Lynch, and the new loan would be priced at 150 basis
points over the interbank rate, or 4.5 to 5.0%.  The plan, which is
reportedly backed by two leading creditors, Banca Intesa and UniCredito,
would also extend until 2008 a EUR3 billion- convertible loan offered by
creditor banks to the loss-making industrial group last year.

"What's new in the press is the EUR2 billion- loan. People have been
expecting a capital increase of about two billion euros but another two
billion euros from the loan shows Fiat's borrowing requirements are bigger
than thought," said an analyst in Milan who asked not to be named.

Fiat's creditor banks still have concerns over the plan, which is also
expected to include the axing of as many as 12,000 jobs, most outside Italy,
according to reports circulating in some Italian newspapers.

According to financial daily MF, only UniCredito among Fiat's eight banks is
in favor of a EUR2.0 billion- capital increase for Fiat, plus a new loan
worth the same amount in return for changes to the terms of the 2002
convertible loan.  Fiat had offered a discount of EUR3 per share on the
strike price of the convertible loan as well as its extension to 2008 from
its current expiry date in 2005, according to the report.  The other banks
want to completely revise the term loan.  They also want Fiat's founding
family, the Agnellis, to bear the bulk of the cash injection.


=====================
N E T H E R L A N D S
=====================


ROYAL KPN: S&P Upgrades Credit Rating to 'BBB+'
-----------------------------------------------
Standard & Poor's raised KPN's credit rating from 'BBB' with a positive
outlook to 'BBB+' with a positive outlook, reflecting the continued success
of KPN in deleveraging its balance sheet and improving operational
performance.

The positive outlook assumes that KPN pursue a conservative and controlled
strategy and does not experience any weakening in its competitive position
or operating performance.  According to S&P a further meaningful
deleveraging and maintenance of free cash flow generation could lead to
another upgrade.

This upgrade follows an earlier upgrade by S&P from 'BBB-' to 'BBB' on
December 5, 2002 and adjustment of the outlook from stable to positive on
March 12, 2003.  Last Friday, Moody's Investors Service Ltd also raised
KPN's credit rating from Baa2 on review for upgrade to Baa1 with a stable
outlook.


===========
N O R W A Y
===========


PAN FISH: Sells Pan Pelagic to Unit CEO for NKR70 Million
---------------------------------------------------------
Seafood producer Pan Fish, which recently reported a pre-tax loss of NOK2.65
billion (US$378 million), has agreed to sell its Pan Pelagic ASA unit for
NKR70 million (US$9.9 million).

Online news agency just-food.com, citing a Reuters report, said the unit
would be sold to the firm's chief executive, Arne Stang, and proceeds would
be used to reduce debts by NOK180 million.

Pan Fish is the world's number two salmon farmer after Dutch Nutreco, and
was once one of Norway's hottest seafood producers.  It suffers from low
prices for salmon and a strong Norwegian currency, and was only saved from
total collapse last year by a refinancing agreement that allowed it to
continue operations with its banks effectively in charge.

CONTACT: PAN FISH ASA
         Grimmergt. 5
         N-6002 ALESUND
         Norway
         Home Page: http://www.panfish.com
         Phone: +47 70 11 61 00
         Fax: +47 70 11 61 61
         E-mail: post@panfish.no

         Investor Relations
         Oyvind Torlen
         Phone: +47 70 11 61 33
         E-mail: oyvind@panfish.no


===========
P O L A N D
===========


DAEWOO-FSO: Denies Involvement in Tax Fraud
-------------------------------------------
Zeran-based car manufacturer, Daewoo FSO, denied having perpetuated together
with subsidiaries a PLN50 million- fraud through non-payment of VAT.

Newspaper Zycie Waszawy reported the issue on June 18 citing information
from the Internal Security Agency, which is investigating Daewoo in relation
to transactions made between 1997 and 1999.  The company reasoned that
during those years, Daewoo's local partnerships were transformed into
subsidiaries that bought the assets of Daewoo FSO.

"According to existing VAT regulations, these transactions were properly
taxed.  In all cases, VAT was calculated and paid in full to a proper fiscal
office.  In accordance with the law, however, subsidiaries that had paid too
much tax, could apply for a refund," it said in a statement.

Daewoo FSO reinforced its stand saying the tax return was confirmed by a tax
office inspection.

CONTACT:  DAEWOO-FSO MOTOR CORPORATION
          Ul. Jagielloivska 88
          03-215 Warszawa
          Phone: +48-22-676-3955
          Fax: +4822-676-1501
          Homepage: http://www.daewoo.com.pl


===========
S W E D E N
===========


SCANDINAVIAN AIRLINES: Inks Deal to Realize e-Booking Strategy
--------------------------------------------------------------
Scandinavian Airlines (Other OTC:SASDF), in cooperation with Amadeus, is
offering travel agencies tools for Internet sales. The offering is aimed at
travel agencies in Scandinavia that currently do not have their own solution
for sales on the Internet.

"Our cooperation with Amadeus means that we can now make an active effort to
support our travel agencies in the development of online tools.  This
contract is part of our goal of stimulating Internet sales.  We are adapting
to our customers' changed habits and the rising demand for efficient
electronic sales channels.  We want to be present wherever the customers
want to purchase," said Christian Hylander, head of distribution strategies
at Scandinavian Airlines.

The strategic cooperation with Amadeus E-Travel is a natural step in the
development of Scandinavian Airlines' new distribution strategy, which aims
to increase ticket sales via electronic channels.  As a result of this
cooperation, the travel agencies will have access to one of the market's
best online booking systems, which ensures all of the functionality required
for efficient distribution.

The result is lower total prices for the travel agencies' self-booking
sites, greater cost-efficiency and increased availability of the products
offered by Scandinavian Airlines. The customers will have access to a modern
booking system, with a clearer overview of prices and products.  The system
can be adapted according to the customers' needs and help both leisure
passengers and business customers.

CONTACT:  SCANDINAVIAN AIRLINES
          Christian Hylander, Vice President
          Distribution Strategy & Channel Development,
          Phone: +46 709 971 548
          Peter Rathsmann, Director E-Travel
          Amadeus Scandinavia
          Phone: +46 730 422 548


=====================
S W I T Z E R L A N D
=====================


ABB LTD.: Judge Fitzgerald Delays Exit from Creditor Protection
---------------------------------------------------------------
Judge Judith K. Fitzgerald slowed down the emergence of Combustion
Engineering, Inc. from Chapter 11 under a plan of reorganization designed to
simultaneously extinguish ABB Ltd.'s asbestos-related liabilities.

Judge Fitzgerald approved Combustion Engineering's Disclosure
Statement this week, but held back confirmation of the Company's Plan until
it can demonstrate that direct creditors of Basic, Incorporated and ABB
Lummus Global, Inc., received more notice about the proceedings and
plan-related injunctions.

Judge Fitzgerald sees that the list of Lummus and Basic creditors was
prepared from Combustion's records rather than those companies' records.  If
notice by publication was all that was given to those creditor
constituencies, then the fourth factor of the analysis in In re Dow Corning
Corporation, 208 F.2d 648 (6th Cir. 2002) fails and that's a stumbling block
to plan confirmation.  If notice was adequate, then the plan has Judge
Fitzgerald's blessing and she recommends confirmation.  Because the Plan
compromises asbestos-related personal injury claims, U.S. District Court
Judge Alfred Wolin is also required to put his stamp of approval on the Plan
before it can be confirmed.

Full-text copies of Judge Fitzgerald's Opinion and Order are
available at no charge at:

   http://www.deb.uscourts.gov/Opinions/2003/Combustion.pdf

               and

   http://www.deb.uscourts.gov/Opinions/2003/Combustion_order.PDF

ABB Ltd.'s U.S. subsidiary Combustion Engineering, Inc.,
delivered a Chapter 11 petition to the U.S. Bankruptcy Court for
the District of Delaware on February 17, 2003, to halt and resolve the tide
of asbestos-related personal injury suits brought against the companies.
Over the past dozen years -- according to information obtained from
http://www.LitigationDataSource.com
-- the number of claims against Combustion Engineering, its
affiliates, ABB and former joint venture partners, has
skyrocketed:

     Year   Asbestos Claims Asserted Against CE
     ----   -----------------------------------
     1990   18,891 .
     1991   19,000 .
     1992   20,000 +
     1993   21,000 +
     1994   22,000 ++
     1995   23,842 +++
     1996   27,577 ++++++
     1997   28,976 +++++++
     1998   28,264 ++++++
     1999   33,961 ++++++++++
     2000   39,138 +++++++++++++
     2001   54,569 ++++++++++++++++++++++++
     2002   79,204 ++++++++++++++++++++++++++++++++++++++++

CE is named as a defendant in cases pending in multiple
jurisdictions, with plaintiffs alleging injury as a result of
exposure to asbestos in products manufactured or sold by CE or
that was contained in materials used in CE's construction or
maintenance projects.

CE proposed a prenegotiated reorganization plan and disclosure
statement similar to the model described by Todd R. Snyder and
Deanne C. Siemer in "The Patronus Technique: A Practical Proposal for
Asbestos-Driven Bankruptcies," 11 Journal of Bankruptcy Law and Practice
357.

               Combustion Engineering's History

Combustion Engineering was incorporated in Delaware in 1912 as
The Locomotive Superheater Co. and manufactured and sold
superheaters for steam locomotives.  From the 1930s forward,
CE's core business is designing, selling and erecting power-
generating facilities, including major steam generators.  CE
also services large steam boilers and related electrical power
generating equipment.  From the 1930s through the 1960s,
asbestos insulation was used on many CE boilers.

                   Development of the Plan

Faced with escalating asbestos litigation costs and decreasing
insurance coverage, an economic decline in its business, and
ABB's financial woes, CE began exploring its options in late
2002.  After considering several options, CE concluded that the
best avenue for maximizing payments to both current and future
claimants and enhancing the value of CE's estate was through a
consensual restructuring.  CE recognized that it could not
propose a plan to effectively reorganize without the cooperation
of ABB, Asea Brown Boveri and representatives of current and
future asbestos claimants.  Over a three-month period, CE, ABB
and asbestos claimant representatives engaged in extensive
negotiations to develop a strategy for permanently addressing
CE-related asbestos claims.  The negotiations culminated in the
Prepackaged Chapter 11 Plan.

                Establishment of a 524(g) Trust

The pre-packaged plan was negotiated with certain asbestos
claimants' lawyers and approved by David T. Austern, Esq. (who
serves as General Counsel for Claims Resolution Management
Corporation in Fairfax, Virginia), the proposed representative
for future claimants.  The Plan contemplates establishment of a
trust under 11 U.S.C. Sec. 524(g), entry of a channeling order
directing present and future asbestos claimants to that trust
for payment, and entry of an injunction prohibiting present and
future claimants from seeking compensation from any source other
than the trust.

                   Valuation & Plan Funding

Under the Prenegotiated Plan, all of CE's value -- at the end of
September  2002, CE's value was US$812,000,000 -- is delivered to the Sec.
524(g) Trust for the benefit of present and future
claimants.  In addition:

      (1) ABB contributes:

          (a) 30,298,913 shares of its stock, initially valued
              at $50,000,000, but with a current market value
              exceeding $120,000,000;

          (b) a financial commitment to pay $250,000,000 to the
              Trust in pre-agreed installments from 2004 to 2009
              (guaranteed by certain ABB affiliates);

          (c) up to $100,000,000 more from 2006 through 2011 if
              certain performance benchmarks are achieved; and

          (d) the release of all claims and interest of the ABB
              group in insurance covering CE's asbestos personal
              injury claims;

      (2) Asea Brown Boveri contributes:

          (a) an indemnification of all of CE's environmental
              liabilities, which has a value of around
              $100,000,000;

          (b) a release of its indemnification rights against CE
              for asbestos claims asserted against Asea Brown
              Boveri after June 30, 1999;

          (c) a note evidencing Asea Brown Boveri's agreement to
              contribute almost $38,000,000 on account of the
              asbestos claims attributable to:

                 -- Basic, Incorporated (CE acquired this
                    acoustical plaster manufacturer in 1979) and

                 -- ABB Lummus Global, Inc. (CE acquired
                    this manufacturer of feed water heaters that
                    used asbestos-containing gaskets in
                    transactions stretching from 1930 to 1970);

              and

          (d) if Lummus is sold within 18 months of the Plan's
              Effective Date, an additional $5,000,000; and

      (3) Lummus and Basic will release and assign all of their
          interests in insurance covering asbestos personal
          injury claims, including certain CE-shared policies.

Accordingly, the total value of these contributions to the Trust
exceed $1 billion, excluding any value attributable to the
insurance policies, and is subject to wide swings as the value of CE
increases or decreases over time.

                    Bankruptcy Professionals

Jeffrey N. Rich, Esq., at Kirkpatrick & Lockhart LLP, and Laura
Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones &
Weintraub, P.C., represent Combustion Engineering.

The Blackstone Group, L.P., provides CE with financial advisory
services.

David M. Bernick, Esq., at Kirkland & Ellis, provides legal
advice to ABB.

The CE Settlement Trust, holding the largest unsecured claim
against CE's estate, is represented by Hasbrouck Haynes, Jr.
CPA, at Haynes Downard Andra & Jones LLP.


ABB LTD.: Confident Asbestos Settlement Will Pass Scrutiny
----------------------------------------------------------
Swiss-Swedish engineering group ABB expressed confidence in meeting a US$1.2
billion- settlement with 100,000 asbestos victims with the recent court
approval of its proposed bankruptcy deal for its Combustion Engineering
subsidiary.

The approval of Delaware bankruptcy Judge Judith Fitzgerald was still
subject to additional findings of fact with respect to two subsidiaries.
Her verdict is also still subject to confirmation by a higher court and a
possible appeal from lawyers acting for victims.  Analysts, nonetheless,
sees the ruling to have cleared the way for the settlement of asbestos cases
against the company.

"Although the market had been expecting this for some time, there is no
getting away from the fact that this is a landmark deal which many people
did not believe was possible a few months ago," said Ben Uglow, an analyst
at Morgan Stanley.

The asbestos settlement is also a key factor in the company's planned
divestment of its oil, gas and petrochemical divisions.  ABB is selling the
operation to reduce debt, and has promised to also unload its building
systems division by the end of the year.  It may even launch a rights issue
to raise about US$1 billion.

The disposals -- which will also include several smaller financial assets --
and rights issue will result to the company having US$1.5 billion in
liquidity by the end of the year, says Mr. Uglow.

"It does not mean they are out of the woods entirely, but at least they have
a fighting chance now," Mr. Uglow said.


SWISS INTERNATIONAL: Replaces Faulty Year-old Business Plan
-----------------------------------------------------------
Swiss International Air Lines took off on March 31, 2002 with a Business
Plan intended to maintain the Swiss air transportation system and the most
important connections between all airports in Switzerland and abroad.  Since
that time, the operating environment has continuously changed: passenger
volumes have remained substantially down, revenues have steadily dropped,
while costs have increased as productivity remained at the same levels.
Like most airlines, it has been impossible for our company to operate
profitably under such conditions.

The economic growth forecasts, which were laid down in the first Business
Plan have in no way been realized and, since Autumn 2001, have had to be
continually lowered.  At that time, nobody foresaw the unfavorable economic
development, even less so as regards the war in Iraq and the SARS lung
infection.  Worldwide the revenues per passenger kilometer were 18% below
the previous year's figures; in Asia, in April 2003, the receipts were no
less than 44% lower.  These changes necessitate the elaboration of a new
Business Plan.

Repositioning in the market

SWISS will reposition itself in the market: as an international carrier with
intercontinental and European connections, an offer in the charter sector
and with its own cargo business.

The main objectives are: an Ebit margin of 5-7% and a positive operational
cash flow. The set time limits permit the preparation of a detailed analysis
by mid-August. Following this, these measures should be implemented during
the subsequent twelve months and bring the desired results from 2005
onwards.  SWISS is presenting the measures, which must be taken for survival
and is outlining with which new offers it intends to reposition itself. It
is not possible to inform about the finalized route network, the exact price
structure and the current state of the alliance question, as we prefer to
discuss this with our partners and suppliers first.

Excellence and efficiency

The SWISS objective remains unchanged.  It is a leading airline with an
international network, where the needs of the clients are the focal point.
Swiss strives to provide the highest quality, based on true Swiss values.
It is also striving to achieve profitability on a par with the best in the
branch. In the offer, a differentiation must be made

(a) Excellence in intercontinental traffic.  It is there that
    premium quality continues to be demanded and is met by
    SWISS.  A new premium product will be provided from
    continent to continent by the Airbus 340.

(b) Efficiency in European traffic: as an answer to the changing
    customer preferences, the product will be adapted to market
    requirements which are based on price related to
    punctuality, timetable, connections, the ability to change
    reservations and comfort.

New business concept for Europe

SWISS plans to launch an innovative European concept this autumn, when it
will become the first scheduled service airline to offer both a Premium
Business Class and an extremely competitively priced Economy Class on
European routes.  This in order to meet customer demands for competitive
cost levels.  By doing so, SWISS aims to allow its customers to select which
level of price-performance suits their individual requirements.  The
customer makes his or her choice, and pays only for what he or she actually
wants.  In the future, those who book Economy Class will have to pay for
food and beverages.  In Business Class, however, passengers can look forward
to the usual impeccably high standard of SWISS service.  This new European
concept will supersede both the previous pricing structure and temporary
promotions (e.g. Swiss Europe Savers) within Europe.  All seats on European
flights will be offered at transparent prices with clearly defined services.
Outward and inward flights may be mixed as desired (e.g. Economy Class
outward, Business Class back) depending on departure times, time of booking,
availability and the customer's personal preferences.  In contrast to
low-cost carriers, however, passengers benefit by a large network with
higher frequencies and can still collect Miles.

Benchmark figures of the new Business Plan revealed

The benchmark figures of the new Business Plan point the way ahead: the
product is to be tailored to customer needs, both the network and the fleet
are to be reduced, costs cut and the workforce downsized in line with these
changes.  The Board of Directors and management of SWISS are confident that
the agreed cornerstones of the new Business Plan, which is entitled
"Foundation for Winning", are necessary to ensure SWISS's survival.

The benchmark figures drafted so far provide for a CHF1.6 billion reduction
in annual costs.  CHF600 million will be generated by actual cost savings,
and around CHF1 billion will derive from the volume effect.  Various areas
will contribute to this: cockpit, cabin, in-flight service, ground services,
maintenance, sales & distribution, overheads, key suppliers, network, fleet
optimization and the European Business Concept.

Measures involving the network and the fleet

The first step in the direction of profitability is to make the necessary
adjustments to the network.  Focusing on high revenue routes and
destinations with a promising future will provide the basis for all further
action.  The network must, therefore, be trimmed by up to 35%.  In line with
this, there will also be a substantial reduction in the number of
destinations served directly from all SWISS locations in Switzerland.  On
the precise number and choice of destinations to be eliminated SWISS is
informing first its partners.  The key markets will be maintained in the
network.

The seat-kilometers on offer in the intercontinental sector will be reduced
by 31%.  The number of aircraft will be trimmed from 25 to 18. SWISS will
concentrate on high-volume routes and abandon non-profitable destinations.
The long-haul fleet will be harmonized, the A330 and A340 family concept
will generate multiple synergies.

On European routes, the seat-kilometers will be reduced by 38%. The number
of medium-haul aircraft (A320 family) will be reduced from 24 to 21, and
from 59 to 35 in the regional sector (Saab, Embraer, Avro).  There are also
plans to further standardize the regional fleet (ERJ 145 or Saab 2000).
Loss-generating domestic connections will be abandoned.  It is expected that
the SWISS European network can be rendered profitable by concentrating on
high-volume European destinations.

Personnel measures

The sacrifices, which SWISS now has to make, are substantial.  The
reductions in our network and fleet will mean around 3000 redundancies.
This is a painful measure, and SWISS is consulting with the unions to find
the most amicable solutions. Around 700 cockpit jobs, 830 cabin jobs, 850
overheads (incluging outstations), around 350 maintenance jobs, about 140
ground service jobs and 130 cargo jobs are affected.  These reductions come
in addition to the job losses announced in November 2002 (300) and February
2003 (700).

Uncompromising commitment from all partners is essential

SWISS intends to work in close consultation with the trade unions to manage
both these job losses and the upcoming round of cost-cutting.  With regard
to saving, SWISS is highly reliant on its partners and suppliers: the
cornerstones of the new Business Plan, and hence the long-term survival of
SWISS, can only successfully take effect if everyone - staff, suppliers,
lenders, trade unions and the authorities - pulls together in the same
direction. T he turnaround requires a clear commitment to the future of
SWISS.  Over the next few weeks we will therefore be calling on all those
involved to find viable solutions which will then flow into the detailed and
definitive Business Plan.  No specific statements about the final route
network will be made until then.

Key financials

A credible, appropriately structured Business Plan will provide the basis
for a successful business policy.  The aim is to have an Ebit margin of 5 to
7% from 2004 onwards, and to ensure that the operative cash flow is also
positive from 2004 onwards.  Our target is to reach sales of CHF3.2 billion
in 2004 and CHF3.3 billion in 2005.  Total restructuring costs in 2003 and
2004 amount to CHF150 to 200 million.

Additional financing of CHF500 million will be required to attain the
necessary financial stability for the restructuring. Liquidity will
stabilize as the restructuring measures are implemented provided there are
no further unforeseen events with a big negative impact.

Consequences of the ruling by the court of arbitration

The court of arbitration has stipulated that a proportional zipper system
should apply to job losses amongst the two SWISS pilot corps.  This will
mean unaffordable costs and expenditure as well as unacceptable operational
restrictions for SWISS until the contract with SWISS PILOTS expires in 2005.

This is a situation which jeopardizes the implementation of the new Business
Plan, and hence the company's survival.

The SWISS Board of Directors has therefore decided to enter into immediate
negotiations about the collective working agreements with all trade unions.
Compromises will be required on all sides if the ambitious goal of the new
Business Plan is to be achieved.

Bearing in mind the difficult situation the company expects the full
willingness of the parties concerned to have discussions concluded until
July 15 in order to have clarity on further options that will have to be
taken.

Outlook

The priorities to ensure the future of SWISS are:

(a) Commitment of all partners: We are all sitting in the same
    boat.  It is in no one's interest to see SWISS fail.
(b) Implementation of restructuring: SWISS must implement the
    planned measures without delay to minimise further losses.
(c) Safeguard credit lines: Including operating loans and
    working capital facilities.  SWISS is currently involved in
    negotiations with the banks to find an agreement as soon as
    possible.
(d) Solution to the alliance issue: SWISS has to create
    partnership for long term survival.  Restructuring must,
    however, go ahead, to create a sustainable competitive
    position under any scenario.

CONTACT:  SWISS
          Corporate Communications
          P.O. Box, CH-4002 Basel
          Phone:  +41 (0) 848 773 773
          Fax:  +41 61 582 35 54
          E-mail: communications@swiss.com


SWISSPORT GROUP: To Cut Jobs in Response to Swiss Downsizing
------------------------------------------------------------
Swissport will be forced to eliminate around 350 positions in Switzerland in
the wake of the initial scenarios and planned fleet reductions announced on
Tuesday by SWISS.  The resizing of the company's activities and associated
redundancies will be implemented in accordance with the severance benefit
provisions enshrined in the corresponding Collective Working Agreement.

The company says the redundancy will affect workers at the operating bases
in Zurich, Basel and Geneva.  Full details of the extent of these measures
and the areas they will primarily affect will not be available until the new
flight schedules and product specifications are confirmed.  Definite
decisions and precise figures are thus not expected until the beginning of
July.  Swissport is also likely to have to eliminate up to 100 positions at
its stations outside Switzerland in view of these developments.

Swissport regrets having to take such actions, and will be doing its utmost
to ensure that the inevitable redundancies are effected as carefully and
considerately as possible and in close collaboration with the company's
union partners.  A severance benefits package is already in place.  Needless
to say, all alternative working models and options such as early
retirements, part-time solutions and short-time working will also be
considered wherever possible.

Swissport predicts that the planned downsizing of SWISS will reduce its
total revenues by some CHF60 million a year (CHF50 million in Switzerland
and CHF10 million elsewhere).  SWISS accounts for 50% of Swissport's total
revenue in Switzerland and 20% of total revenue worldwide.  Swissport is the
world leader in the airport ground-handling field.  The company's workforce
of some 3,000 employees at Zurich, Basel and Geneva airports provides ground
services for 80 airline customers.  The Swissport group serves over 650
customers at 155 airports around the world, and 60 million passengers a year
benefit from the services offered by its 18 000 personnel.

CONTACT:  SWISSPORT INTERNATIONAL LTD.
          Corporate Communications
          P.O. Box
          CH-8058 Zurich-Airport
          Phone: +41 1 812 4950
          Fax: +41 1 811 1001
          E-mail: stephan.beerli@swissport.com
          Corporate Communications
          Stephan Beerli, CEO Swissport Zurich & Switzerland
          Phone: 01 812 49 50
          Urs Sieber, CEO Swissport Geneva
          Phone: 01 812 61 70
          Ernest Hochuli, CEO Swissport Basel
          Phone: 022 799 3010
          Stefan Resele
          Phone: 061 325 23 00


===========================
U N I T E D   K I N G D O M
===========================


CABLE & WIRELESS: Sells French Business to Tiscali Subsidiary
-------------------------------------------------------------
Cable & Wireless, the global telecommunications group, on Tuesday announced
the sale of its domestic Internet access and business services activity in
France to the French subsidiary of Tiscali SpA.

The disposal is part of Cable & Wireless' strategy to focus its activities
on multinational enterprises and service providers in continental Europe and
to withdraw from providing domestic only services.  Cable & Wireless retains
offices in Paris with about 140 employees.  From a network perspective,
Cable & Wireless keeps 2 POPs in Paris, 1 in Lyon and 1 in Lannion and can
rely on its pan-European network and the international capabilities of the
Cable & Wireless group.  This will allow Cable & Wireless in France to serve
the needs of about 100 customers with a portfolio of end-to-end business
information and communications solutions.

Cable & Wireless is selling its French activities related to hosting,
Internet access and network services provided to small and medium companies,
as well as VISP (Virtual Internet Service Provider) services.  Cable &
Wireless will work closely with Tiscali to maintain service continuity for
customers who are being transferred following the transaction.

"We are pleased that the transaction allows Cable & Wireless to refocus its
operations in France and we shall work with Tiscali to ensure a smooth
transition both for our customers and for our employees.  Cable & Wireless
will concentrate on the needs of its core customers," said Robert Drolet,
CEO continental Europe, Cable & Wireless.

The disposal of parts of the French business follows sales of Cable &
Wireless' domestic businesses in Belgium, Sweden, the Netherlands,
Switzerland, Italy and Germany.  The consideration is EUR5.6 million,
payable in two installments.  The transaction involves the transfer of
approximately 120 employees.

Within continental Europe, Cable & Wireless is focused on serving
multinational enterprises and service providers, such as Heinz, Royal Dutch
Shell, Diesel and Vodafone, providing IP, data and wholesale voice services
on an international basis. Cable & Wireless also supplies IP transit to
major telecommunications operators in virtually every European country,
including nearly two thirds of European incumbents.

Cable & Wireless is one of the world's leading international communications
companies.  It provides voice, data and Internet Protocol services to
business and residential customers, as well as services to other telecoms
carriers, mobile operators and providers of content, applications and
internet services.  Cable & Wireless' principal operations are in the United
Kingdom, continental Europe, the United States, Japan, the Caribbean,
Panama, the Middle East and Macau.

Tiscali S.p.A, is the European Internet Company providing access, content
and business applications, as well as innovative communications services.
As at March 31, 2002, Tiscali had 7.6 million active users (360,000
broadband users) and 15 million unique visitors to the Tiscali portals,
confirming the company as one of the leading web properties in Europe.  For
more information, visit Tiscali's Web site: http://www.tiscali.com

CONTACT:  CABLE & WIRELESS PLC
          Group Investor Relations
          124 Theobalds Road
          London WC1X 8RX
          Phone: +44 (0)20 7315 4460/6225/4379

          Louise Breen
          Phone: +44 20 7315 4460

          Caroline Stewart
          Phone: +44 20 7315 6225

          Virginia Porter
          Phone: +1 646 735 4211


CONVERGENT COMMUNICATIONS: Demise Certain Sans Major Unit Sale
--------------------------------------------------------------
Convergent Communications risks falling into liquidation if it fails to
reach a sale agreement involving major subsidiary, Convergent Telecom, soon.

CEO Graham Darnell, who joined the company just this April, told Yorkshire
Today earlier this week that the firm needed a buyer for the unit as early
as Tuesday to prevent creditors from intervening and force the company into
liquidation.  The report did not say how much money the sale of Convergent
Telecom would fetch, but it did say that shareholders would likely be left
with little or nothing after the proceeds shall have been paid to creditors.

"Even a successful sale of subsidiary Convergent Telecom is likely to cast
doubt over the future of the 160 staff who work at the Pocklington company,"
said Yorkshire Today.

Once valued as high as GBP100 million, the company is now teetering on the
brink, with Mr. Darnell admitting recently that he would have not accepted
the offer to become CEO had he known the extent of Convergent's woes.

"When I joined, it was not as per the brochure.  There were a lot of issues
that were underneath in terms of the business, I was not told about all the
liabilities," Yorkshire Today quoted him saying.  But Mr. Darnell said he
had remained with the firm to "act in the best interests of all the staff."

Shares in Convergent Communications have been suspended for a month now at
3.5p.  The company had earlier claimed to be in talks with six potential
suitors.  Since going public in May 1998, the company has been reporting
rising levels of losses, including GBP22.5 million last year.


EQUITABLE LIFE: Evidence Shows Actual Shortfall Reached GBP3 Bln
----------------------------------------------------------------
The Equitable Members' Action Group was expected yesterday to dispute the
previously stated deficit in the society's finances when it closed to new
business in December 2000.

According to The Times, chartered accountant Burgess Hodgson has found out
that the actual deficit reached GBP3.3 billion, or GBP700 million more than
what the company had claimed.  Ironically, Mr. Hodgson based the new figure
on documents submitted in the separate case filed by the company against
former auditor, Ernst & Young.

The paper said the group has already submitted its findings to the Penrose
inquiry.  Among others, said report claims that the insurer was already in
deficit before the House of Lords forced the society to honor pledges to
holders of guarantees because it had been overpaying policyholders.  By Mr.
Hodgson's estimates, Equitable paid between GBP1.6 billion and GBP2.7
billion more to policyholders than their assets were worth throughout the
late 1990s.

The shareholders' group expects the Penrose inquiry to take into account
these latest findings when it drafts its report to the Treasury.  Originally
expected this month, the result of the inquiry won't be known until autumn.


INVENSYS PLC: Long-term Corporate Credit Rating Lowered to 'BB-'
----------------------------------------------------------------
Standard & Poor's Ratings Services said it lowered its long-term corporate
credit rating on U.K.-based engineering group Invensys PLC to 'BB-' from
'BB+' following a review.  At the same time, Standard & Poor's also lowered
its senior unsecured debt and bank loan ratings on the group to 'B' from
'BB+'.  The senior unsecured debt and bank loan ratings are rated two
notches below the corporate credit rating to reflect structural
subordination.

In addition, all ratings on Invensys were removed from CreditWatch, where
they were placed on Feb. 14, 2003. The outlook is negative.

At March 31, 2003, the group's priority liabilities (including those at the
operating subsidiary level) substantially exceeded the limit of 30% of
consolidated assets, which is the threshold for a two-notch differential
with the corporate credit rating of a high-yield issuer.  The group had
lease-adjusted total debt of GBP2.3 billion ($3.8 billion).

"The downgrade reflects the heightened level of operational and financial
risk faced by Invensys in a weak industry environment that shows little sign
of an upturn," said Standard & Poor's credit analyst Leigh Bailey.

"Although the group has made progress in reducing its net debt levels, the
material increase in Invensys' financial liabilities and the marked
deterioration in its financial performance has necessitated the further
break-up of the group to ensure ongoing financial viability."

Standard & Poor's believes the group's disposal program--which is targeted
to realize net sale proceeds of at least GBP1.8 billion--is subject to a
significant level of execution risk due to its large-scale nature and
depressed state of the market place.  Although Invensys has a good track
record in achieving asset disposals at reasonable prices, the group's
reliance on these disposals to reduce its financial liabilities could make
it more difficult to attract satisfactory bids.

"Standard & Poor's considers the forced reduction in the group's size and
scale and the concentration of management resource on the resolution of
pressing financial issues is likely to be detrimental to the group's
business profile, leaving it in a weakened position compared with its main
competitors," added Mr. Bailey.  "The group's financial profile could
deteriorate further because its earnings will be pressured by additional
pension servicing costs and the currency risk of the weakening U.S. dollar."

The ratings assume that Invensys' reduced debt service costs will support
the group's weak financial coverage ratios.  A review of the ratings would
be likely if these weak credit ratios deteriorated further or if disposal
proceeds were insufficient to meet the group's debt maturities and financial
liabilities.


KUJU PLC: Bad Debt Provisions Cause After Tax Loss
--------------------------------------------------
Kuju plc, a leading developer of interactive games software for the PC,
video game console and mobile phone games markets, announces its preliminary
results for the twelve months ended 31 March 2003.

Highlights:

(a) Turnover up approximately 30% to GBP6.12m (2002: GBP4.72m).

(b) Pre-tax losses on ordinary activities of GBP162,851 (2002:
    profit of GBP345,337) before exceptional items relating to
    bad debt provisions of GBP434,778 resulting in a total post
    tax loss of GBP491,629.

(c) During the year 3 titles were released and 2 new major
    titles signed which include Train Simulator 2 (PC title for
    Microsoft, to be released for Christmas 2003) and a major
    new original title with Konami, scheduled for release in
    2005.

(d) Both major projects scheduled for release for Christmas 2003
    were publicly exhibited at the main industry show (E3) in
    May this year and both received very favourable press.

(e) Development capacity expanded with the establishment of a
    new studio in Sheffield.

(f) The mobile phone division has continued to develop with
    completion of 21 titles for SMS, WAP, Java, and Symbian
    platforms and the first distribution deals signed for the
    divisions' growing self funded portfolio of Java games.

Commenting on the Preliminary results, Dominic Wheatley, Chairman of Kuju,
said: "The disappointing results were largely caused by two large doubtful
debts relating to one project.  The company is making every effort to
reclaim the amounts owed.  This has masked good progress that Kuju has made
in the year producing quality products and investing in the latest software
tools and equipment.  The new signing of a project with Konami is another
important step in ensuring the company extends its relationships with solid
major publishers."

To view full results and financials: http://bankrupt.com/misc/KUJU_PLC.htm

CONTACT:  Kuju plc
          Phone: 01483 414 344
          Jonathan Newth, Managing Director
          Ian Baverstock, Business Development Director

          Buchanan Communications
          Phone: 020 7466 5000
          Bobby Morse / James Strong


MARCONI CORPORATION: Grants Share Options to Executives
-------------------------------------------------------
Marconi Corporation plc (London: MONI) announces that it has granted options
to acquire ordinary shares in the Company to its executive directors and
senior managers as set out in its recent prospectus.  The options that have
been granted were under the Marconi Corporation plc Senior Management Share
Option Plan described in full in that prospectus.  The options were granted
24, June 2003.  The mid market-closing price of a Marconi Corporation plc
share on the day of the grant was 58.75p.

Marconi will be accounting for these options in full compliance with UK
GAAP.  This will lead to a non-cash charge to the Company's P&L account in
the current and next three financial years.

Grants to Directors of Marconi Corporation plc

The directors of Marconi Corporation plc, whose names appear below, have
notified the Company on Tuesday, in accordance with section 324 of the
Companies Act 1985, that, through the grant of options described above, they
have acquired interests in the number of ordinary shares of 5 pence in the
Company set against their respective names.

Name of         NUMBER OF       Date of         Total Exercise Price
Director        SHARES          grant            payable for any
                subject                            exercise
               to option

Michael     17,500,000      24 June, 2003           GBP1
Parton

Michael     10,000,000      24 June, 2003           GBP0
Donovan

John         3,000,000      24 June, 2003           GBP1
Devaney

No consideration was paid for the grant of the Options which may become
exercisable in various tranches during the period of 51 months after 19 May,
2004, subject to the satisfaction of the performance conditions applicable
to the particular tranches.  No Option which becomes exercisable may be
exercised more than 10 years after its date of grant.

UK GAAP

Current UK GAAP (UITF 17 and UITF 25) requires the difference between the
share price at the date of grant and the price paid for the option to be
spread over the performance period. National insurance contributions are
also incurred on unapproved schemes.

Marconi Corporation plc is a global telecommunications equipment, services
and solutions company.  The company's core business is the provision of
innovative and reliable optical networks, broadband routing and switching
and broadband access technologies and services.  The company's customer base
includes many of the world's largest telecommunications operators.  The
company is listed on the London Stock Exchange under the symbol MONI.

CONTACT:  MARCONI CORP.
          Heather Green, Investor Relations
          Phone: + 44 207
          E-mail: heather.green@marconi.com


MEPC LTD.: Long-term Ratings Lowered to 'BB-' After Review
----------------------------------------------------------
Standard & Poor's Ratings Services said it lowered its long-term corporate
credit and senior unsecured debt ratings on U.K.-based property investment
company MEPC Ltd. to 'BB-' from 'BB', following a review concerning the
company's weakening financial profile and announcement that there will be
significant management changes.

At the same time, Standard & Poor's lowered its preferred stock rating on
MEPC International Capital L.P., which is guaranteed on a subordinated basis
by MEPC, to 'B-' from 'B+'.  In addition, all ratings remain on CreditWatch
with negative implications, where they were placed on June 5, 2003.

"MEPC's financial profile has been weakened by dividend payments and loans
to the company's owners," said Standard & Poor's credit analyst Tommy Trask.
MEPC is owned by clients of pension fund manager Hermes Pensions Management,
primarily the British Telecommunications PLC (A-/Stable/A-2) pension scheme.
Although Standard & Poor's notes MEPC's outstanding GBP1.3 billion ($2.7
billion) of loans to its owners, the ratings do not take these into account
as cash flow required to service the loans comes primarily from MEPC itself
in the form of dividends.  In addition, the loan has recently been reduced
to fund dividend payments.  On this basis, MEPC's interest coverage
(including preference dividends and capitalized interest) and net debt
(including preferred stock)-to-property assets ratios were too weak for a
'BB' long-term rating.  At March 31, 2003, MEPC had total debt of GBP857
million (including preference shares).

Four current directors of MEPC will retire from June 30, 2003, and will be
replaced by representatives of Hermes.  This creates uncertainty regarding
MEPC's operational and financial strategies.  A new business plan is being
prepared by the new management to be presented to Standard & Poor's in due
course. Until such time, the ratings will remain on CreditWatch.

Standard & Poor's will meet with the new management of MEPC in the next
three months to resolve the CreditWatch status.  The key issues are the
company's operating and financial strategies.


MMDH: Closed Due to Falling Advertising Market in Region
--------------------------------------------------------
Scottish advertising agency, Faulds, was forced to abandon its dreams of
building presence in London with the closure of its office in Soho just less
than a year after it started the operation.

Marketing director Christine Tulloch told The Scotsman it had "been a
difficult decision."  She did not reveal the cost of the failure, but said
the management had to close MMDH due to falling advertising market.  She
said though they will "be maintaining links in London and [we] will never
say 'never again' to our own office there."

Faulds bought London-based MMDH in July last year in a deal believed to be
worth GBP2.5 million from its four directors who have now left Faulds.  The
closure will also result to the redundancy of the firm's staff.  Faulds
still has 58 staff at its long-established Dundas Street offices in the
capital.  Ms. Tulloch assured the jobs in that unit will not be affected.

The closure of the operation, which follows Fauld's GBP5 million- contract
with car repair company Kwik-Fit, is expected to put an end to talks with
Japanese ad firm Asatsu-DK regarding acquisition of the firm.   Faulds,
earlier, lost Royal Bank of Scotland's GBP10 million advertising brief to
London giants Saatchi & Saatchi.


MMO2 PLC: German Unit Surpasses Targeted Subscriber Base
--------------------------------------------------------
mmO2 plc reported that O2 Germany has added a further 188,000 net new
customers since the start of April, taking the business past the milestone
of 5 million subscribers.

Fuelled by the ongoing success of its unique Genion Home service, O2 Germany
is growing particularly strongly in the contract segment, which now accounts
for more than 55% of its total subscriber base.  As reported at mmO2's
Preliminary Results last month, O2 Germany's blended average revenue per
user (ARPU), at EUR340, was the highest in the German market.  The company
continues to attract high value prepay and postpay customers, with the
improving ARPU trend being maintained in the first two months of the current
financial year.  Subscriber acquisition costs and churn remain at the levels
reported at the year-end.

Rudi Groger, chief executive of O2 Germany, said: "The powerful momentum
achieved over the past 18 months is continuing.  The business has clearly
demonstrated its ability to generate strong top line growth, while at the
same time manage costs and improve operational efficiency.  As a result, O2
Germany delivered its first full-year positive EBITDA for the year ended 31
March 2003."

mmO2 hosted a visit by City analysts and investors to its German operations
on Wednesday, where they will receive presentations on the company's market
strategy, operational performance and 3G plans, as well as demonstrations of
its successful range of products and services.

The Group will be holding a mobile data briefing for analysts and press in
London on 1 July 2003, ahead of its first quarter Key Performance
Indicators, which will be released on 22 July 2003.

mmO2

Following completion of the sale of O2 Netherlands, mmO2 has 100% ownership
of mobile network operators in three countries - the UK, Germany and
Ireland -- as well as a leading mobile Internet portal business.  All of
these businesses are branded as O2.  Additionally, the company has
operations on the Isle of Man (Manx Telecom) and owns O2 Airwave -- an
advanced, digital emergency communications service.

mmO2 was the first company in the world to launch and rollout a commercial
GPRS (or 2.5G) network and has secured third generation mobile telephony
licenses in the UK, Ireland and Germany.

mmO2 has approximately 18.2 million customers and some 11,750 employees and
reported revenues for the year ended 31 March 2003 of GBP4.874 billion.
Data represented 19.4% of total service revenues in the quarter ending 31
March 2003.


CONTACT:  MMO2
          David Boyd
          Head of Investor Relations
          E-mail: david.boyd@o2.com
          Phone: +44 (0)1753 628230


POOLE DEVELOPMENTS/DOLPHIN QUAY: In Administrative Receivership
---------------------------------------------------------------
Orb subsidiaries, Poole Developments and Dophin Quay, were placed under
administrative receivership after being wrecked by cash-flow problems.

The Royal Bank of Scotland has appointed partners of Price Waterhouse
Coopers as receivers for the operations behind Poole's Dolphin Quay
Waterside development, involving 105 apartments costing up to GBP1.25
million each and 70,000 sq. ft. of retail space.

PWC partner Barry Gilbertson said, according to the Telegraph: "The various
difficulties of Orb have been well-documented.  It seems those difficulties
caused the companies not to have enough money to pay the building contractor
on the project, Taylor Woodrow."

He said Taylor Woodrow suspended work earlier this month and "that caused
nervousness at the bank, which appointed administrative receivers."

Homebuyers of luxury flats at Poole Dorset could lose their deposits,
according to Mr. Gilbertson.  Contracts had been exchanged on 85 apartments,
with buyers paying an average deposit of 10pc.

Mr. Gilbertson also said: "We're struggling to find out exactly who the
directors of these companies are."

Jersey-based Orb is currently involved in a legal dispute with cash shell
Izodia over the alleged disappearance of GBP33 million Izodia funds.


PPL THERAPEUTICS: Shareholders OK New Share Nominal Value
---------------------------------------------------------
At the Annual General Meeting of PPL Therapeutics plc held on Friday June
20, 2003, a resolution was passed approving certain changes to the share
capital of PPL in order to ensure that the nominal value of ordinary shares
is below its current market value.

As a result, the nominal value of each issued and unissued ordinary share of
50 pence each has been sub-divided into one new ordinary share of 1 penny
and one deferred share of 49 pence.  Each resulting new ordinary share of 1
penny has essentially the same rights as before the subdivision.  The number
of ordinary shares currently held by each shareholder has not changed.  The
articles of association have also been amended to reflect the creation of
the deferred shares.  The deferred shares will not be listed and have
minimal rights.

CONTACT:  PPL THERAPEUTICS
          Geoff Cook, Chief Executive Officer
          Lindsay Dunsmuir, Chief Financial Officer
          PPL Therapeutics plc
          Phone: 0131 440 477

          Alistair Mackinnon-Musson
          Philip Dennis
          Hudson Sandler
          Phone: 020 7796 4133
          E-mail: ppl@hspr.co.uk


SAFEWAY PLC: Regulator Sends 'Remedies Letters' to Bidders
----------------------------------------------------------
The Competition Commission has sent remedies letters to the main parties in
the Safeway merger inquiries.  These inquiries concern the mergers in
contemplation between each of Wal-
Mart Stores Inc, the owner of Asda Group Ltd (Asda), J Sainsbury plc, Wm
Morrison Supermarkets plc, Tesco plc, and Safeway plc.

On May 8, the Commission set out in its Issues Statement a number of issues
that it wished to consider which, together with any other issues identified
as the inquiry proceeded, would help the Commission to reach conclusions on
the question of whether any of the four potential mergers might be expected
to operate against the public interest.  The Commission has received further
evidence from the parties, their competitors and other interested
organizations and individuals since May 8.  It has as yet reached no
conclusions on any matter, and further evidence is awaited, but in order to
ensure that the parties are aware of all the issues that might affect its
conclusions, the Commission is taking the opportunity to set out its current
thinking on the issues, including potential areas of concern, in Part 1 of
the following statement.  In Part II, the Commission suggests certain
remedies which might be appropriate in respect of one or more of the mergers
in contemplation should it conclude that any of them might be expected to
operate against the public interest.

The Commission is continuing to study the issues of competition and choice
in local areas through its ongoing isochrone analysis.  It is also
considering the responses to two surveys it has carried out, of small and
large suppliers respectively.

A Remedies Letter is always sent to main parties before the Commission has
reached any conclusions, to give them the opportunity to comment, on a
purely hypothetical basis, on possible ways in which any adverse effects of
the merger might be prevented or removed.  The purpose of making the
statement of remedies public is to inform all interested parties and give
them an opportunity to raise any further points with the Commission.  The
Commission would be grateful for any written views, which interested parties
may wish to present, on any aspect of the Statement, to reach the Commission
by no later than Friday July 4.

Parts I and II of the Remedies Statement are set out in the Report of the
Commission.

To See Full Report:
http://bankrupt.com/misc/Safeway_Merger.pdf


SAFEWAY PLC: Wm Morrison Passive About Possible Merger
------------------------------------------------------
Wm Morrison Supermarkets, which offered a GBP2.9 billion bid for Safeway in
January, is taking a wait-and-see stance in the current battle to acquire
supermarket chain Safeway.

During the company's annual meeting, chairman Sir Morrison answered the
question on whether it would consider a joint bid with one of the company's
rival saying: "We are anxious to take any opportunities to discuss any
options.  But we would prefer to await the results of the Competition
Commission [inquiry]."

The Commission is due to submit its report to trade secretary Patricia
Hewitt on August 12, with the findings expected to be published in
mid-September.

The statement comes just as the Competition Commission publishes its
"remedies statement" which suggested a merger between Safeway and Wm
Morrison could benefit consumers.  The pronouncement apparently singled out
Morrison ahead of other interested buyers J Sainsbury, Tesco and Asda.

Mr. Morrison said the firm discussed with the Commission issues related to
the acquisition of Safeway on Tuesday; but he did not provide details of the
discussion that took place.

Meanwhile, a spokesman for Sainsbury denied suggestions of any talks aimed
at taking in Wm Morrison in its effort to acquire Safeway.  Morrison's offer
has already lapsed and Mr. Morrison would not reveal whether he would be
willing to pay more, saying only that the management will "evaluate the
situation if it's relevant."


SAFEWAY PLC: Sainsbury Says Suggested 'Remedies' Not Surprising
---------------------------------------------------------------
Sainsbury's responded to the Competition Commission's statement on current
thinking and hypothetical remedies issued on June 24.

Peter Davis, group chief executive, said: "This is half-time in the process;
fact gathering is ongoing and the issues are still being debated.  We are
continuing to provide information to the Competition Commission in response
to their recent requests for information.  The issues are broadly the same
as those cited in the Issues Statement on 8th May and the remedies, which
are entirely hypothetical, contain no surprises.  We are looking forward to
further discussions at our planned meeting next week and to working with the
Commission to the end of the process."

CONTACT:  SAFEWAY PLC
          Lynda Ashton, Investor Relations
          Phone: +44 (0) 20 7695 7162


SAFEWAY PLC: Failure to Bag Merger Won't Affect Biz, Says Tesco
---------------------------------------------------------------
Tesco acknowledged the provisional views and range of possible remedies
reached by the Competition Commission covering the potential bids for
Safeway.

Chief Executive, Sir Terry Leahy, said: "We note that no final decisions
have yet been made by the Commission, who are due to report their findings
to the Secretary of State on 12 August 2003. We welcome the opportunity to
comment on the issues and possible remedies before the Commission reaches
its conclusions about the proposed bids.

"As we have previously stated, and as the Commission notes, the current
proposals affecting the future of Safeway raise serious issues as to whether
a structural change, which could see the four major retailers become three,
should be permitted.  Although the hurdle for consolidation for any of the
national players seems to be high, if such a restructuring were to be
permitted, we have always said that Tesco would be best placed to lead this
change.  We are a consumer champion with a world-class management team and
experience of running a range of store types and sizes and this would be
sustained after any acquisition.

"No matter what happens we will remain focused on delivering the best for
our customers.  This has been demonstrated by our strong group sales growth
of 15.1% in the first quarter of the year.  Our clear four-part strategy
continues to drive growth in food, non-food, and retail services and to
develop our business internationally."

CONTACT:  TESCO
          Lucy Neville-Rolfe
          Phone: +44 (0) 1992 646 606

          Steven N. Butler
          Phone: +44 (0) 1992 644 800

          GREENHILL & CO. INTERNATIONAL LLP
          (Financial adviser to Tesco)
          Phone: +44 (0) 207 7440 0400
          Simon Borrows
          David Wyles

          MORGAN STANLEY
          (Financial adviser to Tesco)
          Phone: +44 (0) 20 7425 5293
          Simon Robey
          Mark Warham

          CAZENOVE & CO. LIMITED
          (Joint brokers to Tesco)
          Phone: +44 (0) 20 7588 2828
          John Paynter
          Julian Cazalet

          DEUTSCHE BANK AG LONDON
          (Joint brokers to Tesco)
          Phone: +44 (0) 20 7547 6843
          Charlie Foreman

          MAITLAND CONSULTANCY
          (PR adviser to Tesco)
          Phone: +44 (0) 20 7379 5151
          Angus Maitland
          Philip Gawith


SPORTINGBET PLC: Takes Steps to Meet Earn Out Obligations
---------------------------------------------------------
On April 29, 2003 the Board of Sportingbet announced that it had been in
discussion with a number of parties with a view to securing additional
funding in order to meet the Company's earn out obligations which are due
from September 2003 and that, as part of these discussions, the Company was
aware that one of the parties with which it had held discussions was
considering making an offer for the whole of the issued share capital of
Sportingbet.

The Board of Sportingbet confirms that a preliminary proposal has been
received at an indicative offer price of 30 pence per share in cash and the
Company is now in discussions with this potential offeror.  The proposal is
subject to a number of conditions, including renegotiation of the Company's
earn out obligations with the vendors of Sportsbook.com, due diligence, the
recommendation of the Board and the support of the Company's shareholders.
Accordingly, there can be no certainty at this stage that a formal offer
will be made by this potential offeror for the Company.

Any offer by the potential offeror, if made, will be in cash at 30 pence per
share, unless otherwise agreed by the Board of Sportingbet or in the event
of an announcement of a firm intention to make an offer by a third party.

This announcement has been reviewed by the potential offeror.

In parallel with the above proposal, the Board has held discussions with the
vendors of Sportsbook.com in relation to the settlement of the earn out
obligations on satisfactory terms which would ensure that Sportingbet has
sufficient working capital for its requirements.  These discussions are
ongoing but no agreement is likely to be reached pending clarification of
whether an offer will be made for the Company.

Pending resolution of the above discussions, the announcement of the
Company's preliminary results for the year ended 31 March 2003 has been
postponed.  The Board anticipates that the results will be announced in
July.

Due to the seasonality of the sporting calendar, the first quarter is
Sportingbet's quietest; however, during this quarter the Company has made a
solid start to the new financial year.

A further announcement will be made when appropriate.

CONTACT:  SPORTINGBET PLC
          Nigel Payne
          Phone: 020 7251 7260

          Cubitt Consulting
          Peter Ogden
          Phone: 020 7367 5100


* S&P Publishes Default Modeling Criteria for Securitizations
-------------------------------------------------------------
Standard & Poor's Ratings Services said that it published its criteria on
default modeling for European consumer asset-backed securitizations.

"Standard & Poor's has recently refined its approach to the historical
analysis of this type of asset class, to ensure that the variability in the
data quality between different originators is accounted for systematically,"
said credit analyst Victoria Johnstone, an associate director at Standard &
Poor's Structured Finance Ratings group in London.

A key component of the rating approach to consumer finance structures is the
examination of the credit quality of the receivables underlying the
securities, including estimations of the asset portfolio's default
probability.  Standard & Poor's default estimation for such pools relies on
an analysis of originator-specific historical default rates for the asset
type in question.

There are numerous advantages to this approach to default estimation.

"The principal ones are that, firstly, default rates are derived from the
actual asset performance experienced by an originator, and are therefore
originator, and hence transaction, specific," said Ms. Johnstone.

"And secondly, the analytical technique produces consistent results across
all types of transactions.  It does so by taking into account the
variability of the historical data, and therefore systematically accounts
for data quality and quantity across different originators."

Because the underlying default assumptions are dependent on the periodicity
of the underlying data, originators are encouraged to provide granular data
covering as a long a period as possible.  Standard & Poor's will apply this
revised methodology on all future consumer transactions.

The criteria article, entitled "Default Modeling for European Consumer
Asset-Backed Securitizations," was published Tuesday and is available to
subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis
system, at http://www.ratingsdirect.com.Alternatively, call one of Standard
& Poor's Ratings Desks: London (44) 20-7847-7400; Paris (33) 1-4420-6705;
Frankfurt (49) 69-33-999-223; or Stockholm (46) 8-440-5916. Members of the
media may contact the Press Office Hotline on (44) 20-7826-3605 or via
media_europe@standardandpoors.com.


* S&P Says Corporate Defaults Drive CDO Rating Actions
------------------------------------------------------
Relatively high numbers of corporate defaults were the main cause of rating
volatility in synthetic CDO transactions, according to a report published by
Standard & Poor's Ratings Services.

The study found that high-profile defaulting entities such as Enron Corp.,
Railtrack PLC, Worldcom Inc., and British Energy PLC were included in the
portfolios of many synthetic CDO transactions and contributed to the
increase in the number of rating actions taken since the beginning of 2002.

Of all note classes issued in synthetic CDO transactions, 15% had been
downgraded at least once by the end of March 2003.  Of these downgraded
classes, 38% are so-called fallen angels, having made the transition to
non-investment grade from investment grade rating categories.

However, the report notes that perception of the performance of CDO
transactions may be worse than actual performance.  "These CDO rating
transitions should be viewed in the context of the overall market," said
Andrew South, a credit analyst at Standard & Poor's in London.  "While
suffering more severe rating downgrades than the rest of the ABS market, the
performance of CDOs has nonetheless been broadly in line with that of
corporates."

In all, only 39 transactions out of a total of 257 have experienced rating
actions, and only four classes of notes from four different transactions
have actually defaulted.

Nevertheless, there was a marked increase in rating actions at the end of
2001 and beginning of 2002.  Before Q4 2001, no more than about 3% to 4% of
classes outstanding experienced rating actions in any one quarter, whereas
for most of 2002 this figure rose above 8%.

Mr. South said: "It is not yet clear whether this has simply been an
extraordinary period in world credit markets, or whether other effects are
at play, such as adverse portfolio selection by collateral managers
motivated by arbitrage considerations."

Corporate defaults were the main cause of rating volatility, but their
effect was exacerbated because the same corporates were included in the
portfolios of a number of transactions.  The most notable names, based on
the number of transactions affected, include Enron, Railtrack, Worldcom,
and, more recently, British Energy.  Of the 39 synthetic CDOs downgraded by
the end of March 2003, each of these obligors was referenced in between 12
and 17 transactions.  Some 23 transactions suffered more than one obligor
default in their portfolios.

The impact of these defaults was more severe because some of the major
defaults occurred within a short space of time.  "Enron and Railtrack
defaulted in the same quarter, which concentrated the impact on the affected
transactions and goes some way to explaining the severity of certain
individual rating actions," said Mr. South.

Lower-than-expected levels of recoveries on the entities that most severely
affected the CDO market, in many cases below 20%, also contributed to rating
downgrade severity.

According to the report, obligor defaults alone do not fully explain the
extent of synthetic CDO downgrades in recent years.  "Accompanying downward
credit migration of non-defaulting corporate entities in CDO reference
portfolios also appears to have been severe," said Mr. South.

Despite rating volatility during 2002, there are signs that stability is
returning to the CDO market.

The beginning of 2003 has seen a decrease in the relative number of classes
affected by rating actions, back to almost pre-2002 levels at around 5% of
outstanding classes per quarter.

"As the CDO market matures, increased seasoning of CDO transactions reduces
their susceptibility to downgrade," said Mr. South.  "However, whether the
trend of fewer downgrades continues will depend in much greater part on the
future performance of corporate and other referenced credits."

The report, entitled "Corporate Defaults Drive European Synthetic CDO Rating
Actions," is available on RatingsDirect, Standard & Poor's Web-based credit
analysis system. Members of the media may contact the Press Office Hotline
on (44) 20-7826-3605 or via media_europe@standardandpoors.com.


                            *********


S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter -- Europe is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc.,
Washington, DC USA.  Larri-Nil Veloso, Ma. Cristina Canson, and Laedevee
Gonzales, Editors.

Copyright 2003.  All rights reserved.  ISSN 1529-2754.

This material is copyrighted and any commercial use, resale or publication
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Information contained herein is obtained from sources believed to be
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