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To: ild who wrote (231312)	3/26/2003 1:32:03 PM
From: ild	Respond to of 436258

Sears Bonds Soar, But Rating Agencies Less Certain By CHRISTINE RICHARD Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)-Reports that Sears Roebuck & Co. (S) plans to sell its credit card business have sent the company's bonds soaring in active trading Wednesday. Sears 7.0% bonds maturing in 2011 were quoted on MarketAxess Wednesday morning at a spread over Treasurys of as low as 222 basis points. The same bonds traded Tuesday at spreads over Treasurys of 356 to 381 basis points, also according to MarketAxess. A basis point is 1/100th of a percentage point. Sears stock was recently quoted at $24.40 a share, up nearly 14%. Despite the sharp rally in Sears bonds, the rating agencies were less impressed with the plan. Fitch Ratings said it doesn't expect the potential sale to result in any change to Sears ratings, and it described the impact of the sale as "mixed." "The sale of the credit business would remove what has historically been Sears' largest and most consistent source of earnings and cash flow," Fitch said in a written statement. "However, it is assumed that the proceeds from the sale would be used to pay down debt levels, which would leave Sears with a stronger balance sheet and a more focused business operation." Sears has around $30 billion in outstanding debt, including both secured and unsecured long- and short-term debt at the end of 2002, according to the company's 10-K filing with the SEC. Corrected March 26, 2003 12:57 ET (17:57 GMT) In a conference call early Wednesday, Sears management said it expects the company to emerge from the transaction with an "extraordinarily healthy" balance sheet. But, Standard & Poor's is erring on the side of caution. S&P said it likely would cut Sears senior unsecured long-term rating to triple-B from triple-B-plus if the card business is sold. "Although Standard & Poor's anticipates that proceeds from any sale of the credit business would result in a very substantial deleveraging of the company's balance sheet, the absence of more than $1.5 billion of its operating income (in 2002) is considered to be an important negative factor," S&P said in a written comment. Sears Roebuck & Co. (S) had $30 billion in outstanding debt, including both secured and unsecured long- and short-term debt at the end of 2002, according to the company's 10-K filing with the SEC. (An item published at 10:29 a.m. EST misstated Sears' outstanding debt.) Meanwhile, Moody's Investors Service said Wednesday that it was sticking with its previous assessment of Sear's Baa1 long-term and Prime-2 short-term debt ratings and maintaining its negative outlook. Even though bonds soared, Moody's noted that the concerns causing it to have previously assigned a negative outlook remain. These include the risk of asset-quality deterioration due to a soft economy, a large and growing amount of asset-backed debt on the balance sheet - which subordinates unsecured bondholders - and the possibility that Sears could sell its credit business but not substantially reduce debt. Sears bonds have been the most actively traded of the day with $138 million in 30-year bonds trading and $92 million in 10-year bonds trading as of mid-morning, according to MarketAxess.