Westinghouse Electric Corp.'s chairman yesterday called bankruptcy rumors "preposterous" and downplayed the junk bond rating one regency assigned on Friday.
"We have no idea as to how the rumors started concerning Chapter 11 filings," Paul E. Lego, Westinghouse's chairman, said in a statement. "Any rational analysis of our financial condition could not support such an idea."
Westinghouse spokesman Jay McCaffrey said the statement was a recap of what Lego told key stockholders of the Pittsburgh-based company during a noon teleconference.
Lego's statement also questioned the value of Duff & Phelps Credit Rating Co.'s analysis in lowering Westinghouse's debt to junk from investment grade.
"As you know, Duff & Phelps recently lowered its ratings on our debt," said Lego. "While we recognize that Duff & Phelps are professionals, their debt rating personnel have had no access to our internal financial details or outlook and no communication with our management."
Duff & Phelps' downgrade included lowering the senior debt of both Westinghouse Electric Corp. and Westinghouse Credit Corp. to BB-plus from BBB-plus.
Daniel J. Donoghue, a Duff & Phelps senior vice president, yesterday said the agency "absolutely" stands by its rating.
"We're not trying to cause disruption in funding, and we're not trying to project any kind of failure," Donoghue said. He added that the credit corporation, not the parent, is the basis for Duff & Phelps' concern.
However, Duff & Phelps' action "probably hit a raw nerve with people," he said. The agency down-grades corporations' debt regularly without spurring the market reaction that the Westinghouse move did.
Donoghue acknowledged that not having the company's cooperation places the rating agency at a disadvantage.
"The only thing I can say is that we are kind of calling it the way we see it," he said.
Lego said while third-quarter results were less than stellar, the company is on solid financial ground.
"I was disappointed in third-quarter results because of the provisions taken in our financial services unit," he said.
"However, our $244 million in operating profit, excluding Financial Services, in the third quarter is evidence of the underlying strength of the corporation."
Westinghouse on Oct. 12 announced a net third-quarter income of $14 million and no earnings per share, according to McCaffrey.
The company spokesman said the provisions Lego referred were $150 million of charges against potential losses. Of that, $100 million were against Westinghouse's investment in troubled Phar-Mor Inc., he said.
According to Lego's statement, Westinghouse has generated nearly $700 million of operating profits this year to date from its existing businesses, has a $6 billion revolver, and a strong balance sheet, the statement said.
That $700 million represents an 11% increase over the same period for 1991, McCaffrey said.
Before announcing its third-quarter earnings, Westinghouse said it reviewed its financial situation "in depth" with Moody's Investors Service, Standard & Poor's Corp., and Fitch Investors Service. All three have investment-grade ratings for Westinghouse's debt and commercial paper.
"Therefore," the statement said, "we believe the more reasoned and well-informed review comes from those three rating agencies who follow us in depth."
The statement, however, acknowledged that Standard & Poor's lowered its debt rating to A-minus from A senior and to A2 from A1 commercial last Tuesday.
Asked why Duff & Phelps doesn't work with Westinghouse, Donoghue replied, "Companies choose which agencies they want to work with. My honest opinion is that they chose agencies which would cast them in the most favorable light."
In Secondary trading, both high-grade and high-yield bonds lost 1/4 point.
"Nothing's happening," one high-yield trader said.
In new-issue activity, Republic New York Corp. sold $150 million of subordinate floating rate notes due 2002 at par. The notes float quarterly at six basis points under the three-month London Interbank Offered Rate. The notes have a 9.5% interest rate cap and 5% floor, and pay quarterly. Moody's rates the offering A1, while Standard & Poor's rates it AA-minus. Lehman Brothers managed the offering.
