While cable and cyclical junk issues are good bets for credit quality gains in 1994, airlines could be a strong dark horse, one expert said.

"The wild card could be some airlines," said Kingman D. Penniman, an executive vice president at Duff & Phelps.

Penniman said the industry's cost-cutting and recapitalization efforts could finally pay off. He cited UAL Corp. issues as among those likely to benefit.

Cable issues are expected to continue to benefit as telephone companies seek them out for alliances, Penniman said.

Certain cyclical issues such as steel, paper, and diversified manufacturing companies should improve along with the economy, he said.

"We are definitely looking for the cyclical-type credits to improve," Penniman said. He named paper company Stone Container Corp. as among the credits he expects to do better in 1994.

But not every cyclical credit is on the improvement list, Penniman said. For example, the aluminum industry suffers from oversupply.

"They're selling more but at lesser prices," he said.

As for those for whom 1994 will not be as rosy, Penniman cited the utility, energy, and automobile and related industries.

Utility issues will face "increasing competition in an unsympathetic rate environment," he said. "More of them may be joining us."

As for energy issues such as oil and natural gas companies, many may have factored in "more price relief than may come to pass," Penniman said.

Aside from Chrysler Corp., which has staged an impressive comeback, most auto and auto-related companies still need time to improve.

"I think we are still working to become more competitive in the world environment, and we may see them taking more write-offs longer term," Penniman said.

The question with Chrysler is whether it has reached a plateau, he said.

In secondary activity, spreads on high-grade issues were unchanged as trading continued to be light. Junk bond prices were also unchanged.

Rating News

Standard & Poor's Corp. gave an A-minus rating to Progressive Corp.'s $200 million of shelf-registered senior debt.

With Progressive expected to issue 10-year debt under the shelf, Standard & Poor's affirmed its rating on the company's A-minus senior debt, BBB-plus subordinated debt, and BBB-plus preferred stock, the rating agency said in a release.

Standard & Poor's also changed its rating outlook on Progressive to positive from stable. The actions affect roughly $780 million of debt.

"S&P's revision of the ratings outlook reflects the company's excellent and improving consolidated operating results in its insurance operations in 1992 and through the first nine months of 1993," Standard & Poor's release says. "This is combined with its improved capitalization, the result of an equity flotation of $177 million in the third quarter and strong retained earnings."

Standard & Poor's also affirmed its BBB-plus rating on Detroit Edison Co.'s senior secured debt after a Fermi-2 nuclear unit shut down on Dec. 25, following a turbine failure that caused mechanical and fire damage to the generator.

"In view of adequate insurance for both damaged equipment and recovery of higher replacement power cost which is effective after a 21-week waiting period, the financial impact of this accident on Detroit Edison is expected to be relatively modest," Standard & Poor's said in a release.

The rating outlook is still negative, the agency said.

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