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Moody's revises Halliburton's outlook to stable
Tuesday May 11, 2004 4:15 pm ET

(The following statement was released by the rating agency.)


Approximately $3.9 Billion of Securities Affected

NEW YORK, May 11 - Moody's Investors Service (News - Websites) affirmed the Baa2 senior unsecured ratings of Halliburton Company and changed the rating outlook from positive to stable. The rating action was in response to Halliburton's announcement late yesterday that it has reached a non-binding settlement agreement in principle with the leaders of the London Market Insurance Companies that, if implemented, would resolve all insurance disputes with respect to asbestos claims. The agreement is preliminary and remains subject to board approval of all parties and agreement by all remaining London Market insurers. Halliburton also announced that it expects to enter into a non-binding agreement in principle with its solvent domestic insurance carriers in the near term.

Moody's changed the rating outlook from positive to stable to reflect to potential for cash receipts by Halliburton under the proposed insurance settlement agreements to be less imminent than Moody's had expected. The rating affirmation and stable outlook assume the global settlement plan will be approved as currently proposed. Moody's will continue to monitor the pace of insurance recoveries and Halliburton's debt levels. Material de-leveraging as a result of more rapid insurance recoveries or improvement in Halliburton's business fundamentals could have favorable rating implications. However, if the bankruptcy proceedings are subject to substantial delays, or there is a material change in the proposed asbestos settlement plan or in the proposed insurance settlement agreements, Moody's will review Halliburton's ratings. If the proposed insurance settlement agreements are implemented (including the previously announced agreement with Equitas), Halliburton would expect to receive approximately $1.6 billion in cash for all DII Industries insurance receivables, of which the company expects to collect over $1.0 billion by mid-2006. The proposed settlement agreements would be subject to several conditions, including confirmation of the bankruptcy plan of reorganization for DII Industries and the other Halliburton affiliates now in bankruptcy, and the condition that no U.S. federal asbestos reform legislation is passed in the US Congress before January 5, 2005.

In its assessment of Halliburton's ratings and outlook, Moody's made certain assumptions with respect to insurance recoveries on claims submitted by the company under all of its existing insurance policies. The aggregate amount Halliburton expects to receive (approximately $1.6 billion) under the proposed insurance settlement agreements exceeds Moody's original expectations. However, the timing of total payments, as currently proposed, appears to be less favorable than Moody's original best case assumptions, namely the repayment of at least $1.4 billion of debt by the end of 2005. Halliburton's liquidity remains solid. The company is currently negotiating the sale of up to approximately $600 million of its KBR government receivables. Moody's will continue to monitor the company's receivables from its Iraq contracts, which are expected to trend down in the near term. Ratings affirmed are Halliburton Company's senior unsecured debentures, notes, and medium-term notes rated Baa2; its shelf registration for senior unsecured debt rated (P)Baa2; its shelf registration for subordinated debt rated (P)Baa3; its shelf registration for preferred stock rated (P)Ba1; and its Prime-2 rating for commercial paper and extendible commercial notes. Headquartered in Houston, Texas, Halliburton Company is one of the world's largest diversified energy services, engineering, maintenance, and construction companies.