In another blow for struggling Lucent
Technologies, two credit rating agencies have reduced the company's
debt rating to a notch above junk-bond status.
The decrease by Moody's Investor Service and Standard & Poor's
means the telecommunications equipment maker will have to pay
higher rates of interest when it wants to borrow money by selling
notes or bonds.
The credit ratings are closely watched by bond investors
including some who are expressly prohibited from investing in
lower-grade debt because of worries about it being repaid on time.
By reducing the Moody's said it was lowering its ratings due to
"significant operational difficulties," while S&P; cited
"substantial operating losses." Both companies lowered Lucent's
corporate credit rating two notches — from "Baa1" to "Baa3" for
Moody's and "BBB+" to "BBB-" for S&P.;
Michelle Davidson, a Lucent spokeswoman, said the company can
still borrow from existing credit lines if needed.
"We have sufficient cash to fund our operations for the near
term," she said.
The ratings downgrades were the latest blow to Lucent, whose
financial problems have mounted in the past year as the AT&T; Corp.
spinoff repeatedly missed its earnings targets. It fired its chief
executive last year as its stock tumbled by more than 75 percent
from its highs and demand for its products from its biggest
customers sagged.
Last month, Lucent said it is eliminating up to 16,000 jobs,
representing 13 percent of its worldwide work force of 123,000. The
company also reported a $1 billion loss for the final three months
of 2000.
Last week, it was reported that the Securities and Exchange
Commission has begun an investigation into Lucent's accounting
practices involving how it booked $679 million in revenue during
its 2000 fiscal year, which ended Sept. 30. Lucent restated the
revenue in December after conducting its own examination.
In trading Monday on the New York Stock Exchange, Lucent shares
fell 56 cents to $14.80.
