S&P Joins Fitch in Downgrade of Nokia's Bond Credit to "Junk"
April 27, 2012 12:01 PM
comment(s) - last by
Rating downgrade isn't always fatal -- Ford only escaped "junk" status this week; MSFT only AAA tech comp.
Struggling Finnish phonemaker Nokia Oyj.'s (
) recovery bid was dealt a blow on Friday when top financial agency Standard & Poor's (S&P)
[press release] the company's bonds to a notch into "junk" status.
The S&P rated Nokia's senior unsecured notes at BB+ and rated the company's liquidity at B. In the bonds world anything below BBB/Baa ratings are considered "junk" -- higher risk investments.
Some countries have seen their credit rated as "junk", including Portugal (BB), Indonesia (BB), and Vietnam (BB). The U.S. recent lost its coveted triple-A credit rating, being downloaded to AA+, a notch from the top [
]. Many other nations including America's former imperial owner, the United Kingdom and its northern neighbor Canada still enjoy "AAA" credit.
[Image Source: Wikimedia Commons]
Fitch also recently
downgraded Nokia's bonds
to junk status.
A junk credit rating is a worrying sign for investors, but not necessarily a death sentence. For example, over the last decade Ford Motor Comp. (
) long languished in "junk" status, and only escaped the dubious distinction this week with
[press release] by Fitch to "BBB-" status, a notch above junk.
Nokia issued a
, citing its cash war chest as one instrument to help it weather the storm:
Espoo, Finland - Timo Ihamuotila, Nokia's Executive Vice President and CFO, comments on today's rating announcement from Standard & Poor's:
"As we have detailed in recent announcements, Nokia is in the middle of a transformation program which encompasses every aspect of our business. We are implementing a decisive action plan to position our company for future growth and success. The main focus of these actions is on lowering the company's costs, improving cash flow and maintaining a strong financial position, while bringing attractive new products to market."
Nokia's financial position remains strong. As of March 31, 2012, Nokia had gross cash balances of EUR 9.8 billion, and a net cash position of EUR 4.9 billion.
Nokia will surely look to do the same as it tries to push through the
painful Windows Phone transition
. But the credit downgrades give its critics ammo to use against it, should it slip too far during that process.
An ironic note:
Microsoft Corp. (
partner and Windows Phone BFF
is the only tech company to enjoy a perfect triple-A credit rating, at present [
]. Why does the
world's most valuable company
, Apple, Inc. (
) not have a triple-A rating? Simple, it
never issues bond debt
This article is over a month old, voting and posting comments is disabled
Harper is changing that...
4/27/2012 3:33:40 PM
It took the Chretien 12 years to reduce the debt from 500b to 400b, but only 4 years for the Harper government to bring that number back up and beyond in record deficits. It takes so much hard work to fix something, but nothing at all to screw it up.
"We are going to continue to work with them to make sure they understand the reality of the Internet. A lot of these people don't have Ph.Ds, and they don't have a degree in computer science." -- RIM co-CEO Michael Lazaridis
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