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Nokia's debt gets closer to junk status

Lumia phones are already there
Fri Mar 02 2012, 16:21

FINNISH PHONE MAKER Nokia has had its debt rating cut to one step above junk status by Standard and Poor's.

Nokia's long-term debt rating was cut to BBB- by Standard and Poor's and the credit rating agency put the firm on negative outlook. By putting Nokia on negative outlook, the agency is warning that it might suffer another downgrade within two years, which would result in the firm's debt being consigned to junk status.

According to Thierry Guermann, a Standard and Poor's analyst, "The negative outlook reflects the possibility of a downgrade in the next two years". Guermann referred to low or mid-single digit margins and the potential that Nokia's cash reserves dip might below €2bn as possible reasons for yet another ratings cut.

Nokia's debt rating was cut to Baa2 by Moody's rating service, which is also its second lowest investment grade.

Nokia, like many large companies, has to service its debt, but ratings agencies are becoming increasingly worried the firm won't be able to meet its obligations and therefore are cutting the firm's ratings. To gauge how Nokia is regarded by the financial market, this is the fourth cut by Standard and Poor's within a year.

Nokia must hope that its Windows Phone handsets will gain popularity very quickly. Recent reports point to the firm having shipped fewer than one million Lumia phones since launch, a number that is nearly matched every day by the army of Android devices. µ

 

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