Moody's Downgrades Ericsson's Credit Rating
Ericsson (Stockholm, Sweden) announced that it was surprised by a downgrade of its long-term credit rating from Ba1 to Ba2 by Moody's Investor Service that was expected to cost the company about 55 million kronor ($5.85 million) in raised interest payments. Ericsson said the downgrade was unexpected given the success of its recent 30 billion kronor ($3.2 billion) rights offering.
Moody's said the downgrade mainly reflects announcements by several wireless operators to cut investments in third-generation networks, dimming the outlook for a stabilization in Ericsson's orders. Previously, Moody's lowered Ericsson's debt rating to the Ba1 junk level, which is just below investment grade.
Ericsson recorded its first annual loss of 21.3 billion kronor ($2.3 billion) in 2001, and has started a restructuring package that will bring total employment below 60,000 by 2003, from 107,000 last year. Ericsson reported that its cost-cutting actions remain on track for returning to profit sometime next year.