NEW YORK—Moody’s Investors Service Inc. has downgraded the debt of Brightpoint Inc., Indianapolis, citing the “recent decline in profitability” of the company and the “uncertainty associated with growth in the wireless handset market over the next several quarters.”
In its announcement after the close of trading March 14, Moody’s said it had lowered the speculative-grade rating on Brightpoint’s $380 million in outstanding debt to Ca from B2 and assigned a “negative outlook” to the wireless handset distributor.
“The industry expects to see growth of around 5 percent to 10 percent in 2002, but this growth is predicated upon sustained global wireless subscriber growth, increasing take-rates for 2.5G handsets and new handset features (like) color screens that entice consumers to replace their current phones. Moody’s believes there is considerable uncertainty associated with all these factors,” said Tom Marshella, managing director, and Marcus C. Jones, senior analyst, of the rating agency’s corporate finance group.
The Moody’s analysts said they have taken into consideration Brightpoint’s efforts to “scale down its business and improve profitability, including a global restructuring of operations and reductions in headcount of over 15 percent.”
While characterizing Brightpoint’s liquidity position as “tight,” Marshella and Jones also noted that Brightpoint’s “business does not rely upon substantial capital investment, and (its) debt service is relatively modest.”
However, the negative outlook assigned “reflects the challenges the company will face, and the possibility that business conditions may not improve in the near term,” they said.
