NEW YORK-Moody’s Investors Service downgraded the debt of Lucent Technologies Inc. and Nortel Networks Corp. Nov. 1 and assigned a negative outlook to the companies.
The rating agency lowered its speculative-grade rating on Lucent’s $7 billion of outstanding debt by two notches, to Caa1 from B2.
“Despite these difficulties, Moody’s recognizes Lucent remains a leading vendor to the telecom sector with broad product offerings, a substantial $4.4 billion cash position and a materially reduced cost structure,” the rating agency said.
“However, Moody’s believes most wireline and wireless telecom carriers will continue to cut back on capital expenditures in 2003 to absorb some of the excess capacity and to focus on their own cash flow.”
The rating agency lowered its speculative-grade rating on Nortel’s $5 billion in outstanding debt three notches, to B3 from Ba3.
“Nortel has made significant progress in reducing its cost structure and has had several quarters of sequential improvement in its gross profit margin, which reached 38 percent in the most recent quarter,” Moody’s said. “However, if as we expect, revenues continue to decline, the costs will need to be further reduced to reach breakeven before the end of 2003.”
