Ericsson’s rating cut to junk
Swedish firm’s rating on a par with Nokia after Moody’s says a strategy based on cost-cutting is not sustainable
Stockholm — Ericsson’s credit rating has been cut to junk by Moody’s Investors Service, in a blow to new CEO Borje Ekholm, as the ratings agency highlights risks to his plan for turning around the struggling Swedish telecommunications equipment maker. The downgrade on Wednesday — marking the first time since 2005 that Ericsson has been rated junk — pushed up the yield on its €500m bond maturing in 2021 as much as 21basis points to 1.03%. Provisions and restructuring charges would lead to "credit metrics that will no longer be commensurate with investment-grade ratings", Moody’s analyst Alejandro Nunez said as the agency lowered Ericsson’s senior unsecured long-term rating to Ba1 from Baa3. The company had an A3 rating as recently as 2014 and Wednesday’s cut was the third in less than seven months. Moody’s action underscores the steep challenges facing Ekholm as he tries to engineer a turnaround at Ericsson. Sales continue to slide at double-digit percentage rates as competitor Nokia...
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