CDO credit ratings downgraded to junk status:
dailynews.yahoo.com
Tuesday April 3 4:40 PM ET
Comdisco Hires Advisers, Draws Down Credit Lines
By Cyntia Barrera Diaz
NEW YORK (Reuters) - Information-technology services provider Comdisco Inc. (NYSE:CDO - news) said on Tuesday it hired advisers to assist it with strategic options and decided to draw down about $880 million from its loan facilities to retire commercial paper obligations as they come due.
Shares of the Rosemont, Ill. company tumbled to an all-time low of $2.05 then modestly bounced back, closing down 64 percent to $2.55. Tuesday was the busiest trading day ever for Comdisco as 10.5 million of its shares changed hands. The company was the second biggest percentage decliner on the New York stock exchange.
Comdisco said it hired Goldman, Sachs & Co. (NYSE:GS - news) and McKinsey & Co. Inc. to evaluate strategic alternatives for maximizing the company's value.
Mary Moster, vice president of corporate communications, would not discuss the alternatives under consideration.
``I think the company is professing not to be for sale,'' said Mark Jordan, an analyst with A.G. Edwards & Sons Inc. ''There are probably a limited number of logical buyers for all the company or pieces,'' of it.
The $880 million will help Comdisco to retire about $825 million of commercial paper obligations that range in maturity from 30 to 60 days, according to Moster.
``They are a leasing company so by its nature they have debt,'' Jordan said. ``They have been working down debt over the last six months and would expect that to continue through the balance of the fiscal year.''
Comdisco's drawdown wreaked havoc with the company's credit ratings, which were cut to junk status from investment-grade by two leading U.S. rating agencies, Moody's Investors Service and Standard & Poor's. Both said the company now has much reduced financial flexibility.
Downgrades to junk status ordinarily make it harder or more costly for companies to raise cash, and can force investors not permitted to own junk bonds to sell.
The news comes just one month after the arrival of Chairman and Chief Executive Norman Blake, who headed Promus Hotel Corp. from December 1998 to December 1999, until it merged with Hilton Hotel Corp. (NYSE:HLT - news).
``We are working hard to deploy resources and develop our businesses to generate value and realize the potential of the company,'' Blake said in a statement.
``With adequate cash on hand,'' he said, ``we are able to retire the company's commercial paper obligations on an orderly basis, fund our ordinary course working capital requirements, and address short-term liquidity needs.''
In early February, Comdisco pulled the plug for an initial public offering of a tracking stock for its venture unit due to market conditions.
The stock would have reflected the performance of the unit, which provides start-up companies with equipment leasing and other financing and services. Comdisco had planned to offer 10 million shares of the tracking stock at $14 to $16 each.
Comdisco's earnings for the first quarter ended Dec. 31 more than doubled, boosted by its leasing and ventures business. However, the company said its technology services business turned in a disappointing performance and that it had to make ``dramatic profitability'' improvements in the unit. |
