JPM- Article about a possible debt downgrade.
GET READY FOR A JPM CHASE DEBT DOWNGRADE
By JESSICA SOMMAR February 15, 2002 -- Embattled J.P. Morgan Chase could take another hit soon as rating agencies prepare to downgrade the big bank's debt.
Dina Dublon, chief financial officer at J.P. Morgan, spoke with analysts yesterday and seemed to be preparing them for an eventual downgrade.
The downgrade would not affect J.P Morgan's business, Dublon said, according to analysts on the conference call.
Earlier this year, rating agencies Standard & Poor's and Moody's put J.P. Morgan debt on "negative outlook," analysts recalled.
"A credit downgraded from AA to A is not a big deal. It's not going to increase their funding costs so dramatically. But the psychological impact would be higher," said Craig Woker, a senior analyst for independent researchers Morningstar.
"But given the skittishmess of rating agencies, they may react again and given the environment may hand out another downgrade in short order," said David Hendler, analyst with New York-based independent researchers CreditSights.
And that's what's been killing Morgan's stock.
J.P. Morgan's stock finished down 4 cents to $30.21, but is up from its low of $28.30 on Feb. 5.
The stock has been walloped by fears of additional credit exposures for the nation's second largest bank.
Already, J.P. Morgan has written off billions from the collapse of Enron and the troubles in Argentina, Woker said. In the fourth quarter, J.P. Morgan wrote down $2.6 billion for Enron and $400 million for Argentina, a source at the firm said. But bankrupt Global Crossing and troubled Tyco add to J.P. Morgan's pressures and rattled investors are on a buyers strike.
Global Crossing's exposure is $94 million, and Tyco total potential exposure is $1 billion, a source at the bank said. Confidence in the bank has been so shaken that some investors are calling for heads to roll.
"Our credit qulity and our performance over the past year has been stronger than our top peers," a spokesman at J.P. Morgan said in defense.
But investors are still jittery.
"Shareholders want somebody's head to roll, but it's still unclear whose they want," said an institutional investor familiar with the situation.
"More than (Vice Chairman and risk manager) Shapiro, Harrison (Chairman and CEO) has got to go," the source added. "As much as you want to blame Harrison and Shapiro, these people aren't crooks." |
