Corning cut by Moody's to one notch above "junk"
NEW YORK, May 8 (Reuters) - Corning Inc.'s (NYSE:GLW - news) credit ratings were cut Wednesday by Moody's Investors Service to within one notch of "junk" status and may be cut again on concern customers of the largest fiber-optic cable maker will continue to scale back spending "dramatically."
Moody's cut Corning's senior unsecured debt rating two notches to "Baa3" from "Baa1" and its short-term debt rating to "Prime-3" from "Prime-2." Downgrades ordinarily raise borrowing costs. Moody's said its action affects about $5 billion of Corning debt.
The rating agency said it has "growing concern that the recovery in the company's telecommunications operations will be delayed until well into 2003."
It said Corning, which is based in Corning, New York, is a market leader with "strong" liquidity, but said "the rapid fall off of business in the telecommunications sector will curtail internal cash generation more severely than originally anticipated, prolonging (Corning's) cash burn rate."
As of March 31, Corning had $1.8 billion of cash on its balance sheet, $2 billion of available bank credit lines and just $277 million of commercial paper, Moody's said.
The rating agency said its review will focus on the demand for fiber and other telecommunications products, as well as Corning's efforts to cut costs as revenue falls.
Last month, Corning officials repeated its pledge to cut up to 4,000 jobs, or one-eighth of its global work force, and both shut plants and cut capital and research spending.
Standard & Poor's, another rating agency, rates Corning's long- and short-term debt a respective "BBB-minus" and "A-3," equal to Moody's new ratings, with a negative outlook.
On Wednesday, a day U.S. stocks soared, Corning shares closed on the New York Stock Exchange at $6.78, up 52 cents, or 8.3 percent. They have fallen 71 percent in the last year. |
