Moody’s downgrades the rating of Nokia to junk bond with negative outlook
The risk rating agency Moody’s downgraded the note today a degree of Finnish mobile phone maker Nokia to Ba1 level, equivalent to junk status, the poor prospects for sales and profit the second quarter.
The downgrade came a day after Nokia announced that its losses between April and June exceed those in the first quarter, when it lost 1,572 million euros net, having failed to sell as many phones as expected.
Also, the Finnish tech giant introduced a broad restructuring plan that includes closing several plants in Finland, Germany and Canada and the dismissal of 10,000 employees worldwide by the end of 2013, in order to cut its high operating costs.
Nokia’s announcement caused shares to plummet more than 18% at the close of trading on the Helsinki Stock Exchange, to 1.82 euros per share, its lowest level since 1996.
According to Moody’s said in a statement, Nokia restructuring plan evidence “a pressure level of income and consumption of capital reserves than our previous estimates.”
The agency placed a negative outlook Nokia, leaving the door open to further reductions in the medium term, although considered the restructuring plan as a measure “positive and necessary” for the company ceases to generate losses.
“The return to profitability also depends Nokia make a successful transition of its range of intelligent devices to the new Windows Phone operating system and stabilize its core handset business,” he added.
Moody’s is the third of the major rating agencies to downgrade the credit rating of Nokia to junk bond level, after Fitch and Standard & Poor’s (S&P) do the same at the end of April.
Category: Investing
