Nokia gets credit rating downgraded two notches by Moody's; outlook still negative
According to Reuters, credit ratings agency Moody's has downgraded the ratings of Finnish cell phone manufacturer Nokia by two notches on Wednesday, theoretically making it more expensive for the company to conduct business. Last month, two other credit agencies-S&P and Fitch-also downgraded Nokia's credit ratings. The lower a company's ratings, the more interest it must pay when issuing bonds or borrowing money from the bank.
Moody's action comes after Nokia reported a loss last week for its latest quarter. And while the company is pinning its hopes on a series of new handsets powered by the Windows Phone 7 OS, it is planning on soon offering the MeeGo powered Nokia N9, a touchscreen device that has no hardware buttons on the front of the unit. Despite receiving some positive feedback when it introduced the N9, as we reported Nokia insists that its future is with Microsoft's mobile OS.
source: Reuters
While announcing the downgrade, Moody's did say that Nokia has enough liquidity and cash to survive while it makes the transition from offering Symbian powered models to producing its new Windows Phone 7 flavored phones. After the downgrade, Moody's ranks Nokia's debt at Baa2, which is just 2 rankings above "Junk" status. Many mutual funds and banks are not allowed to hold debt rated below Baa. Moody's still says that Nokia's outlook is negative, even after the ratings cut, which means that the next action by Moody's will most likely be another cut in Nokia's credit ratings.
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