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Nokia says Moody's rating downgrade a non-issue, net cash actually higher than a year ago

Posted: , posted by Daniel P.

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Nokia says Moody's rating downgrade a non-issue, net cash actually higher than a year ago
Nokia issued a press release commenting on its recent Moody's credit rating downgrades (today Moody's slashed from Ba3 to Ba1), which followed other agencies slashing its bonds a few notches in the "B" levels. Some were quick to point out that lower credit ratings are bad for the borrowing costs, since pension and other funds are only allowed to buy "A"-rated securities, but that's precisely why for junk bonds where the stock is trading in sub-$2 levels, those downgrades don't matter much anyway.

Nokia already issued a rebuttal to Moody's last downgrade, but now with the quarterly results out last week, and not as bad as expected, the Finns add some more arguments why its junk-to-junk rating downgrades are a non-issue at this point:


It's good that the company has cash, instead of relying on debt to finance its transition to Windows Phone 8 with its eventual high-margin handsets, but the cost controls are even more important if Nokia wants to maintain a zero sum game until it has fully transitioned, and the company seems to deliver by slashing unneeded jobs and outsourcing production. These measures will be needed at least until some time next year, when it will become clear what acceptance Nokia Windows Phone 8 devices have received.

source: Nokia

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