WORLDWIDE • FINANCE Some of the major energy companies have seen their credit ratings drop worryingly as they struggle to maintain equilibrium against post-Enron financial aftershocks.
ABB, the heavily indebted IT and T&D group with a legacy of asbestos liability problems, has been thrown a lifeline by its key creditor banks, Barclays, Citigroup and Credit Suisse First Boston, who have agreed to underwrite a threatened $3 billion loan. But Moody’s Investors Service has downgraded its long-term debt rating by two notches, and its short-term rating to the lowest investment grade. Standard & Poor’s have disputed Moody’s decision, arguing that ABB had alternative funding and describing it’s situation as a short-term ‘bottleneck’. ABB is stepping up plans to raise $2 bn to shore up its balance sheet.
GE has also hit problems. This follows an attack by bond fund manager Bill Gross to the effect that without Wall Street’s backing for GE Capital, the group’s financial arm, GE was merely “the failed conglomerate of yesteryear”. He also highlighted the group’s accumulation of outstanding commercial paper (short-term debt issued by GE Capital) three times the size of the bank credit lines supporting it and warned that GE Capital was vulnerable to a collapse in investor confidence. Stocks in the company then fell by 3.5 per cent. The group has acknowledged that it carries too much short-term debt following its strong increase in assets in 2001, and states that the plan for 2002 is to consolidate. It has reduced its short-term debt from $117 bn at the end of last year to $103 bn now, while negotiating with banks to increase its credit.
Turbine maker Rolls-Royce has lost its A grade credit rating in deteriorating market conditions for its civil aerospace engine business. Moody’s lowered the group’s unsecured debt rating from A3 to Baa1. The company has predicted that its civil aircraft deliveries will fall by 30 per cent this year, reducing turnover by £1 billion.