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Moody's Cuts Sprint Nextel to Junk Status

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Debt ratings agency, Moody's has cut Sprint Nextel to "junk level", causing a sharp fall in the company's share price. The agency also changed its outlook on the company to "negative" from "under review" and said "downward rating pressure will persist until the company is able to stem the erosion of its competitive position."

The agency warned that the turn-around of the company would take longer than originally expected and that the subscriber base is likely to continue to shrink until the second half of next year, before then stabilising. Pali Research analyst, Walter Piecyk recently wrote that the company is expected to be very aggressive next year in boosting its subscriber base.

Moody's did however rate Sprint's liquidity as "very good" over the next 12 months and noted that its cash balance stood at about $4 billion and is not expected to deteriorate significantly over the next couple of years. The firm does have debts of around USD3 billion which will need to be repaid or rolled over in the same time frame.

Standard & Poor's lowered its debt rating on the company to junk status earlier this year.

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