A day after Alcatel-Lucent (ALU) reported a $5 billion fourth-quarter loss, ratings service Standard & Poor’s kept the equipment maker on CreditWatch negative.
S&P set those ratings on Dec. 12 and is maintaining them until analysts meet with Alcatel-Lucent in the next month or so. Alcatel-Lucent is refocusing its strategy and finances, but that might not be enough to win over observers. To wit, Patrice Cochelin, credit analyst for S&P, warned in a statement that “a downgrade appears increasingly possible given Alcatel-Lucent’s rapidly deteriorating operating environment, margin pressures, and negative free cash flow.”
Cochelin said S&P would be unlikely to downgrade Alcatel-Lucent by more than one notch since the equipment supplier is expected to sell its 20.8 percent stake in Thales S.A. to boost near-term liquidity.
Still, Cochelin added, “we do not rule out lowering the ratings by more than one notch if we are unable to ascertain the company's ability to meet 2010 and 2011 debt maturities.”
