Ericsson responds to Ba1 rating by Moody’sMoody’s Investor Services today announced that it has downgraded the long-term credit rating of Ericsson from Baa3 to Ba1 and continues to review its rating for possible further downgrade pending completion of the rights offering. The action does not affect the underwriting of the rights offering.
The terms agreed with the banks supports the underwriting even if the company’s credit rating were to drop to BB by Standard & Poor’s or Ba3 by Moody’s. Ericsson believes such a scenario is unlikely. According to Moody’s, their new rating will remain under review until the completion of the rights issue, whereupon Moody’s expects to confirm the Ba1 ratings with a negative outlook.
Credit agencies have been systematically lowering their ratings for the communication equipment industry for some time. Ericsson views Moody’s decision as related to their view of the industry in general and the company believes that it will not impact Ericsson’s leadership position in the market.
The financial impact of this decision amounts to an increase in financing costs of approximately SEK 101 million annually.