Ericsson shares battered by Moody’s downgrade

Moody’s Investor Services today downgraded Ericsson’s long-term credit rating to junk status, making the world’s largest wireless vendor another telecom casualty in the string of investment-grade credit rating downgrades.

Ericsson, however, was quick to point out that the action doesn’t affect the underwriting of its $3.25 billion rights issue.

Moody’s said Ericsson’s new rating, which fell to “Ba1” from “Baa3”, will remain under review until the rights offering is completed. Ericsson said Moody’s rating would cost the company about $10.7 million annually in financing costs. The junk status rating reflects Moody’s concern over the company’s second-quarter decline in orders for wireless infrastructure and the challenges associated with the company’s downsizing and cost-cutting strategy.

Ericsson shares were down 19%, trading at 81 cents per share at Telephony press time.

--Lynnette Luna, Senior Editor