Standard and Poors turns up heat on Nokia

Nokia’s executive vice president and CFO has shrugged off the firm’s latest credit rating downgrade of 2012.
Timo Ihamuotila claims the impact of Standard & Poor’s decision “is limited”, and again pointed to the vendor’s “strong focus on cash conservation” and efforts to cut operating costs while improving its overall business model.
The ratings firm this week cut Nokia’s long-term corporate credit rating from BB+ to BB-, and executed a similar move on the vendor’s unsecured debt. Despite Ihamuotila’s defense, Standard & Poors states it took the move after revising its cash flow assumptions for the firm following “downward revision of our estimates of revenues and profitability for Nokia’s smartphone operations in 2012 and 2013.”
Nokia’s business risk rating was also shifted from ‘fair’ to ‘weak’, and its financial risk to ‘significant’ from ‘intermediate’.
In his response, Ihamuotila notes Nokia increased its cash position year-on-year during the second quarter, ending the period with net cash of €4.2 billion. “[W]e have a strong financial position and robust liquidity profile,” he states, adding. “We also have access to additional liquidity via a revolving credit facility of €1.5 billion,” which the firm hasn’t accessed yet.
The fact remains, though, that credit ratings firms are losing faith in Nokia. Rival agencies Moody’s and Fitch Ratings have already junked the vendor’s status, in turn turning up the heat on its attempts to turn its performance around. Crucially, though, the downgrades suggest Nokia will pay heavily if it ever has to draw on that revolving credit facility.

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