- Aeh, wieviel wird da vernichtet? - XERXES, 05.02.2002, 19:13
Aeh, wieviel wird da vernichtet?
Tyco Plunges on Rating Downgrades, Credit Concerns (Update4)
By Rachel Layne
Exeter, New Hampshire, Feb. 5 (Bloomberg) -- Tyco International Ltd. shares plunged as much as 26 percent on investor concern a credit crunch threatens the conglomerate's plan to split into four companies.
Shares of Tyco dropped $6.27 to $23.63 in early afternoon trading after dropping as low $22.25. Tyco had already lost about half its market value this year. Yields on Tyco's debt rose to junk bond levels.
Standard & Poor's Corp. and Fitch Ratings lowered their ratings on Tyco's $57.1 billion in debt yesterday. S&P cited the ``uncertainty'' regarding Tyco's access to the capital markets and the smaller cushion available after the company draws on $5.9 billion in loans. Tyco said it is using the loans to ensure that it has enough cash during the transition.
``They changed their story,'' said Robert Streed, who manages about $1 billion for Northern Trust Corp. in Chicago. ``They were valued as taking acquisitions, infusing corporate culture into acquired companies, and now they come in and break the corporate culture.''
Chief Executive Dennis Kozlowski said two weeks ago that he would split Tyco to bring greater transparency to its accounting. Some analysts have alleged that Tyco used acquisitions to mask slower growth.
Streed, who met with Kozlowski after the plan was announced, declined to comment on Northern Trust's holdings.
Tyco's 6.38 percent coupon notes maturing in 2011 fell 5 cents to 75 cents on the dollar, traders said. Yield on the debt climbed 100 basis points to 10.2 percent.
Cash Flow
Tyco is using the loans to repay $4.5 billion in commercial paper from its industrial businesses. Albert Gamper, chairman of Tyco's finance unit, said on a call with analysts and investors yesterday that ``we may be out of the commercial paper market.''
Tyco has projected free cash flow of $4 billion in the fiscal year ending 2002. The company defines free cash flow as cash generated from operating businesses minus capital spending and dividends. Analysts often use it to gauge the stream of profit coming from businesses.
Investors pointed to similarities to Enron Corp. and Xerox Corp. being shut out of the commercial paper market in the past two years after credit concerns made that type of borrowing prohibitively expensive. J.P. Morgan Chase & Co. is leading the banks providing Tyco with the loans.
Enron later collapsed and sought bankruptcy protection after being shut out of the commercial-paper market. Xerox needs to refinance its bank loans by October and is shifting equipment financing to outsider lenders.
Rating Cuts
Tyco, which is based in Bermuda and run from Exeter, New Hampshire, makes products ranging from electrical connectors to industrial valves to security systems, had lost about $46 billion in market value since December.
Standard reduced its rating on Tyco's bonds three levels to ``BBB'' from ``A'', and the commercial paper to ``A-3'' from ``A-1.'' Fitch dropped its ratings to ``A-'' from ``A'' and the short-term debt to ``F2'' from ``F1.''
Moody's Investors Service Inc. confirmed Tyco's ``Prime- 2'' commercial paper rating yesterday and said it continues to review the long-term ratings on Tyco's bonds.
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