Fiat credit rating junked by Moody’s

Fiat's double dip

20 December 2002 By Rob Cox, Rob Cox, Rob Cox, Rob Cox Follow @rob1cox

Fiat may meet debt reduction targets this year. But only through financial engineering. Moody’s rightly decided that was insufficient. Fiat may be shocked, but it can’t have expected better. Now its banks will likely step up asset sales.

This content is for Subscribers only

Context News

Fiat's shortterm debt rating was cut to below investment grade by Moody's Investors Service. The rating agency had put Fiat's debt on review for a downgrade in November.

The firm said its rating "reflects the execution risk associated with the strategic repositioning of Fiat Auto, the weak trading environment for Fiat Auto, as well as the targeted cash flow improvements for Fiat's remaining businesses over the next 12 to 18 months."

Fiat said the decision by Moody's "is surprising and unjustified in light of the Company's real operating and financial position. The Group's position has not deteriorated...On the contrary, it has improved significantly."

The announcement came days after Fiat sold its 5.1% stake in General Motors to Merrill Lynch for $1.16 billion. Fiat bought its stake in 2000 for $2.4 billion and subsequently sold bonds exchangeable into the shares worth E2.2bn.

As part of the agreement with GM, Fiat also sold the US car company a 20% stake in Fiat Auto and has a right to sell the remainder from 2004 to GM.

Separately, Fiat said it sold a stake in an Italian paper company, which is expected to bring in another E80m or so, according to a person familiar with the situation.

Email a friend

Please complete the form below.

Required fields *