* Rating cut to BB+ from BBB-
* Fitch downgraded Nokia to junk earlier this week
* Spreads at widest ever, pushes up CDS
* Shares down 0.9 pct
By Tarmo Virki and Josie Cox
HELSINKI/LONDON, April 27 Cellphone maker Nokia
Oyj had its credit rating cut to "junk" status by
ratings agency Standard & Poor's on Friday, its second downgrade
to non-investment grade status this week as the company battles
falling sales and doubts over its product strategy.
The rating cut, which follows a similar move by Fitch
Ratings earlier this week, sent spreads on Nokia bonds to their
widest ever against mid-swaps, a bond market benchmark, and
pushed the price of insuring Nokia debt against default to its
highest-ever level, indicating a growing level of investor
concerns about the company's prospects.
Its shares were down 0.9 percent at 2.732 euros by 1447 GMT,
not far from a 15-year low of 2.60 euros set earlier this month.
S&P said its downgrade reflected its concerns that the
decline in sales at Nokia's phone business this year could be
similar to the 18 percent fall in 2011.
It cut its rating to BB+ from BBB-, at which point Nokia
debt is rated as too risky to be bought by many pension funds
and other mainstream investors, and said the company's credit
rating outlook remained negative.
Nokia, once the world's dominant mobile phone provider , has
lost out to Apple Inc and Google Inc in the
smartphone business and Chief Executive Stephen Elop is pinning
hopes of a turnaround on Lumia, a new range of smartphones which
use Microsoft software.
But sales of the new range have so far been slow and are yet
to compensate for diving sales of legacy products.
"We still expect revenue from Lumia smartphones to grow over
time, but not sufficiently to offset a rapid decline in revenue
from Symbian-based smartphones over the next few quarters," S&P
analysts said in a note.
Nokia said it had 4.9 billion euros ($6.5 billion) in net
cash reserves and was trying to turn around the business.
"The main focus of these actions is on lowering the
company's costs, improving cash flow and maintaining a strong
financial position, while bringing attractive new products to
market," finance director Timo Ihamuotila said in a statement.
Five-year credit default swaps (CDS) on Nokia debt rose 50
basis points to an all-time high of 645 basis points, according
This means it costs $645,000 annually to buy $10 million of
protection against a Nokia default using a five-year CDS
Nokia has issued two eurobonds worth in total 1.75 billion
euros and two dollar bonds worth a combined $1.5 billion.
Nokia's 5.5 pct April 2014 euro note's asset swap spread
widened 65 basis points to its highest ever at 495.6 basis
point, while the spread on the 6.75 pct April 2019 note was 48
basis points wider at 682 basis points, according to Tradeweb.