Comdisco Inc yesterday followed IBM Corp into the credit-rating mire yesterday after Moody’s Investors Service Inc and Standard & Poor’s Corp both said they were reviewing their ratings on the debt of the big mainframe leasing company. The news came in the wake of a warning from the Rosemont, Illinois company that it was cutting its work force by 10% and expected to take a net charge of $48m, $1.18 a share against its first quarter figures. The charge, $80m at the pre-tax level, includes a $20m reserve against IBM litigation, a $25m addition to the reserve for receivables, and a $35m charge for reorganisation, which will involve more closely aligning Comdisco’s leasing and disaster recovery operations; exiting certain marginally profitable business lines; and the staff cuts. Standard & Poor’s currently rates Comdisco senior debt Triple-B-Plus and subordinated debt Triple-B. Moody’s said it placed the Baa2 senior and Ba1 subordinated debt ratings of Comdisco Inc and under review for possible downgrade, affecting about $996m of debt. The move by Moody’s to lower its rating on IBM senior debt to double-A2 from triple-A – forecast here in early December (CI No 1,819) marks the first time that IBM has seen a credit rating lower than triple-A from either of the two major agencies since it first began borrowing in 1979. The reduction will tend to make it more expensive for IBM to borrow but a double-A2 rating, shared by the likes of AT&T Co and Pitney Bowes Inc, is still a blue-chip rating. Only 13 US industrial companies still have a triple-A rating, Emerson Electric Co and General Electric Co among them. But the bad news from Comdisco emphasises that times in IBM’s core mainframe business are not getting any easier, and all the signs are that the company will be reporting woeful first quarter figures. Standard & Poor’s Corp still rates IBM debt Triple-A but has maintained a negative outlook on the company ever since last August.
