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April 19, 1994

CREDIT RATINGS

By CBR Staff Writer

Digital Equipment Corp is learning that while you don’t need to borrow any money, you can bask in a super-high rating on your creditworthyness, but as soon as you start borrowing and need to borrow more, your blue-chip rating gets stripped away. In the wake of DEC’s horrible figures on Friday, Standard & Poor’s Corp quickly downgraded the company’s senior debt to triple-B from triple-B-plus and the preferred stock to double-B-plus from triple-B-minus. The agency warns that these ratings, as well as DEC’s A-2 commercial paper rating, may be lowered further. About $1,400m of debt, including preferred stock, is affected. The actions reflect continuing losses and increased uncertainty about DEC’s ability to restore profitability over the near term, the agency said, adding that prior ratings anticipated break-even results or a modest loss for the current fiscal year with improvement thereafter; it will now review fiscal 1994 results and assess expectations for future performance before deciding whether to cut again. Moody’s Investors Service Inc has not yet made a cut, but said it has put DEC’s Baa2 senior debt, Prime-2 short-term debt and ba1 preferred stock ratings under review for possible downgrading. Moody’s says it is concerned that operating results and debtholder protection measurements will continue to be under significant pressure for the intermediate term.

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