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April 5, 2004

S&P downgrades EDS

Standard & Poor's sliced another notch off Electronic Data Systems' credit rating yesterday, placing the embattled services company just above junk bond level.

By CBR Staff Writer

The ratings firm, which put EDS on CreditWatch at the beginning of February, also said the outlook for the services firm was negative.

Ratings for EDS’s corporate credit and senior secured ratings were lowered from BBB to BBB-. S&P affirmed its A-3 commercial paper rating for EDS.

S&P said it had downgraded EDS’ rating because of weak operational performance due to cost disadvantages, turnaround challenges on underperforming contracts, and because industry pressures mean a significant improvement in profit levels over the near term is a challenge.

At the same time, S&P said it expected EDS’ operating profit margins, currently at 3%, to improve, as it continues its restructuring.

At BBB-, EDS’ credit rating is still considered investment grade – just. If S&P decides to lop off that third B off EDS’ credit rating, the service giant would be in junk bond territory.

This article is based on material originally published by ComputerWire

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