Fri, Feb 23, 2001 EST
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Lucent's Debt Rating Lowered to Near
Junk-Bond Status

Associated Press
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MURRAY HILL, N.J. — In another blow for struggling Lucent Technologies, two credit rating agencies have reduced the company's debt rating to a notch above junk-bond status.

The decrease by Moody's Investor Service and Standard & Poor's means the telecommunications equipment maker will have to pay higher rates of interest when it wants to borrow money by selling notes or bonds.

The credit ratings are closely watched by bond investors including some who are expressly prohibited from investing in lower-grade debt because of worries about it being repaid on time.

By reducing the Moody's said it was lowering its ratings due to "significant operational difficulties," while S&P; cited "substantial operating losses." Both companies lowered Lucent's corporate credit rating two notches — from "Baa1" to "Baa3" for Moody's and "BBB+" to "BBB-" for S&P.;

Michelle Davidson, a Lucent spokeswoman, said the company can still borrow from existing credit lines if needed.

"We have sufficient cash to fund our operations for the near term," she said.

The ratings downgrades were the latest blow to Lucent, whose financial problems have mounted in the past year as the AT&T; Corp. spinoff repeatedly missed its earnings targets. It fired its chief executive last year as its stock tumbled by more than 75 percent from its highs and demand for its products from its biggest customers sagged.

Last month, Lucent said it is eliminating up to 16,000 jobs, representing 13 percent of its worldwide work force of 123,000. The company also reported a $1 billion loss for the final three months of 2000.

Last week, it was reported that the Securities and Exchange Commission has begun an investigation into Lucent's accounting practices involving how it booked $679 million in revenue during its 2000 fiscal year, which ended Sept. 30. Lucent restated the revenue in December after conducting its own examination.

In trading Monday on the New York Stock Exchange, Lucent shares fell 56 cents to $14.80.

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