Standard & Poor's and Moody's, the international rating agencies, are likely to inflict a further rash of downgrades on the beleaguered telecoms equipment manufacturers, after slashing the ratings of Marconi and Alcatel, analysts have predicted.
A cut in a company's credit rating can dramatically increase the cost of debt repayments for a borrower, as well as making any new foray into the debt markets considerably more expensive. Investors are likely to demand higher returns for the risk of holding on to a downgraded borrower's paper.