Industry News | December 23, 2002

Moody’s May Cut McDonald’s Debt Ratings

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Reuters reported late Friday that Moody’s Investors Service said it may cut McDonald’s Corporation’s (NYSE: MCD) “Aa3” long-term senior debt ratings, Moody’s fourth highest credit grade. Around $9 billion in debt would be affected.

In addition, Moody’s may also cut McDonald’s “A1” subordinated debt rating but affirmed its “Prime-1” short-term debt rating.

Any negative change in debt ratings could lead to higher borrowing costs for the company.

According to Reuters, Moody’s vice president Peggy Holloway said the potential action was influenced by declining same-store sales, a reversal in the European sales rebound from earlier in the year, and McDonald’s expectations that the downward trend will continue. Holloway also said that a change would likely be modest given McDonald’s overall financial and cash flow condition.

McDonald’s stock price opened at $15.20 in Monday morning trading, down 3.5% from its Friday close of $15.75.