S&P downgrades Getronics

Standard & Poor's said it lowered Getronics NV's long-term corporate credit rating to B from B+, the company's senior unsecured notes to CCC+ from B- and its €300 million senior secured bank loan to B from B+. The loan has a 3 recovery rating.

All ratings remain on CreditWatch with negative implications, where they were placed on Jan. 19 following a profit warning.

S&P said the downgrade follows Getronics' announcement of significant cash burn in 2005, particularly at its Italian subsidiary. At Dec. 31, Getronics had €437 million of debt. In 2005, the company incurred an unexpected €53 million loss at its Italian operations, where a large outsourcing contract was postponed and evidence of intentional misrepresentation by local management was found, the agency said. Revenues from Italy fell by 19% to €222 million in 2005.

Getronics' management is seeking to sell its Italian unit, and S&P said it expects to resolve the CreditWatch placement after the timing and conditions of an exit from Italy are announced. In the meantime, cash losses in Italy continue to pressure the ratings on Getronics, and management has said that the €53 million net loss in Italy could be repeated in 2006, according to the agency.

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