Moody’s lowers British Telecom to negative

Moody's Investors Service said it changed the outlook on British Telecommunications plc and British Telecom Finance BV to negative from stable following news of its revised performance expectations for the current year and the following year.

The agency also said it affirmed the company’s Baa1 senior unsecured and issuer ratings, the provisional Baa1 medium-term note program and senior unsecured shelf rating, as well as the prime-2 short-term rating.

Moody's also said it changed the outlook to negative on EE Ltd. and EE Finance plc, both wholly owned subsidiaries of British Telecommunications. The agency also affirmed EE's Baa1 issuer rating, Baa1 senior unsecured debt ratings and provisional Baa1 medium-term notes program rating.

The outlook change reflects the company's weaker expectations for operating performance over the medium term, which further weighs on its financial profile from an already stretched level for the Baa1 rating due to a pension deficit, Moody’s explained.

The higher pension deficit was previously buffered by an expectation for an improving operating performance at the company, the agency said.

But now this profit warning will further delay the de-leveraging that was previously anticipated, Moody’s said.

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