McDonald's Corp's credit ratings on about US$9 billion in debt may be lowered by Moody's Investors Service because of a failed price-war with rival hamburger chains and slowing US and European sales.
The largest restaurant chain's Aa3 senior long-term and A1 subordinated debt ratings may be cut, Moody's said in a statement.
McDonald's long-term debt is rated three levels below the top rating of Moody's, whose last revision for the company was an update in 1994.
McDonald's, burdened by costs to shut restaurants and falling sales, said Tuesday it will have its first quarterly net loss since the chain went public in 1965. Moody's said any rating change will be "modest" because of the company's overall financial health.
"It's disappointing to hear we're coming up for review but it's not totally unexpected," said Lawrence Creatura of Clover Capital, which manages US$1.7 billion and owns McDonald's shares.
"McDonald's has some very obvious and solvable problems but they will not be solved unless the entire organization is focused on resolution."
James Cantalupo will become chief executive next month, when McDonald's is expected to report sales in restaurants open at least a year dropped more than 1.6 percent this quarter.
The company is also being hurt by weaker demand in Germany and the UK, Moody's said. The negative sales trends may continue, the credit-rating company said.
"Moody's is therefore concerned that debt protection measures may again deteriorate in 2002, and take longer to rebound over the intermediate term due to increased industry competition," it said.
McDonald's shares rose US$0.11 to US$15.75 at 4:17pm in New York Stock Exchange Friday. They have declined 40 percent this year.
The review will look at Cantalupo's plans and new initiatives on the company's balance sheet and its financial policy, it said.
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