Just when bond investors thought it was safe to go back into the
telecom sector, Moody's dropped a bombshell. By downgrading British
Telecom's long term debt two notches to Baa1 last month, it threw a
sector showing glimmers of recovery into disarray. Most astonishing
to investors and galling to BT's management was the fact that
Moody's chose May 10, the day BT announced its rights issue - the
lynchpin of its debt reduction plans - to break the bad news,
fuelling speculation that it was privy to particularly damming
information about the company.
It wasn't that the market hadn't expected the downgrade at all -
earlier that day, Standard&Poor's had taken BT down a peg to A-
and placed it on negative outlook - but the severity of Moody's
action caught it off guard. BT had been making all the right
noises: besides committing to the largest ever rights issue,
expected to raise £5.9 billion, it...
