ABB has had a rough 12 months. The Switzerland-headquartered power and automation technologies conglomerate was faced with the worst operating environment for its businesses in 20 years. It was making heavy losses and was also saddled with an increasing asbestos liability at US subsidiary Combustion Engineering.
On top of that, it was far too reliant on short-term debt. This was the result of a series of acquisitions made during the bull market funded with commercial paper. So when the once double-A company was first downgraded to triple-B last March, it was left scrambling for alternative sources of funds.
Now embarking on its third corporate restructuring programme, after a change of CFO and CEO and two revisions to its growth and profits targets, ABB has been downgraded a further three times by Moody's, which now rates the company B1 with a negative outlook.
When Euromoney spoke last month to Peter Voser, the CFO who came into the job in March 2002 to repair the company's sickly balance sheet, ABB had been downgraded yet again just a day earlier. This time, S&P downgraded the company to sub-investment grade for the first time to BB+ from triple-B with a negative outlook, citing ABB's operational risks to generating free cashflow, excessive financial leverage and reliance on short-term funding.