ABB halts key bank talks after breaching loan terms

The embattled engineering group ABB was last night forced to postpone a key meeting with its banks after credit rating downgrades saw it breach the terms of a $3bn (£2.1bn) loan.

The embattled engineering group ABB was last night forced to postpone a key meeting with its banks after credit rating downgrades saw it breach the terms of a $3bn (£2.1bn) loan.

The meeting, originally scheduled for today at CSFB's offices in Zurich, was delayed until 3 April to give the Swiss-Swedish engineer more time to prepare for the session. The downgrades make asset disposals even more crucial to bolster ABB's balance sheet.

The meeting, with the 24-strong banking consortium, had been planned to discuss the $3bn short-term credit facility put in place in December, which has been fully drawn.

Moody's cut ABB's credit rating late on Monday to "Baa2", just two notches above junk status, on concerns about ABB's short and long-term financing. The move was a dramatic fall from grace for ABB, once considered one of Europe's finest businesses, and it saw the company's shares drop nearly 7 per cent yesterday. The Moody's downgrade was its second in two weeks. Last night Standard & Poor's, the other major credit rating agency, followed with its own downgrade, to single "A".

S&P's said: "The rating action follows intensifying pressure on the group's efforts to secure adequate short-term liquidity and resolve its longer term financing needs."

ABB has 15 working days to agree new terms with its banks otherwise the $3bn comes due, putting the company at peril.

S&P's said it was likely the banks would agree to new terms. Maria Bissinger, a director at S&P's, said: "Another key challenge for the group is to secure medium- to long-term financing, and to reduce the overall debt burden by at least $1.5bn during 2002."