Nasdaq debt rating sinks to 'junk' status

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The Independent Online

Nasdaq suffered a fresh blow yesterday after the ratings agency Standard & Poor's pushed its debt further into "junk" status.

S&P warned that the huge loans taken out to finance the proposed acquisition of the London Stock Exchange would act as a "heavy burden" on Nasdaq's balance sheet, and downgraded its long-term credit to BB, two notches below "investment grade".

Nasdaq was put on watch by S&P after it unveiled its hostile takeover bid for the LSE. S&P analyst Charles Rauch said: "The new ratings take into account the potential transformation in Nasdaq's franchise should it successfully acquire the LSE but this is more than offset by Nasdaq's heavy reliance on issuing more debt to complete this transaction."

On Monday the company unveiled a $5.8bn financing package, designed to buy out the 71 per cent of the LSE that Nasdaq does not already own, and refinance the two companies' debt.

The level of debt being used to finance the bid - worth £12.43 a share - has raised alarm in the City and Mr Rauch warned there would be "considerable integration risk" in the deal.

The LSE's shares closed unchanged at £13.11 yesterday, indicating investors still believe a counter-bidder will emerge or that Nasdaq will have to pay more.

Nasdaq said the £12.43 bid was its "final offer" but it can be increased in the event of a counterbid or recommendation from the LSE board.