UBS downgraded WPP stock from "buy" to neutral, joining S&P, Moody's, and Citi in lowering the group's credit rating. The moves mark analyst fears that WPP may have bitten off more than it can chew in its borrowings. As BNET reported in April, WPP in Q1 2009 doubled its YTD net debt to Â£3.4 billion. Another Â£176 million is due this year and then a massive Â£850 million lump is due in 2010.
In addition, WPP chief Martin Sorrell has been flying all over the world saying gloomy things about revenues. BNET previously argued he's softening up expectations for his Q2 2009 earnings report.
So you can see what's riding on that Vodafone review. Without it, Sorrell will have a harder time convincing analysts that he's got a plan that entails enough revenues to dig himself out of all this. It also explains why Publicis, not WPP, locked up Razorfish even though both took a look at it.
Has Sorrell's appetite for debt finally been sated?
- See previous coverage of WPP:
- Citi Cuts WPP to "Sell"; Sorrell Defends "Suicide Pact" on Pay; Attacks Obama on Taxes
- Sorrell's Comments on Procurement Reveal Opacity of Agency Billing Practices
- WPP: Sorrell Sees No New Client Dollars; Layoffs Possible in Europe; Zimbabwe Eyes an Opportunity
- Could WPP Chief Sorrell's Successor Be Lord Stephen Carter?
- WPP Stock Down 11% as CEO Sorrell Gets $95 Mil. Pay Package. Coincidence?
- At WPP, Sorrell's $95 Mil. Pay Package Gathers More Foes -- But Passes Anyway
- WPP's Sorrell Wants $95 Million Pay Package; Sparks Protest at "Unnecessarily Complex" Scheme
- WPP's Sorrell Dusts Off Latest Wacky Recovery Metaphor: "An Italic L, Flipping Up"
- WPP Q1: Debt Doubles; "It's All Lehman Brothers' Fault"