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Wall Street Downgrades WPP on Debt Fears; Has Sorrell Reached His Credit Limit?

WPP stock has been on a wild ride of late as Wall Street tries to figure out which has the upper hand in the company: It's ability to win new business (it may just have clinched the £800m Vodafone business) or its crushing debt payments.

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 £3.4 billion. Another £176 million is due this year and then a massive £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?

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