S&P downgrades Thomson

Standard & Poor's said it lowered Thomson SA's long-term corporate credit rating to BBB from BBB+, short-term corporate credit rating to A-3 from A-2, senior unsecured debt rating to BBB from BBB+ and junior subordinated debt rating to BB+ from BBB-.

All ratings were removed from CreditWatch with negative implications, where they were placed on Feb. 2 following a profit warning. The outlook is negative.

The downgrade reflects S&P's concerns about margin pressure in Thomson's core businesses and debt that has increased significantly, primarily as a result of strongly negative cash flow in noncore businesses, debt-funded acquisitions and shareholder payments.

The BBB senior unsecured bank loan rating reflects Thomson's limited secured debt, the presence of subordinated capital and documented downstream loans offsetting structural subordination, the agency said. The BB+ junior subordinated rating is two notches below the corporate credit rating, recognizing the notes' absence of maturity, optional and noncumulative interest deferability and deep subordination.

Supporting the ratings are S&P's view that Thomson is relatively well positioned to anticipate the fast-changing market for video products and services given the group's good positioning at many stages of the video production and delivery chain.

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