Moody's confirms Interpublic

Moody's Investors Service confirmed its Interpublic Group of Cos. including its senior unsecured debt at Baa3 and senior subordinated debt at Ba1. The outlook is stable.

Moody's said the confirmation concludes a review begun on May 9, 2003 due to concerns over weak operating performance and free cash flow shortfalls.

The confirmation reflects Moody's belief that Interpublic's management team, which took over nearly one year ago and is now six months into a 24-36 month turnaround plan, has significantly strengthened the company's balance sheet, shored up liquidity and made progress improving operating performance.

Specifically, management has reduced financial leverage, and cost-cutting efforts have finally gained some traction, resulting in recent operating margin improvement.

Moody's said it believes that Interpublic still faces significant business risks associated with the advertising cycle and the competitive nature of the advertising sector, which in turn requires the company to strengthen credit metrics further and then maintain a conservative financial profile.

The stable outlook is based on the company continuing to conserve capital, especially given that current bank facilities limit the company's ability to pay dividends, repurchase shares of common stock, make cash acquisitions or investments, and capital expenditures, and Moody's expectation that operating performance and credit metrics will continue to improve.

Despite the current strength of the balance sheet, Moody's believes the Baa3 rating is still somewhat weakly positioned.

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