Fitch cuts Unisys to junk, rates loan BB+

Fitch Ratings said it downgraded Unisys Corp.'s senior unsecured debt to BB+ from BBB- and assigned a BB+ rating to the senior bank credit facility.

The outlook remains negative.

Fitch said the downgrade and negative outlook reflect weakened credit protection measures and liquidity, deteriorating financial performance as services operating margins continue to be negatively affected by challenges associated with improving certain problem contracts, and Unisys's lowered financial outlook for 2005.

Additionally, technology segment revenue in the second quarter of 2005 declined for the fifth straight quarter due to persistent weakness in higher margin ClearPath system sales relative to ES7000 servers and a decline in other specialized technology. Fitch also believes there is potential for further amendments to the company's bank covenants in the second half due to possible asset write-offs.

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