Moody's downgrades Philips

Moody's Investors Service said it downgraded to Baa1 from A3 the long-term issuer and senior debt ratings of Royal Philips NV. The outlook is stable.

"Our decision to downgrade Philips' ratings reflects the marked deterioration in its profitability and leverage levels and the only partial expected recovery over the next 12 to 18 months given the intense competition in the lighting sector and intensifying competition in health care, as well as the company's continuously high restructuring and other extraordinary costs," Roberto Pozzi, a Moody's vice president and senior credit officer, said in an agency news release.

Moody's anticipates that Philips' acquisition of Volcano and its planned share buybacks worth around €500 million in 2015 and €400 million in 2016 will be more than offset by the proceeds from the sale of the combined Lumileds and automotive lighting business, which Philips expects to complete in the first half of 2015. The proceeds of the disposal are uncertain at this juncture, but the agency estimates that Philips' credit metrics will remain broadly unchanged pro forma for such transactions.

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