BOSTON (Reuters) - U.S. ratings agency Standard & Poor’s warned on Friday it may cut the credit rating of billionaire investor Carl Icahn’s Icahn Enterprises to junk status after the portfolio absorbed heavy commodity sector losses in the last few months.
S&P placed its triple-B-minus issuer credit rating and senior unsecured debt rating of Icahn Enterprises on “CreditWatch with negative implications,” the agency said in a statement.
The news weighed on Icahn Enterprises’ stock price, pushing it down nearly 11 percent in afternoon trading to $48.75. In the last 12 months the stock price has been cut in half mainly because its energy investments have been hit by falling commodity prices.
Icahn Enterprises has lost “at least $1.4 billion in value” since the end of September, S&P wrote in the statement, adding it thought Icahn’s hedge fund had lost money this year because of bets on energy companies including Chesapeake Energy Corp. and Cheniere Energy Inc., along with miner Freeport-McMoRan Inc., which have fallen. Chesapeake is down 56 percent this year.
“The CreditWatch listing indicates that we believe there is at least a one-in-two likelihood that we may lower the ratings within the next 90 days,” S&P said.
Icahn was not immediately available to comment.
Things could improve if Icahn can sell the unfinished Fontainebleau casino on Las Vegas’ strip, which the investor bought out of bankruptcy in 2010, S&P said. But S&P also worried that Icahn could reinvest the money from a sale, instead of keeping it in cash.
Icahn Enterprises holds stakes in the companies that the investor has bet on and is often seen as a proxy for his fund’s performance, which is not publicly disclosed.
Many prominent hedge fund managers are nursing heavy losses this year due to bets on energy stocks. They may be vulnerable to investor withdrawals, analysts have said. Icahn stopped managing outside client money in his hedge funds several years ago, leaving his family office to invest his personal fortune, which Forbes puts at $22 billion.
Still, this warning of a possible downgrade is bound to sting the 80-year old investor who has delivered some of Wall Street’s best returns over the last decades and is as active as ever in pushing corporations into shaking up their business plans.
Icahn has said several times in the last few months that he has no plans to retire.
Editing by Jennifer Ablan and Alden Bentley