September 4, 2013 / 11:30 AM / 4 years ago

Fitch may upgrade Nokia debt rating after Microsoft deal

HELSINKI (Reuters) - Credit rating agency Fitch said it may upgrade Nokia’s speculative-grade debt rating after the company announced the sale of its handset business to Microsoft.

The flagship store of Finnish mobile phone manufacturer Nokia is pictured in Helsinki September 7, 2012. REUTERS/Sari Gustafsson/Lehtikuva

Fitch Ratings said it placed Nokia’s senior unsecured ratings of “BB-” on “Ratings Watch Positive” because of an expected improvement in its finances following the 5.4 billion euro ($7.2 billion) deal announced on Tuesday.

Nokia has been struggling to reverse a decline in its cash position and fall in market share. In August, Fitch reaffirmed its “BB-” rating but said its long-term issuer default rating was negative, citing a lack of visibility in the devices and services (D&S) business.

“The sale of the D&S business brings to a close a period of extreme stress in the credit profile of the handset industry’s former leading manufacturer,” Fitch said in a statement.

Fitch said Nokia’s remaining operations, including Nokia Solutions & Networks, a previous venture with Siemens which it bought out in early July, as well as a patent portfolio and navigation business, would hold strong capital and a significant net cash position.

The agency said a closure of the Microsoft deal would likely lead, at a minimum, to an affirmation of the current ratings at “BB-” with a stable outlook or a potential one-notch upgrade. One notch up from “BB-” would be “BB”, still speculative grade.

($1 = 0.7601 euros)

Reporting by Ritsuko Ando; Editing by Louise Heavens

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