C&W Stock Nosedives Following Downgrade
Shares in Cable & Wireless fell by almost 50% in early trading as news spread that the ailing telecoms group needs to find £1.5 billion after being downgraded to junk status.
Under the terms of the deal, Cable & Wireless agreed with the German company, which was buying the stake, that if its credit rating fell below investment grade, it would set aside £1.5 billion to cover a possible tax bill.
C&W is now obliged to to stump up the cash or obtain a bank guarantee for the required amount. Shareholders were apparently unaware of the details of the indemnity at the time of the One 2 One sale and may call for the resignation of Graham Wallace, the group’s chief executive.
By 1pm, shares in Cable & Wireless had stabilised at 49p, down 33.5p on the day.
