• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Fitch Places Dell's Ratings on Rating Watch Negative

Posted on: Wednesday, 13 September 2006, 18:00 CDT

Fitch Ratings has placed Dell Inc.'s (Dell) ratings on Rating Watch Negative (RWN) following the company's decision to delay the filing of its Form 10-Q for the fiscal second quarter ended Aug. 4, 2006. The Rating Watch Negative also reflects Fitch's belief that the ongoing Securities and Exchange Commission's (SEC) investigation into the company's revenue recognition and other accounting and financial reporting matters could potentially result in a restatement of prior financial results.

The following ratings are affected:

-- Issuer default rating (IDR) 'A';

-- $1 billion bank credit facility 'A';

-- Senior unsecured debt 'A';

-- Commercial paper (CP) 'F1'.

Approximately $1.5 billion of debt securities are affected by Fitch's action, including the undrawn $1 billion credit facility.

Dell attributed the filing delay to issues raised in conjunction with the ongoing informal SEC investigation initiated in August 2005 and the independent investigation being conducted by the company's audit committee. The investigations have indicated the possibility of misstatements in prior period financial reports including issues relating to accruals, reserves and other balance sheet items. The materiality of any potential misstatements and requirement to restate previously reported financial results have yet to be determined. In addition to the SEC, the United States Attorney for the Southern District of New York has also subpoenaed documents related to Dell's financial reporting practices from 2002 to the present. Despite these issues, Fitch believes Dell continues to have strong financial flexibility and liquidity.

Fitch expects the removal from Rating Watch Negative will be contingent upon Dell's ability to file its 10-Q within the cure periods prescribed by the company's credit facility and bond indenture, in the absence of any necessary waivers, and the materiality of any financial restatements that may result from the ongoing investigations into Dell's financial reporting matters.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria, and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance, and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Source: Business Wire

More News in this Category