Standard & Poor's Issues Interpublic Debt Warning

Cites Possibility of Junk Status Rating

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NEW YORK ( -- Standard & Poor's last night issued a stern warning about Interpublic Group of Cos.' debt situation, saying it will decide in the "near term" whether to keep the embattled company's current credit rating or reduce its debt to so-called junk status.

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"There is no remaining cushion in the rating to withstand any negative news or disappointing earnings performance," the credit rating service said.

Downgraded stock
Interpublic has seen downgrades of its debt by S&P, Fitch Ratings and Moody's Investors Service since last fall, after the company announced a restatement of earnings covering the last five years.

The ratings agencies have cited a possible cash crunch this year, as Interpublic faces the expiration of a $500 million credit line in May and the possibility that investors may put up to $587 million in notes to the company for redemption in December, both of which will require new financing.

Negotiating with lenders
Credit ratings affect a corporation's ability to secure credit for operations and lower ratings can increase financing costs. Interpublic is currently negotiating with its lenders to amend its credit agreements, and both sides recently extended the date for completing the amendments from Jan. 15 until Feb. 10.

Interpublic's stock dropped on the ratings news, down 2.1% to $13.13 in late-morning trading.

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