Moody’s raises Motorola’s debt on good cash flow

Moody’s Investors Service on Wednesday raised its rating on Motorola Inc.’s (MOT.N: Quote, Profile, Research) debt, citing its improving market positions, increasing cash flow and declining debt levels.

“Motorola’s handset market share has increased from 13.6 percent in 2003 to 22.4 percent in the third quarter of 2006 at a time when the handset market was growing at rates averaging above 20 percent per annum,” Moody’s said in a statement.

“The resultant growth in revenue and operating profit has driven free cash flow from $368 million in 2002 to $3.4 billion for the last 12 months ended July 1, 2006,” Moody’s said.

Cash balances have exceeded $14 billion since the fourth quarter of 2005 and are expected to be more than $10 billion, well above the company’s current debt levels of approximately $4.3 billion, the ratings agency said.

Moody’s raised Motorola’s senior unsecured debt one notch to “Baa1,” its third lowest investment grade ranking, from “Baa2.” The outlook is positive, indicating an additional upgrade is likely over the next 12 to 18 months.

Motorola’s 7.625 percent bond due 2010 traded at 9.69 percentage points over Treasuries on Wednesday, according to MarketAxess, wider than 0.63 percentage point on Monday, its last recorded trade.

Source- http://today.reuters.com