S&P Cuts Credit Rating of Icahn Enterprises to Junk Status

May 18 2016 | 12:05am ET

U.S. ratings agency Standard & Poor's has lowered the credit rating of billionaire investor Carl Icahn's Icahn Enterprises to double-B-plus, the top rung of so-called junk status, after the company’s investment values dropped and leverage increased in recent months.

S&P had put the alternative investment management firm on notice in February that it had placed the company’s debt ratings on watch with “negative implications.”

The particular ratings cut by S&P were the long-term issuer credit rating and senior unsecured debt rating. Both had been at triple-B-minus beforehand, and both have been given “stable” outlooks, according to Reuters. 

The downgrade was primarily due to the increased loan-to-value ratio of Icahn Enterprises, which in turn was driven by a decrease in portfolio value and cash. The company's LTV rose to more than 53%, S&P said in a statement, and is likely to remain between 45% and 60% over the next year. 

The move was largely expected, as evidenced by the lack of immediate movement in the company’s stock price. IEP closed little changed in Tuesday trading near $52 per share, but is down more than 14% for the year to date. 

S&P noted that the first quarter rate of return in the investment portfolio was -12.8%. Icahn Enterprises booked negative returns for each of the past two years

Icahn’s most recent 13-F securities filings revealed the asset manager has sold out of large positions in Gannett, Tegna and Mentor Graphics in the first three months of the year. He exited a $4.8 billion stake in Apple earlier in the quarter.

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