Spreads on some of Intel's longer-dated bonds were as much as 20 basis points wider on Friday
Bonds issued by troubled chip maker Intel Corp. were getting crushed on Friday as the stock cratered toward a 50-year low, with spreads widening by 15 to 20 basis points as the selling gained momentum.
Adding to the gloom, S&P Global Ratings placed its A-minus rating on Intel to CreditWatch Negative, meaning it could downgrade the credit in the near-term.
The move "reflects our view that the company will likely miss the free cash flow and, possibly, leverage targets we view as consistent with the current rating," the rating agency said in a statement.
Intel (INTC) shocked investors late Thursday with an earnings report that brought a miss on adjusted profit and downbeat guidance. The company said it would cut $10 billion in costs and reduce headcount by 15%, while suspending its dividend, which costs it about $2.2 billion a year.
"Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate," Chief Executive Pat Gelsinger told investors. "Our revenues have not grown as expected-and we've yet to fully benefit from powerful trends, like AI."
S&P said the cost-cutting measures, "could alleviate some near-term cash-flow-generation challenges." But it's unclear whether it will be enough to maintain the company's business competitiveness and enable healthy growth.
Moody's has an A3 rating on the credit, after a February downgrade from A2.
The following charts from data solutions provider BondCliQ Media Solutions shows the sharp movement in spreads overnight-the red arrow separates that trend from the flatter performance earlier in the week.
The bonds have seen net selling on Friday with a small set of buyers emerging after 10.00 a.m. Eastern.
Intel has more than $52 billion worth of bonds, according to FactSet data, with $3.75 billion due to mature in 2025.
The stock, meanwhile, is now down 57% in the year to date, while the S&P 500 SPX has gained 12%.
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