Moody's downgrades Lexmark

Moody's Investors Service downgraded Lexmark International's debt rating Tuesday, following a similar move earlier this year by Standard & Poor's.

Richard Lane, a Moody's analyst, cited the company's lower sales in recent quarters in explaining the downgrade, emphasizing "a weak demand environment and aggressive competition from a group of larger and more diversified competitors."

He lowered the company's rating from Baa2 to Baa3. That remains investment grade. Ratings don't fall to what's typically called junk status until they're lowered one more notch to Ba1.

Standard & Poor's had lowered the company's rating to BBB-, its last rating above non-investment grade. Lower ratings can mean paying higher interest rates on debt.

Lexmark spokesman Jerry Grasso emphasized that "Lexmark has a very strong financial position."

"Lexmark's business model continues to drive good cash generation," Grasso said. "And 2008 marked the seventh consecutive year where the company generated over $450 million in net cash from operating activities."

Lane said the ratings outlook for Lexmark is negative, but he applauded its liquidity profile, noting that it had $811 million in cash and equivalents at the end of March.

Its two pieces of debt, he said, don't mature until 2013, for $350 million, and 2018 for an additional $300 million. He said Lexmark also has access to $300 million in unsecured revolving credit that matures in January.