Moody's Puts Pressure On Ferro

Moody's Investor Services, the credit-rating firm, has downgraded Ferro's senior unsecured debt from B1 to Ba1 because of continued delays by the Cleveland-based company in issuing audited financial statements. In addition, Moody's will withdraw Ferro's ratings. According to Moody's, the withdrawal relates to the absence of audited financial statements for a sustained period of time and the concern that there may be additional delays in receiving statements for 2005.

In mid-2004, Ferro acknowledged that it had discovered inappropriate accounting entries in its polymer additives business and said it would delay the reporting of its financial reports. An initial review was completed in September 2004 and the scope of the audit was expanded. A second review was completed in September 2005. The company, however, has yet to complete a restatement of its financial results for 2003 or issue audited statements for 2004 and 2005.

"We are surprised and disappointed in the action taken by Moody's," Ferro CEO James F. Kirsch says."The company continues to expect to complete and file its 2004 annual report and 10-K by March 31."

Ferro notes that it expects to have continued access to sufficient liquidity to fund its operations, although its borrowing costs are likely to increase as a result of the rating company's action.

Moody's action is not the only problem facing Ferro if it does not meet the March 31 deadline. The New York Stock Exchange also wants to see the company's audited statements for 2004 by that date. The NYSE originally wanted to see the statements by Dec. 31, 2005, but extended the deadline.

Ferro admits that if it does not file with the Securities & Exchange Commission by March 31, it faces possible delisting from the NYSE.