Moody’s may lower Caterpillar

Moody's Investors Service said it is reviewing for downgrade the A2 long-term and prime-1 short-term ratings of Caterpillar, Inc., Caterpillar Financial Services Corp. and various subsidiaries.

The company’s performance is below expectations given extremely weak business conditions faced by the company, the agency added.

Caterpillar’s ability to generate adequate returns and maintain a sufficiently robust level of financial flexibility has been weakened by its acquisition of Bucyrus at the peak of the cycle and the subsequent erosion in the long-term outlook for coal, along with funding of a significant portion of its $8.3 billion of share repurchases with proceeds from working capital reductions, Moody’s said.

The review will consider the pace at which the company's initiatives will be able to strengthen credit metrics and the degree to which these actions will moderate erosion in performance during future downturns, the agency said.

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