S&P
warns it may cut Icahn Enterprises to junk status, stock
falls
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[February 20, 2016]
By Svea Herbst-Bayliss
BOSTON (Reuters) - U.S. ratings agency
Standard & Poor's warned on Friday it may cut the credit rating of
billionaire investor Carl Icahn's Icahn Enterprises to junk status after
the portfolio absorbed heavy commodity sector losses in the last few
months.
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S&P placed its triple-B-minus issuer credit rating and senior
unsecured debt rating of Icahn Enterprises on "CreditWatch with
negative implications," the agency said in a statement.
The news weighed on Icahn Enterprises' stock price, pushing it down
nearly 11 percent in afternoon trading to $48.75. In the last 12
months the stock price has been cut in half mainly because its
energy investments have been hit by falling commodity prices.
Icahn Enterprises has lost "at least $1.4 billion in value" since
the end of September, S&P wrote in the statement, adding it thought
Icahn's hedge fund had lost money this year because of bets on
energy companies including Chesapeake Energy Corp. and Cheniere
Energy Inc., along with miner Freeport-McMoRan Inc., which have
fallen. Chesapeake is down 56 percent this year.
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"The CreditWatch listing indicates that we believe there is at least
a one-in-two likelihood that we may lower the ratings within the
next 90 days," S&P said.
Icahn was not immediately available to comment.
Things could improve if Icahn can sell the unfinished Fontainebleau
casino on Las Vegas' strip, which the investor bought out of
bankruptcy in 2010, S&P said. But S&P also worried that Icahn could
reinvest the money from a sale, instead of keeping it in cash.
Icahn Enterprises holds stakes in the companies that the investor
has bet on and is often seen as a proxy for his fund's performance,
which is not publicly disclosed.
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Many prominent hedge fund managers are nursing heavy losses this
year due to bets on energy stocks. They may be vulnerable to
investor withdrawals, analysts have said. Icahn stopped managing
outside client money in his hedge funds several years ago, leaving
his family office to invest his personal fortune, which Forbes puts
at $22 billion.
Still, this warning of a possible downgrade is bound to sting the
80-year old investor who has delivered some of Wall Street's best
returns over the last decades and is as active as ever in pushing
corporations into shaking up their business plans.
Icahn has said several times in the last few months that he has no
plans to retire.
(Editing by Jennifer Ablan and Alden Bentley)
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