Halliburton credit rating may be lowered
Tuesday May 18, 12:32 pm ET
The following statement was released by Standard & Poor's###
NEW YORK, May 18 - The Pentagon suspended $159.5 million in payments for meal charges submitted by a unit of Halliburton Co. (BBB/Watch Dev/A-3) as it continued to audit bills for feeding soldiers in Iraq and Kuwait. The Defense Contract Audit Agency cited concerns about the company's billing system for all its Iraq-related contracts, characterizing the system as inadequate. Standard & Poor's views the Pentagon's announcement as an unfavorable development for Halliburton's credit quality, but notes that this an ongoing issue that is not expected to be resolved in the near term and, therefore, has no immediate impact on the ratings. Standard & Poor's will closely monitor the timeliness of Halliburton's cash receipts from the Iraqi-related government contracts. A negative rating action could occur if the timeliness and amounts of those receipts deviate from expected levels. Halliburton is reliant on those receipts to partially offset substantial ongoing outlays associated with its large contracts for infrastructure development and oil production restoration in Iraq. The ratings remain on CreditWatch Developing, indicating that ratings could rise or fall in the foreseeable future depending on the resolution of its asbestos litigation, as well as pressure on financial performance and credit measures due to the challenges associated with its government services operations in Iraq.