Credit ratings agency Moody's Investors Service said today its ratings on Vivendi Universal could face a severe downgrade if the media giant's liquidity problems did not improve in the near future.
The report from Moody's follows a July 1st downgrade of its senior unsecured rating on Vivendi to Ba1. It kept the ratings on review for further downgrade.
The Vivendi board forced chief executive Mr Jean-Marie Messier to resign last Wednesday as it grappled with huge debts after a frantic acquisition spree.
French business veterans took charge as Societé Generale, the group's biggest creditor bank, warned that Vivendi needed to sell assets as well as secure short-term funds after its debt ratings were slashed.
"In the absence of a resolution to Vivendi Universal's liquidity issue in the very near term the company faces a worsening liquidity situation which could result in further severe downward migration of the ratings," Moody's said in a statement.
It reiterated its view that the terms and conditions of new financing would probably be more onerous than that on existing borrowing, and added that "this could well lead to selected downward ratings adjustments in its own right."
Sources familiar with the situation have said Vivendi needed between two and three billion euros of emergency funds to meet short-term demands.
The media group continued talks with its banks over the weekend to avert a cash crisis as predators stalked assets it may be forced to sell to cut its huge debt pile.